The Argentine government put in force through Decree 1112/2017 (29 December 2017) a complete tax reform.
The changes introduced are aimed at promoting investment and competitiveness.
This will allow to move Argentina towards a more equitable, efficient, and modern tax place to invest.
The tax reform includes changes concerning the corporate income tax rates, dividend withholding tax, taxation of certain financial investments, indirect capital gains taxation, thin capitalization rules, the definition of a permanent establishment, transfer pricing, fiscal transparency rules, value added tax (VAT) on digital services, refund of VAT credit balances, revaluation of assets, and social security contributions, among others.
Global entities planning to invest in Argentina need to be advised of the impact of these changes, and may need to take immediate steps to address the tax changes. Due to the significance of the amendments, taxpayers need to evaluate potential effects on their current operations and on how their business in Argentina is structured.
Regarding income Tax for example, the rate of the corporate income tax will be gradually reduced according to the following schedule:
- 2018 and 2019—a rate of 30%
- 2020 onwards—a rate of 25%
An additional withholding tax will be levied on distributed dividends or profits, bringing the total tax rate to 35%, as follows:
- 7% dividend withholding tax rate for distributions on profits accrued for tax years between 1 January 2018 and 31 December 2019
- 13% dividend withholding tax rate for distributions on profits accrued for tax years starting on or after 1 January 2020
An exception applies if retained earnings are re invested in the company.