General Resolution 3576 ("Resolution") was published on December 31, 2013 in the Official Gazette.The Resolution implements the provisions of Executive Order No. 589/2013 (the “Executive Order”) which modified the regime of low or null taxation jurisdictions in force in Argentina.
I. Regime of cooperating countries for fiscal transparency purposes
According to the Executive Order, the denomination as "low or null taxation jurisdiction" shall apply to those jurisdictions that ARE NOT considered "cooperative for fiscal transparency purposes". Jurisdictions that ARE considered "cooperative for the purpose of fiscal transparency purposes" are:
- those jurisdictions executing with Argentina a tax information exchange agreement or an agreement to avoid double taxation at an international level with a clause contemplating a broad exchange of information, provided that the actual exchange of information be implemented;
- those jurisdictions in which their respective governments have initiated with Argentina all negotiations required to subscribe a tax information exchange agreement or an agreement to avoid double taxation with a broad information exchange clause.
Any agreements entered into with Argentina shall comply, where possible, with those international transparency standards adopted by the Global Forum on Transparency and Exchange of Information regarding Taxation Matters, without being able to claim bank or stock exchange secrecy or any other kind of secrecy regarding any specific information requests made by Argentina.
The cooperating status for fiscal transparency purposes shall cease if the subscribed agreement is denounced, is terminated, or upon verification of the lack of actual exchange of information.
II. Powers granted to the Administración Federal de Ingresos Públicos (“AFIP”- by its acronym in Spanish) (the “Federal Tax Authority”)
By means of the Resolution, AFIP prepared the following list of the countries, domains, jurisdictions, territories, associated states and special tax regimes considered as "cooperators for fiscal transparency purposes". Moreover, AFIP may analyze and assess compliance with the actual tax information exchange, tax information exchange agreements and agreements to avoid double taxation with a broad information exchange clause.
Thus, the following list of jurisdictions considered "cooperative for the fiscal transparency purposes" (and therefore excluded from the regime of low or null taxation jurisdiction) is determined by the AFIP and will be dynamic in nature.
In this context, according to the new list, the following countries are excluded as from January 1, 2016:
- United Arab Emirates
On the other hand, the following countries are included as from January 1, 2016:
- Hong Kong
Jurisdictions listed by the AFIP are: click here.
III. Consequences of the loss of the “cooperating country status for fiscal transparency purposes”
In light of the foregoing, it must be worth recalling that the exclusion from the list of "cooperative jurisdictions for fiscal transparency purposes" will bring about the following consequences:
- Transactions carried out among an Argentine party and a foreign party domiciled, incorporated or located in low or null taxation jurisdictions shall not be considered to be consistent with regular market practices or prices on arm's length transactions for transfer pricing purposes;
- Income from low or null taxation jurisdictions might be considered as an unjustified increase in wealth for the Argentine receiver. Amounts received plus a 10% for income consumed in non-deductible expenses, may be considered as net profits for the year in which they occur, for the purposes of determining the Income Tax and, eventually, Value Added Tax;
- Expenditures made by Argentine parties that result in Argentine source income to foreign parties established, incorporated, residing or domiciled in low or null taxation jurisdictions may be deducted only once payment has been made;
- When more than 50% of the income of stock corporations incorporated in low or null taxation jurisdictions derives from passive income (lease of real estates, loans, sale of shares or equity interests in legal entities or mutual funds, investments in financial or banking entities, public bonds, derivative instruments not executed for hedging purposes, dividends or royalties), the Argentine tax resident shareholder shall be required to pay income tax regardless of whether or not such income is received as a dividend.