The double tax treaty between Argentina and the United Arab Emirates is now in force, joining the recently signed DTT between Argentina and Mexico.

New DTT: Argentina – United Arab Emirates

The Argentina – UAE DTT is applicable to the income tax, presumed minimum income tax and personal assets tax collected by Argentina, and to the income tax and corporate tax collected by the United Arab Emirates.

This DTT is one of the most beneficial ones of all the DTTs signed by Argentina.

The main characteristics are the following:

Business profits (Article 7): Profits of an enterprise of a contracting state shall be taxable only in that contracting state, unless the enterprise carries on business in the other contracting state through a permanent establishment situated therein.

Dividends (Article 10): Tax on dividends is limited to 10 percent of the gross amount of dividends if the beneficial owner is a company that holds at least 25 percent of the entity paying the dividends. The limit is 5 percent when the beneficial owner is the government of a contracting state or any division of it. For all other cases, the limit is 15 percent.

Interest (Article 11):Tax on interest is limited to 12 percent of the gross amount of the interest if the recipient is the beneficiary owner.

According to Argentine income tax law, interest is taxed at a 15 percent rate when originated in bank deposits, public bonds, negotiable obligations, trusts and similar titles and when the same are issued in Argentine pesos with adjustment by inflation or issued in foreign currency. Interest for a loan is taxed at an effective rate of 15.5 percent when the borrower is an Argentine financial institution, when the loan is caused in an export pre-finance operation or when the lender is a financial institution located in a jurisdiction deemed to be cooperative for tax purposes. In all other cases, the tax rate applicable is 35 percent.

Royalties (Article 12): The tax on royalties is limited to 10 percent of the gross amount paid if the recipient is the beneficial owner.

According to Argentina income tax law, royalties paid to a foreign beneficiary are taxed at a tax rate of 21 percent, 28 percent, or 31.5 percent according to the concept and nature of the royalties.

Capital gains (Article 13): The tax on transfer of shares is limited to 10 percent if the seller holds a participation of at least 25 percent of the company whose shares are being transferred, and 15 percent in all other cases. Transfer of real estate property can be taxed in the jurisdiction where the asset is located.

The DTT provisions also contemplate the permanent establishment exceptions and the residence definition according to the OECD model.

It is our understanding that the DTT signed between Argentina and United Arab Emirates presents an opportunity for tax savings, particularly in payments made regarding interest and royalties.

New DTT: Argentina – Mexico

The Argentina – Mexico DTT is applicable to income tax, presumed minimum income tax and personal assets tax collected by Argentina, and to federal income tax collected by Mexico. This DTT is also among the most beneficial ones of all the DTTs signed by Argentina.

The main characteristics are the following:

Business profits (Article 7): Profits of an enterprise of a contracting state shall be taxable only in that contracting state, unless the enterprise carries on business in the other contracting state through a permanent establishment situated therein.

Dividends (Article 10): Tax on dividends is limited to 10 percent of the gross amount of dividends if the beneficial owner is a company that holds at least 25 percent of the entity paying the dividends. For all other cases, the limit is 15 percent.

Interest (Article 11): Tax on interest is limited to 12 percent of the gross amount of the interest if the recipient is the beneficiary owner.

Interest is exempted from tax withholdings at the source when the perceiver is the government of a contracting state or a division of it, or when the interests originate in a loan of a minimum three-year term, and the lender-borrower or the lender is one of the financial institutions listed in the DTT.

According to Argentine Income Tax Law, interest is taxed at a 15 percent rate when originated in bank deposits, public bonds, negotiable obligations, trusts and similar titles and when the same are issued in Argentine pesos with adjustment by inflation or issued in foreign currency.

Interest from a loan is taxed at an effective tax rate of 15.5 percent when the borrower is an Argentine financial institution, when the loan arises in an export pre-finance operation or when the lender is a financial institution located in a jurisdiction deemed to be cooperative for tax purposes. In all other cases, the tax rate applicable is 35 percent.

Royalties (Article 12): The tax on royalties is limited to 10 percent of the gross amount paid if the recipient is the beneficial owner and the royalties are paid in concept of intellectual and artistic property rights, technical assistance, patents and trademarks, software licenses and commercial, industrial or scientific know-how. The limit is 15 percent in all other cases.

According to Argentine income tax law, royalties paid to a foreign beneficiary are taxed at a tax rate of 21 percent, 28 percent, or 31.5 percent according to the concept and nature of the royalties.

Capital gains (Article 13): The tax on transfer of shares is limited to 10 percent if the seller holds a participation of at least 25 percent of the company whose shares are being transferred, and 15 percent in all other cases. Transfer of real estate property can be taxed in the jurisdiction where the asset is located.

The DTT provisions also contemplate the permanent establishment exceptions and the residence definition according to OCDE model. It is our understanding that the DTT signed between Argentina and Mexico presents the opportunity for tax savings, particularly concerning payments made around interest and royalties.