On March 20, 2014 Argentine and Swiss tax authorities signed a new agreement to avoid double taxation with respect to taxes on income and on capital. The agreement also includes the exchange of information and will be enforced once both countries complete their national approval procedures.
From 2001 to 2012, an agreement to avoid double taxation between Switzerland and Argentina was in "provisional" force with respect to taxes on income and on capital, which was terminated by the Argentine Republic, as of January 31, 2012. The agreement did not include any information exchange clause, and it meant significant advantages for taxpayers and businesses comprehended in it, particularly with regards to withholding Income Tax applicable to payments of interest and royalties, and also with regards to Personal Assets Tax on shares of Argentine companies held by shareholders resident in Switzerland.
On March 20, 2014, Argentine and Swiss tax authorities came upon a new agreement, materialized in the new “Convention between the Swiss Confederation and the Argentine Republic for the Avoidance of Double Taxation with respect to taxes on Income and on Capital”, which shall apply, in Argentina, to income tax, the tax on presumed minimum income and the personal assets tax. Overall, the new agreement follows the OECD outlines.
Business profits - A cap is not set but it provides with a mechanism for determining the profits of a permanent establishment.
Dividends - Tax withholding percentages in the country of residence of the entity that has to pay them are maintained in accordance to the following limits:
- 10% of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) which holds directly at least 25 per cent of the capital of the company paying the dividends;
- 15% of the gross amount of dividends in all other cases.
According to the Additional Protocol to the Agreement, whether under the Convention, dividends or interest shall be relieved from tax in Switzerland and these dividends or interest, according to the law in force in the Argentine Republic, are considered to be foreign-source income and for that reason are exempt from tax in the Argentine Republic, Switzerland may tax such dividends or interest as if the Convention had not come into effect.
Interest - As in the previous agreement they may be taxed in the country of origin to a maximum rate of 12%.
Royalties - May be taxed in the source country. The maximum rates for the taxability in the country of origin are kept (3% news 5% copyright, 10% use of equipment, patents, trademarks) and a ceiling of 15% for other cases not covered by the above parameters is established.
Corporate profits, interest and royalties that are higher than what had been agreed between independent parties may be taxed by each Contracting State according to its domestic law.
Capital Gains - Gains from the alienation of shares or securities representing the capital of a company may be taxed by the State of residence of the company whose shares are transferred to the maximum of:
- 10% in the case of a direct shareholding of at least 25%, or
- 15% in all other cases.
Similarly, the sale of shares whose value comes in more than 50%, directly or indirectly, of immovable property may be taxed by the State of residence of the company without any exceptions limit the publicly traded company or develop its activity in the aforementioned properties
Patrimony - The clause that allows that shares issued by an Argentine company belonging to a Swiss resident could only be taxed in Switzerland was suppressed. However, a provision under which certain "elements" of "capital of a resident of a Contracting State, located in the other Contracting State, may be taxed in that other State is introduced.
Exchange of information - The clause applies to taxes of every kind and nature received by a Contracting State or political subdivision or local authority (not limited to taxes covered by the scope of the Convention).
The information received by a Contracting State, in principle, will only be used for tax purposes. However, information received by a Contracting State may be used for other purposes if, under the law of both states, can be used for such other purposes and the competent authority of the supplying State authorizes information so.
The Contracting States may not request information for speculative purposes (fishing expeditions) or request information that is unlikely to be relevant to the tax affairs of a given taxpayer.
As established by the Protocol to the Agreement, the exchange of information clause does not oblige the Contracting States to exchange information automatically or spontaneously.
Entry into force - The new agreement shall enter into force thirty days after the later of the notifications by The Governments of the Contracting States that the constitutional requirements for the entry into force of the Convention have been complied with and its provisions shall have effect in both Contracting States, in respect of taxes withheld at source, on income derived on or after the first day of January of the calendar year in which the Convention enters into force and, in respect of other taxes on income or capital, for taxes chargeable for any fiscal year beginning on or after the first day of January in the calendar year next following the year in which the Convention enters into force.
With regard to the exchange of information clause, its provisions shall have effect for information that relates to fiscal years or business years beginning on or after the first day of January of the calendar year next following the entry into force of the Convention.