Group taxation is not permitted in Argentina.
The transfer pricing regulations governing inter-company transactions adopt principles similar to those of the OECD, pursuant to which companies must comply with the arm’s-length principle in order to determine the value of goods and services in their transactions with foreign-related companies.
The following taxpayers, among others, must generally file, together with their annual CIT return, a supplementary return (transactions encompassed by regulations governing transfer prices) and transfer pricing study:
- Taxpayers carrying out transactions with related individuals or legal entities set up, domiciled, or located abroad. Two or more persons are considered to be related parties when one of them takes part, either directly or indirectly, in the administration, control, or capital of the other, or when a person or group of persons takes part, either directly or indirectly, in the administration, control, or capital of those persons.
- Taxpayers carrying out transactions with related individuals or legal entities not set up, domiciled, or located in countries considered to be cooperative for tax transparency purposes, whether related or not.
- Argentine residents carrying out transactions with PEs located abroad and owned by them.
- Argentine residents, owners of PEs located abroad, for transactions carried out by the latter with persons or other type of related entities domiciled, set up, or located abroad.
The Regulatory Decree provides specific rules to determine the fairness of the transfer pricing methodology. These rules are similar to those set by the OECD and contemplate six methods, including the following:
- Comparable uncontrolled price (CUP).
- Resale price method (RPM).
- Cost plus.
- Profit split method (PSM).
- Transactional net margin method (TNMM).
- Special method for export of goods with prices quoted in transparent markets.
There is no specific hierarchy, as each particular transaction must be analysed based on the assets, functions, and risks involved and on information available. Regulations establish that the most appropriate method is that which reflects the economic reality of the transactions.
Country-by-country (CbC) reporting
Through General Resolution (GR) 4130-E, the Federal Administration of Public Revenue (AFIP) established an annual information regime related to the submission of the CbC report and is aligned with Action 13 of the Base Erosion and Profit Shifting (BEPS) Action Plan regarding CbC reporting.
This obligation is applicable to those multinational enterprise (MNE) groups whose ultimate parent’s total consolidated revenue is equal to or higher than 750 million euros (EUR), or its equivalent in the local currency converted to the exchange rate as of 31 January 2015, for the fiscal year prior to the one being reported. The CbC report will be filed annually, no later than the last business day of the 12th month following the end of the ultimate parent’s reporting fiscal year.
Although mainly MNE groups whose ultimate parent is resident in Argentina have the obligation to submit the CbC report, other Argentine entities from MNE groups may also be required to file a CbC report if certain circumstances set forth in the aforementioned resolution take place (i.e. subrogated entities not designated, etc.).
In addition, and regardless of having the obligation or not to file the CbC report in Argentina, the provisions in Title II of said GR require all Argentine entities that are members of a MNE group to file with the AFIP information about the MNE group they belong to, including if the group is required to comply with the submission of the CbC report and, if so, which company will perform the filing on behalf of the group (i.e. the ultimate parent or a subrogate entity). The local entity must comply with this obligation no later than the last business day of the third month following the end of the ultimate parent’s reporting fiscal year.
Thin capitalisation rules apply as a restriction on the deductibility of interest and foreign exchange losses arising from debts of a financial nature that are contracted by taxpayers with related entities (whether local or foreign).
According to the 2017 tax reform, the former 2:1 debt-to-equity thin capitalisation rule was replaced with the BEPS-based rule. The deduction on interest expense and foreign exchange losses with local and foreign related parties now is limited to 30% of the taxpayer’s taxable income before interest, foreign exchange losses, and depreciation. The taxpayer is entitled to carry forward excess non-deductible interest for five years and unutilised deduction capacity for three years.
Certain exceptions to the above limitation are also available.
Controlled foreign companies (CFCs)
Argentina does not have a CFC regime. However, an Argentine taxpayer would be required to immediately tax passive income generated by a CFC that is directly or indirectly held by the Argentine taxpayer to the extent that more than 50% of that CFC’s income is passive and is effectively subject to a tax that is lower than 75% of the applicable Argentine income tax rate.