Amendments to the Corporate Income Tax rate
On June 16, 2021, Law 27,630, which introduced amendments to the corporate income tax law, entered into force.
The most relevant changes introduced by Law 27,630 are the following:
Corporate Income Tax rate
Under prior law, the corporate income tax (CIT) rate was 25%. As per the new law applicable to fiscal years starting on or after January 1, 2021, corporate income will be subject to tax at progressive rates ranging from 25% to 35% as follows (amounts are in Argentine Pesos):
- Taxable income from AR$ 0 to AR$ 5,000,000: 25%
- Taxable income from more than AR$ 5,000,000 to AR$ 50,000,000: AR$ 1,250,000 + 30% on the amount that exceeds AR$ 5,000,000.
- Taxable income from more than AR$ 50,000,000: AR$ 14,750,000 + 35% on the amount that exceeds $50M.
Starting in January 2022, these brackets will be annually adjusted to account for inflation, as per the consumer price index “IPC”, published by the relevant governmental agency (INDEC).
Withholding on dividend distributions
Under prior law, distribution of earnings attributable to FY 2021 were subject to withholding tax (WHT) at a 13% rate. The WHTr ate was tied to the prior CIT rate (25%). Law 27,630 reduced the WHT rate on dividend distributions to non-residents from earnings obtained as from FY 2021 to 7%.
New promotional regime for knowledge-based activities
Argentina’s government, on 26 October 2020, enacted new tax incentives intended to promote certain knowledge-based activities through the end of 2029.
Incentives under the new regime include a reduction by a certain percentage of the statutory corporate income tax (CIT) rate (currently 30%), a reduction to 0% on export duties applicable to the exportation of promoted services, a non-transferable fiscal credit certificate of up to 70% of social security contributions paid by the employer, and tax stability with respect to the new regime’s benefits (available until 31 December 2029).
A similar regime promoting knowledge-based activities was enacted on 10 June 2019, with the publication of Law No. 27,506. This previous regime was suspended, together with its regulations, under a new administration on 20 January 2020 and replaced with this newly shaped regime.
New informative regime requiring domestic and international tax planning disclosures
The Argentine Tax Authorities (AFIP) issued Resolution 4838/2020 on 19 October 2020, which follows the Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) Action 12 (Mandatory Disclosure Rules). The resolution, effective as of 20 October 2020, creates an informative regime with respect to domestic and international tax planning strategies ('the Regime'). The new reporting requirements may apply retroactively.
The Regime requires taxpayers to report any agreement, scheme, plan, or other action resulting in a tax advantage or any other benefit with respect to any Argentine federal tax (not only income tax), or any informative regime in place in Argentina, either in a domestic or cross-border context.
Examples of cross-border tax planning strategies subject to the Regime include:
- using legal entity vehicles to take advantage of tax treaty benefits
- adopting strategies that prevent the creation of a permanent establishment (PE) in Argentina
- when a strategy results in stateless income (supuesto de doble no imposición), allocates taxable income to other jurisdictions, or results in the avoidance of disclosure requirements through any Argentinian informative regime
- when the planning involves non-cooperative jurisdictions or jurisdictions that are considered to be low or no-tax
- taking advantage of tax asymmetries or utilising hybrid instruments, and
- pursuing a tax-planning strategy specifically listed on the tax authorities’ website (not yet published).
The reporting obligation is currently on the Argentine taxpayers participating in a tax-planning process, agreement, scheme, etc., as provided by the Resolution. Tax advisors (individuals and any entities that help, assist, advise, or perform any tax-planning implementation activity
in the course of their business) participating in tax planning either directly or through third parties are also compelled to comply with this regime.
For new domestic tax planning, the due date for reporting is the last day of the month following the last month of the fiscal period in which the planning was implemented. For new cross-border planning, reporting must be made within ten days of implementation. The Resolution provides a special deadline for tax plans implemented between 1 January 2019 and 20 October 2020, as well as tax plans implemented prior to 1 January 2019 that were still in place on 20 October 2020. In those cases, the tax planning must be reported by 29 January 2021.