WHT on dividend and profit distributions
As a result of the 2017 tax reform, a new WHT on dividend distributions and branch profit remittances has been introduced at a rate of 7% (while the applicable profits tax rate is at 30%) and 13% (when the profits tax rate lowers to 25%).
The tax reform also has abolished the so-called ‘equalisation tax’ for profits generated in taxable years starting on or after 1 January 2018. The equalisation tax was a WHT levied at a 35% rate on dividend distributions in excess of tax earnings. However, the equalisation tax still applies to dividend and branch profit distributions made out of earnings accumulated prior to 1 January 2018 that exceeded tax earnings as of the year-end prior to the relevant distribution.
Other payments to residents and to non-residents are subject to WHT rates as follows:
|Interest (1)||Royalties (1, 2)|
|Resident corporations||6/28 (3)||6 (4)|
|Resident individuals||6/28 (3)||6 (4)|
|Non-resident corporations and individuals:|
|France (15)||15.05/20 (6)||18|
|United Arab Emirates (9)||12||10|
|United Kingdom||12 (5)||3/5/10/15|
Withholding from payments of interest and royalties to non-residents is based on a flat rate of 35% applied to an assumed percentage gross profit margin. This margin is not contestable, but the resultant rate may be limited by bilateral treaty. Under the 1998 tax reform, the general margin for interest paid for credits obtained abroad is 100%. However, a margin of 43% is applicable (i) if the debtor is a local bank; (ii) if the creditor is a foreign financial institution located in a country not considered as a low or no tax jurisdiction, or in countries that have signed an agreement with Argentina for exchange of information and have no bank secrecy laws, which are under the supervision of the respective central bank; (iii) if the interest is paid on a loan dedicated to the purchase of tangible assets other than cars; (iv) if the interest is paid on debt certificates (private bonds) issued by local companies and registered in certain countries that have signed an agreement with Argentina for the protection of investments; and (v) on interest paid on time deposits with local banks.
Royalties’ covers a variety of concepts. The rates given in this column relate specifically to services derived from agreements ruled by the Foreign Technology Law, as follows:
Technical assistance, technology, and engineering not obtainable in Argentina: 21% (35% on assumed profit of 60%).
- Cessation of rights or licences for invention patents exploitation and technical assistance obtainable in Argentina: 28% (35% on assumed profit of 80%). On non-registered agreements, the rate is 31.5% (profit of 90% is assumed) or 35% (profit of 100% is assumed), depending on the case.
Several other concepts of 'royalties' are subject to rates that, in turn, may be limited by treaty. A broad sample of these concepts and the non-treaty effective rates are set forth in Note 2.Payments to non-residents (only) for 'royalties', rentals, fees, commissions, and so on, in respect of the following, are subject to withholding at the rates given below on the basis of assumed gross profit margins (Note 1) unless limited by treaty. The treaty concerned should be consulted to determine any limitation in each case.
|Freight and passenger bookings (other than those covered by special treaties), news and feature services, insurance underwriting||3.50|
|Rental of movable assets||14.00|
|Motion picture, video, and sound tape rentals and royalties; radio, television, telex and telefax transmissions; any other means for projection, reproduction, transmission, or diffusion of image or sound; sale of assets located in Argentina||17.50|
|Rental of real estate||21.00|
|Any other Argentine-source income (unless the non-resident is or was temporarily resident)||31.50|