How to Obtain Double Taxation Treaties in Argentina?

In an increasingly interconnected world, international business expansion is a common goal for entrepreneurs and established companies alike. However, one of the primary obstacles to this expansion is the tax burden of operating in multiple jurisdictions. This is where double taxation treaties in Argentina play a crucial role. These international agreements are designed to prevent the same income from being taxed by two different States, thereby facilitating foreign trade and investment. For any entrepreneur seeking to optimize resources and fulfill tax obligations efficiently, understanding how these treaties work is not just a competitive advantage, but a strategic necessity.

Double taxation occurs when two countries claim the right to tax the same income. For instance, if an Argentine company provides services abroad, it might be forced to pay taxes both in Argentina and in the country where the income was generated. Double Taxation Conventions (DTC) establish clear rules to determine which country has taxing rights or how tax paid abroad can be credited. 

Argentina has a network of treaties with various countries, and knowing the process to access these benefits is the first step toward successful international tax planning. In this article, we will explore in detail what these treaties are, the list of countries with active agreements, and the step-by-step process to obtain these benefits.

Understanding the Legal Framework of Double Taxation Treaties in Argentina

The double taxation treaties in Argentina are mostly based on international models such as those from the OECD (Organisation for Economic Co-operation and Development) or the UN. The main objective of these treaties is to eliminate legal double taxation, which happens when the same person is taxed for the same concept in two different states. These agreements are not limited to avoiding double tax payments; they also aim to prevent tax evasion through the exchange of information between the tax administrations of the signing countries.

It is fundamental to understand that these treaties have a higher hierarchy than Argentina's internal laws, as established by the National Constitution. This means that if there is a conflict between a local tax law and the provisions of a current international treaty, the treaty's stipulations will prevail. 

The taxes generally covered by these treaties in Argentina are Income Tax and Tax on Personal Assets. By applying a DTC, the taxpayer can benefit from reduced withholding tax rates at the source for concepts such as dividends, interest, or royalties, or even total exemption in certain specific cases.

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Countries with Active Treaties and Specific Benefits

Argentina has developed a network of treaties with countries across various continents to foster economic reciprocity. The list of nations with which double taxation treaties Argentina exist is dynamic, so it is always recommended to check the current status on the official website of the Federal Administration of Public Revenue (AFIP).

List of major countries with active treaties:

• Americas: Brazil, Canada, Chile, Mexico, and Bolivia (the latter under a particular model of the Andean Community).
• Europe: Germany, Belgium, Denmark, Spain, France, Italy, Norway, Netherlands, United Kingdom, Russia, Sweden, and Switzerland.
• Asia and Oceania: United Arab Emirates, Japan, Australia, and Qatar.

Each of these treaties has its own peculiarities. For example, the treaty with Spain is one of the most widely used by technology service companies, while the treaty with Brazil is vital for the industrial and commercial sector due to Mercosur. Benefits usually manifest as maximum withholding limits. 

For instance, if the general withholding rate for interest payments abroad in Argentina is 35%, a treaty might reduce it to 10% or 12%, generating significant cash flow savings for the organization. Furthermore, these treaties define key concepts such as "Permanent Establishment," which determines if a foreign company's activities on Argentine soil are sufficient for it to be taxed as a local entity.

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Procedure to Obtain and Apply Treaty Benefits

To obtain the benefits of double taxation treaties in Argentina, it is not enough for the treaty to exist; the taxpayer must meet a series of formal and substantial requirements before the AFIP and the paying entity. The process is designed to demonstrate that the beneficial owner of the income effectively resides in the country with which Argentina has the treaty.

Essential steps and requirements:

• Tax Residency Certificate: This is the most important document. The beneficiary of the payment abroad must request from the tax authority of their country a certificate proving their tax residency in that jurisdiction for the corresponding tax period. This document must be apostilled or legalized.
• Beneficiary's Sworn Statement: In many cases, the withholding agent in Argentina (the one making the payment) will require a sworn statement where the recipient of the funds declares that they are the beneficial owner and meet the treaty's conditions.
• Filing with AFIP: Although the application is usually direct by the withholding agent at the time of payment, all documentation must be kept available for the tax authority. In Argentina, General Resolution 2228 regulates much of these accreditation procedures.
• Analysis of the Limitation on Benefits Clause: Some modern treaties include clauses to prevent "treaty shopping" (the abusive use of the treaty by persons who are not residents of either of the two States). It is vital to ensure that the business structure is legitimate and has economic substance in the country of residence.

By following these steps, the Argentine company can make payments abroad applying the reduced rate provided for in the treaty, thus avoiding an excessive tax burden that could compromise the profitability of the international operation.

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FAQ

What happens if Argentina does not have a treaty with the country where I operate? 

In that case, Argentina's internal legislation applies. However, the Income Tax Law allows, under certain conditions, the credit of analogous taxes paid abroad against the Argentine tax liability, up to the limit of the increase in tax due to the incorporation of that foreign income.

Does the tax residency certificate expire? 

Generally, tax residency certificates are valid for one calendar or fiscal year, depending on the jurisdiction that issues them. It is necessary to renew it annually to continue applying the treaty benefits.

How do these treaties influence company registration in the US? 

Although Argentina and the United States do not currently have a comprehensive double taxation treaty in force (there is a limited information exchange agreement), registering a company in the US through OpenBiz allows access to a robust financial ecosystem. It is essential to analyze each specific case to plan for tax efficiency between both jurisdictions.

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