|Bruchou, Fernández Madero & Lombardi, Taxand Argentina|
|EY (Pistrelli, Henry Martin y Associados)|
|Rosso Alba, Francia & Asociados|
|Goldemberg & Asociados|
|Laiún, Fernández Sabellla & Smudt|
|Luna Requene & Fernández Borzese Abogados|
|Teijeiro & Ballone Abogados|
Despite Argentina being South America's second largest economy, the country has suffered much economic setback over the past decade and is now slowly clawing its way out of austerity. Economic mismanagement and allegations of corruption have severely hampered an economy battling a difficult recession. Since taking office in 2015, President Mauricio Macri has been actively trying to turn around the legacy of the past two administrations. However, despite the implementation of free market policies to stimulate growth, recovery remains tepid. As of February 2017, the national deficit stood at ARS 26.7 billion ($1.6 billion), ARS 10 billion more than in 2016. As a result, the government has increased transfer pricing audits with an eye to enhancing revenue streams from multinationals.
The international proliferation of transfer pricing rules and regulations, has significantly impacted tax authorities globally. Companies operating in Argentina now face increasing audit activity from the tax administration, which in recent years has challenged tax-savings motivated transactions and applied the substance over form principle. Accordingly, the tax authorities are permitted to disregard the legal form of an arrangement in favour of the economic substance of the matters.
For example, in the Molinos Rio de la Plata case, the Argentine court (House I of the Federal Chambers of Appeals) applied the principle of substance over form on an extraterritorial basis to a holding company that had avoided paying income tax in Chile and in Argentina. Martin Barreiro, head of tax at Baker McKenzie stated, "The principles behind BEPS have been taken into account by the Argentine court – despite the government not introducing specific amendments in the Argentine tax legislation".
Furthermore, following the ruling in Vicentín SA (September 2016), the tax authorities have been working to develop alternatives to the 'sixth method', in order to benchmark exports of commodities produced in Argentina. The sixth method makes it mandatory to calculate the income tax using the market price at the shipment date for commodity exportations. This applies when there is an intervention of an international intermediary agent. "When the tax authorities reviewed exportation of commodities…they applied the criteria of comparing the FOB invoiced with the FOB reported by the Secretariat of Agriculture, Livestock and Fisheries (SAGPyA) at the shipping date," stated Fernanda Laiún, head of tax and transfer pricing at Laiún, Fernández Sabella & Smudt. This approach has been long established. However, the Vicentín SA ruling was confirmed by the Court of Appeals on July 11 2017, further eroding the use of the SAGPyA price as a valid benchmark. For this reason, the government is now working on a newly-designed database of commodity prices, with the assistance of the Buenos Aires grain exchange (Bolsa de Cereales).
However, what has remained problematic about this approach is that the SAGPyA "does not report the minimum, maximum, opening or closing price. It neither distinguishes between transactions with intermediaries, related companies, tax havens, third parties, nor selling conditions", Laiún added. In Vicentín SA, the Tax Court of Argentina (Tribunal Fiscal de la Nación) formally rejected this approach and has demanded a new and more flexible method to be adopted instead.
Moreover, for distributors of MNEs located in Argentina, the Argentine revenue service (ARS) has been challenging the traditional resale price margin method, in favour of net margin analysis. "This kind of controversy is typical for 2017, and reflects a tax audit trend for both the Argentine and the Chilean revenue services," said Cristian Rosso Alba, head of tax and transfer pricing at Rosso Alba, Francia & Asociados. While the cases being litigated in Chile have not been decided yet, Argentina first court decision on this matter was made public during July. It involves the pharmaceutical company Roche (Federal Tax Court, 2.22.17, "Productos Roche S.A. Química e Industrial s/apelación"), and the Tax Court uphold taxpayer´s criterion of using a gross – rather than a net – margin approach.
The latest normative development in relation to BEPS was the signing of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). On June 7 2017, Argentina joined more than 70 other countries and became a signatory of the convention. The MLI stipulates a series of measures that will overhaul existing bilateral tax treaties to reduce the opportunities for tax avoidance. It is expected that the MLI convention will increase tax certainty by strengthening transfer pricing provisions. Despite Argentina's formal signing, "the final outcome of this initiative will depend on congressional approval, and treaty-amendment matches with the treaty counterparts," stated Rosso Alba. Under the MLI treaty, Argentina will have 17 treaty counterparts. These will include Australia, Belgium, Canada, Chile, Denmark, Finland, France, Italy, Mexico, Netherlands, Norway, Russia, Spain, Sweden, Switzerland, UK and the UAE. Other double tax treaties executed by Argentina, like the ones with Bolivia and Brazil, do not follow the OECD Model Convention, so they were not eligible for the MLI.
In addition, Argentina has signed the Multilateral Competent Authority Agreement (MCAA). This agreement details the automatic exchange of country-by-country reports under BEPS Action 13. From September 2017, this data will be exchanged with more than 50 other jurisdictions. Rosso Alba expects that the MCAA will cause the revenue authority to quickly amend Resolution 1122/01, so that the master file and country-by-country reporting standards can be fully incorporated into Argentine law.
Administración Federal de Ingresos Públicos (AFIP)
Hipólito Yrigoyen 370, C1086ADD, Buenos Aires, 1086
Tel: +54 0810-999-2347
(As of July 2017)
|Corporate income tax||35%|
|Branch tax rates||35%/10%-35%|
|Royalties from patents||12%-28%/31.5%|