When considering an investment into a country, one has to take into consideration income received from the investment country in the form of dividends, interest and royalties, as well as any possible capital gains that might arise from such investment.
In Argentina, dividends as well as branch remittances are not subject to tax to the extent that the amount paid does not exceed the after-tax accumulated taxable income. If so, a 35% withholding tax is imposed on the exceeding amount. Such may be an obstacle when profits accumulated for several years are distributed to shareholders those whether or not resident in a treaty country.
As general rule, interest from loans other than granted by local or foreign financial entities (countries which signed exchange-of-information agreements except the ones located in low tax jurisdictions) are subject to a final withholding tax of 35%. The rate may be reduced to 12% under the treaty provisions. Payments of royalties are also subject to a 31,5% withholding tax that may be reduced to 3% under the treaty. Regarding shareholders’ loans, a 2:1 ratio is applied to Argentinean corporations on loans which are not subject to the 35% withholding tax.
As it is mentioned above, there is no withholding tax on dividends paid to non residents to the extent that the amount of such dividends does not exceed the after-tax accumulated taxable income of the payer. Consequently, just by taking some precautions regarding the amount of payments it is possible to transfer dividends to non-residents without being obliged to pay any withholding tax. On the other hand, it is also possible to use some double tax treaties signed by Argentina and to mitigate the high withholding tax rates applicable to dividend payments to non-treaty countries.
Argentina has concluded double tax treaties with the following countries:
(a) The rates shown in the table apply to the amount of the dividend distribution exceeding the after-tax accumulated taxable income of the payer. Because tax treaties generally limit the withholding tax rate that may be applied to the gross amount of the dividends, it is not clear that the reduced rates in the table will be applied to the excess amount referred to in the preceding sentence. However, it appears that taxpayers will be able to apply the reduced treaty withholding tax rates listed in the table to the excess amount, even if the application of the statutory rate of 35% to the excess would result in a withholding tax that is less than the withholding tax resulting form application of the treaty rate to the gross amount of dividends.
(b) The 10% rate applies if the beneficial owner of the dividend is a company that controls, directly or indirectly, at least 25% of the voting power of the payer. The 15% rate applies to other dividends.
(c) The rates listed are the lower of the treaty or statutory rates.
(d) In general, the rates apply to the following categories of payments: 3% for the use of, or right to use, news, 5% for the use of, or right to use, copyrights of literary, dramatic, musical or other artistic works (but not royalties with respect to motion picture films and works on film or videotape or other means of production for use in connection with television ; 10% for the use of, or right to use, industrial, commercial or scientific equipment or patents, trademarks, designs, models, secret formulas or processes, or for the use of or information concerning scientific experience, including payments for the rendering of technical assistance ; and 15% for other royalties. These categories may differ slightly from treaty to treaty.
(e) The 10% rate applies to royalties for the use of, or the right to use, copyrights of literary, artistic or scientific works. The 18% rate applies to other royalties.
(f) Under a protocol to the treaty, as long as Swiss domestic law does not impose a withholding tax on royalties paid to residents, royalties are taxable only in the contracting state where the beneficial owner of the royalties is resident.