Hacienda Virtual Realty Argentina - HVRA

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Taxation

Taxes are levied in Argentina by the National Government, the Provinces and the local Town Hall authorities.
Most taxes are levied as indirect consumer taxes as they are easier to collect.
Traditionally Argentine Tax Law was based on the principle of taxation at source.
A considerable reform of the tax system in April 1992 abandoned this principle by establishing the taxable transactions on an international basis.
Therefore, individuals and companies resident in Argentina are liable for taxes on a worldwide income and profit basis.



Corporate Income Tax

The tax rate applicable to the taxable income of Argentine corporations is 30%.
The same rate applies to the silent equity of stock issuing partnerships.
The distribution of dividends is not taxed further.
There is no provincial income tax in Argentina.
The income tax rate for branches and other permanent establishments belonging to foreign companies or non-residents is 30% of their taxable income.
There are no differences between the tax treatment of branches and that of corporations. Limited liability partnerships are required to report their taxable income, showing its allocation to the partners, who must bring it into their personal income tax returns and pay tax thereon at the progressive rates applicable to them.
The same treatment applies to the active equity of stock issuing partnerships.

Argentina adopted the worldwide taxation; therefore, Argentine corporations are now required to report their taxable income on a worldwide basis, and are granted relief from Argentine income tax in respect of foreign income taxes paid. A number of income tax withholdings apply to business entities; these must be made by customers, banks and other parties, in respect of sales, interest, rent and lease payments, and so forth.



Income Tax on Individuals

A calendar year basis is used for individual taxpayers. Individuals who have been resident in Argentina at least six months of the year may claim personal allowances.
For determining their taxable income, individuals may also recognize deductions in respect of their contributions to social security funds and medical plans, life insurance premiums (up to a maximum annual limit), funeral expenses (subject to an annual limitation), contributions to retirement plans (up to an annual limit), fees paid to health and medical funds (up to an annual limit), and donations (up to an annual limit), as well as financing expenses for the purchase of assets or services connected with the obtainment of certain types of taxable income.

Resident individuals are required to report their taxable income on a worldwide basis. In this connection, they may claim a tax credit for any related foreign income taxes paid.
This tax credit is limited to the corresponding increase in their tax liability.

Resident individuals are taxed at progressive rates, ranging from 11 to 30%.

There is no provision for filing joint returns, so husband and wife must keep their incomes separate and file separate returns. Salaries and wages are subject to income tax withholding at source. Amounts collected for the sale of goods or rents, interest, fees, commissions, etc. above certain limits are subject to income tax withholding.

Non-resident individuals working temporarily in Argentina (i.e., those who spend less than 6 months of a given calendar year in the country) are entitled to a flat expense allowance equivalent to 30% of their Argentine source income. They are taxed at a straight 30% rate on the excess, so their effective tax rate is 21%.

Instead, a 1.5% tax on the selling price of real estate transfers effected by individuals has been introduced.



Income Tax on Non-Residents

Dividends distributed by Argentine companies are not subject to withholding tax. As in the case of dividends, the remittance of profits by branches or other permanent establishments belonging to foreign companies is not subject to any tax or withholdings.

Any other Argentine source profits paid to non-resident beneficiaries (including those collected in Argentina whilst the beneficiaries have not established permanent residence in this country) are subject to a flat 30% income tax withholding if they are of Argentine source and are not covered by any other special provision.

Under the special provisions covering payments to non-resident beneficiaries, royalties covering technical assistance, engineering or consulting services rendered in Argentina but not otherwise available here are subject to an effective withholding rate of 18%, provided the underlying contracts fulfil the requirements of the technology transfer law, while royalties for operating patents and other types of consideration covered by contracts fulfilling the requirements of this law are subject to an effective withholding of 24%.
Royalties paid to non-residents under copyrights registered with the National Copyright Board are subject to an effective withholding of 10.5%. Interest payments to non-residents are in general subject to an effective withholding tax at the rate of 12%.



Social Security Taxes

The main social security rates levied in Argentina are:

A Federal Covenant has effected a reduction of employers contributions of up to 60% depending on jurisdiction, on the following sectors: primary, industry, construction and tourism.
An obligatory legal bonus [NOTE: "aguinaldo"], equivalent to one month's salary per year, is also subject to similar contributions.

Professionals, researchers, scientists and technicians engaged abroad to work in Argentina for one tour of duty not exceeding two years may apply for exemption from Argentine pension fund withholdings and employer contributions provided they have not taken out permanent residence here, and that they are covered against the contingencies arising from old age, disability and death in their country of nationality or permanent residence.
When the exemption is granted, it applies as from the date of filing.



Value Added Tax

V.A.T. ("IVA") has a very broad scope, as it is levied at all stages of importation, production and trading, including retailing, as well as on a wide range of services (including bank charges and interest).

The standard rate is 18% (temporarily raised to 21% for a year beginning March 1995).
[NOTE: no sign of falling ... ]

All sales of movable assets on the domestic market (as well as imports thereof) are taxed unless specifically exempt under the law.
Practically the only exemptions regarding movable assets concern publications (books, pamphlets, periodicals, magazines, and so forth), shares and other securities, and sales of bread, milk and common water in its natural state to consumers as well as sales of medicines for human use by wholesale druggists and chemist stores (i.e., their sale by the laboratories that manufacture them is taxed).

Property sales are taxed (including the value of the land) only when undertaken by building companies (when the full or partial construction or sale of the property is undertaken with a profit motive) or companies that had earmarked the properties for activities subject to V.A.T. and had recognized fiscal credits for the construction thereof in the last ten years.

The leasing and rendering of services is in general subject to V.A.T. as well, with very few exceptions.
The latter include life insurance, retirement insurance, passenger transport, property rentals, most educational and health services, stock exchange transactions, admissions to sporting events and artistic events or performances, the services of directors and syndics of corporations, employees' salaries, news agency services, radio and TV broadcasting and media advertising space.

Exports are not subject to V.A.T., and exporters may in addition obtain a refund on the tax credit for V.A.T. billed to them for the goods exported. Imports are subject to V.A.T. at the rates corresponding to the items involved.

Parties liable for V.A.T. whose income has been below $ 144,000 (for the resale of goods) or $ 96,000 (for other activities) in the previous calendar year have the option not to register.

Registered taxpayers or the Customs House are required to bill and collect from their purchasers (or importers) who are liable but not registered for V.A.T. an excess tax equivalent to 18% of a flat estimated profit of 50%; i.e. 9% in addition to the standard 18% tax.

It is compulsory for all business concerns (whatever their nature and size) to issue vouchers (invoices, receipts, cash sales slips, work certificates, etc.) showing the place and date of issuance, name and address of the issuer and the buyer; the issuer's tax registration numbers; a reference to whether the issuer is held responsible (liable) or not for V.A.T., with a similar reference concerning the recipient of the voucher, and a detailed description of the sale or service involved.
These invoices must be prenumbered sequentially. There are penalties for breaches of the related regulations, which cover a very wide scope and can even extend to the closure of the issuing company (there are a few exceptions, such as banks, insurance companies, admission tickets, passenger tickets, fuel sales to the public, sales under a minimal limit, etc.).
Their purpose is to contribute to the avoidance of tax evasion.



Tax on Personal Non-Productive Net Worth

Individuals and undivided estates are subject to an annual wealth tax of 0.5% on personal non-productive net worth over $ 100,000 at December 31.
Shares, negotiable bonds, government securities, time deposits and savings account deposits with domestic banks should be included when calculating the taxable amount for this tax.



Stamp Duty

This tax was largely suppressed in the Federal Capital (City of Buenos Aires) effective February 1, 1993, since when it is only levied on deeds covering the transfer of title to real estate (at rates ranging from 0.75% to 2.5% of the price set for the transaction).

Stamp duty is levied by the provinces on documents supporting legal transactions, such as deeds, mortgages, contracts, letters accepting proposals, etc. The rates and rules for assessment are determined in each jurisdiction.

Sample rates in the province of Buenos Aires are 1% for contracts, recognitions of liabilities, promissory notes, bills of exchange and instruments purporting the recognition of commitments to deliver funds, and 4% for conveyances of real estate.
There are exemptions for documents instrumenting financial transactions and those connected with foreign trade or which are a consequence of such transactions, including pro forma bills of exchange.
There are rules designed to avoid double taxation in some cases involving instruments supporting transactions taking effect in other jurisdictions.



Excise Taxes

These nationwide federal taxes are levied on the manufacturers or importers of tobacco, spirits, alcoholic beverages, tyres, fuel and lubricants, and on the manufacturers, importers, bottlers, packagers, and finishers (including the persons for whose account such jobs are undertaken) of toiletries, luxury articles (such as jewellery and furs), soft drinks, syrups, extracts and concentrates, television sets, tape recorders, record players, radiograms, automobiles, magnetic tapes, phonograph records, and photographic plates and film, etc., as well as on insurance companies in respect of the premiums they charge.

Excise taxes are paid on the basis of sworn returns or through stamps affixed to the products sold: rates vary considerably, ranging up to 66% of the retail selling price (including the tax itself) in the case of cigarettes.
The excise taxes previously incident on fuel, natural gas supplied through networks (17%) and telephone services (24%) were suspended on January 7, 1991. In April 1991 excise taxes on tyres were reduced, (their current level is 13.5%) and those on some electronic goods were suspended.



Tax on the Transfer of Liquid Fuels and Petroleum and
Natural Gas By-Products

This is a tax on the transfer (for valuable consideration or free of charge) of liquid fuels and other petroleum and natural gas by-products, which is applied to only one stage of the traffic in them.
The parties responsible for paying it are oil refiners, importers and traders. Transfers between refiners and traders are not taken into account. The tax is settled on the basis of unit amounts per liter or cubic meter. Exports are exempt from this tax. The tax rates vary according to the type of fuel or by-product (e.g. 55% for premium petrol, etc.).
Payments are made on set dates (7 times a month), and tax returns are filed monthly.



Crude Oil Royalties

Companies engaged in crude oil extraction are subject to a fixed royalty per km2, as well as a 12% provincial royalty on the well-head price of the oil, less transportation expenses (the latter are limited to a maximum that is equal to 4% of the aforementioned well-head price).
Incidentally, the gross revenue tax rate applicable to oil exploration companies is much lower than the standard rate of this tax.



Taxes on Gross Revenue

This tax, originally levied by the provinces and the city of Buenos Aires on gross receipts, has been repealed in most jurisdictions for primary, manufacturing, construction and tourism activities.
Deductions from gross sales are usually allowed for discounts, returns and excise taxes; the non-recognition of V.A.T. is also allowed.
Export transactions and trading in government securities are exempt in the city of Buenos Aires and most of the provinces.
Banks and other financial entities may deduct interest payable on deposits for purposes of determining the tax basis. The rates vary from one province to another.



Tax on the Transfer of Real Estate
for Valuable Consideration

This is a national (= "federal") tax.
The rate is 1.5% and it is levied on the selling price of property sales effected by individuals when it is not subject to income tax.



Land and Property Taxes

Land and property taxes are levied by the provinces and the Municipality of Buenos Aires, based on the assessed valuation of the property. Rates vary from one jurisdiction to another, but its amount as a rule is negligible (is never considered in tax planning).



Taxes on Motor Vehicles (License)

These taxes are levied by the provinces and the city of Buenos Aires, based on a variety of guidelines (model, weight, etc.).



Corporation Inspection Tax

This annual tax is levied on all corporations registered in the National jurisdiction. It comprises an organization tax payable in the year in which a corporation is set up, and thereafter an annual assessment based on a sliding scale.



Exemptions and Incentives

The following individuals and entities are exempt from income tax:

diplomatic representatives if reciprocal treatment is given to Argentine diplomats, cooperatives, religious institutions, trade unions, and educational, charitable and scientific institutions, that apply for and are specifically granted such exemption, etc.

The following types of income are exempt:

interest on fixed-term deposits and savings accounts with banks and finance companies; income from government securities and negotiable bonds and gains on their sale; and so forth.
These exemptions do not apply to companies. Dividends paid by companies organized under Argentine law are not subject to income tax here, regardless of whether the shareholder is an individual or a legal entity.
In the case of export transactions, the various domestic tax refunds or reimbursements collected by the exporters are exempt from income tax.

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