• Service: Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 9/5/2013

Argentina - Non-resident capital gains tax; limited time to act 

September 5: Multinational corporations with Argentine subsidiaries must quickly assess and take possible steps to address the potential impact of provisions in a tax reform bill submitted late last week—specifically, measures introducing a 15% tax on capital gains derived from the disposition of unlisted securities such as shares, bonds, and other instruments, etc., and a provisions introducing a 10% tax on dividend and profit distributions.

A summary of main aspects of the tax measures of interest to a multinational company is provided below.

KPMG observation

The new taxes may present a significant challenge, and undoubtedly could make investments in Argentina more costly, for foreign investors. The changes (as proposed) would become effective immediately from the date of publication in the official gazette.

Tax on capital gains

Under the current rules, non-residents that sell or dispose of Argentine shares are not subject to Argentine income tax. If the legislation is enacted:

  • Capital gains derived from the sale of shares, stocks, bonds, and other unlisted securities would be subject to a 15% income tax.
  • Capital gains derived from the alienation of shares, bonds or any other listed security would be subject to income tax at the rate of 15% (including capital gains of non-residents).

The capital gains tax would apply to corporate and other taxpayers.

The tax basis in the shares would need to be verified by the Argentine tax authorities.

Taxpayers could elect to be taxed on the gross sales price. In such situations, 50% of the gross sales price would be the deemed to be the amount of capital gain that would be subject the 15% tax—effectively, a 7.5% tax on the gross sales price.

Tax on dividends and profit distributions

The pending legislation includes measures providing that dividends and profit distributions would be subject to a new tax on such distributions, at a rate of 10%.

The dividend distribution tax would be in addition to the existing 35% "equalization" tax that applies when the distribution is made from earnings of the distributing entity and has not previously been subject to corporate income tax (i.e., so that the earnings are taxed Argentina).

Under the current integrated tax rule, dividend and profit distributions from earnings that have previously been taxed are generally not subject to income tax. In other words, if the earnings have been subject to a corporate level tax at a 35% rate, a dividend distribution is not subject to any additional income tax withholding. However dividends paid to either residents or non-residents from book earnings that exceed previously taxed earnings are subject to an “equalization tax” at a rate of 35%, thereby providing that those earnings are subject to tax at least once in Argentina.

KPMG observation

Given that the potential impact of this tax bill may be significant, multinationals with significant investments in Argentina immediately need to consider the effect of enactment of these measures on their business transactions.

For more Information, contact a KPMG tax professional:

Devon M. Bodoh, Principal in Charge, Latin American Markets

+1 202 533 5681

Alfonso A. Pallete, COO, Latin American Markets

+1 305 913 2789

Marco Banuelos, Latin American Markets

+1 305 341 6424

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