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  • Service: Tax, International Corporate Tax, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 7/30/2012

Argentina - Payments for know-how not included in expense ratio 

July 30: A court in Buenos Aires province determined that certain expenses for “know-how” (royalty payments) were not to be included in the expense ratio.

At issue were payments for acquiring technical and / or scientific skills that were used by the taxpayer in the production of its product (in this case, cigarettes). The taxpayer asserted that payments for know-how were intrinsic to the cigarettes that it manufactured, marketed, and sold.


The tax authorities of the province of Buenos Aires, however, determined that these expenses were not to be treated as royalties for a technology transfer and thus were not to be included in the expense ratio. The court agreed with the tax authorities, finding that if the royalties were eligible expenses, they would be allocated to the jurisdiction where production occurs and not attributed only as a percentage of royalties based on revenue.


This conclusion was based on a finding that expenses incurred as royalties are compensation for the activity of the party providing the know-how, and do not have any connection with the economic activity conducted by the taxpayer.


The case identifying information is: Nobleza Piccardo S.A.C.I y F. c/ Provincia de Buenos Aires (Spanish) No. 15/2012 [PDF 118 KB] (18 April 2012)


Read a July 2012 report (Spanish) prepared by the KPMG member firm in Argentina: Las regalías en el marco del Convenio General



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