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Details

  • Service: Tax
  • Type: Regulatory update, Survey report
  • Date: 1/1/2014

Argentina - Taxation 

International funds and fund management survey
1.1 Taxation of funds
1.2 Taxation of resident unitholders/investors in a resident fund
1.3 Taxation of resident unitholders/investors in a non-resident fund
1.4 Taxation of non-resident unitholders/investors in a resident fund
1.5 Taxation of fund management/custodian companies
1.6 Entitlement to income
1.7 Double tax agreements
1.8 Other tax-favored vehicles
1.9 Transfer taxes, stamp duty, capital duty
1.10 Miscellaneous


1.1 Taxation of funds

There are two kinds of common investment funds for tax purposes. The open fund, which includes mainly financial assets, is not subject to tax on either its income or gains on its assets. The closed fund, which has special objectives similar to companies, is subject to various taxes: income tax, property tax, VAT, and turnover tax.


In the case of income tax, the profits of the fund are not taxable if the following requirements are fulfilled.


  • The fund must be related to infrastructure projects corresponding to public services.
  • Assets making up the fund must be credit rights originating from financing transactions.
  • Units must be placed by public offering.
  • It must not substitute fund property except for short term investments.
  • The fund term should be consistent with the final cancellation date of the credit right which created the fund.
  • The total gross revenues of the fund must be generated by:
    1. the revenues originated by the assets that created the fund
    2. the profit originated from the sale of financial assets that created the fund
    3. the short term investment revenues.

It is allowed that 10 percent of total revenues could be generated by other transactions done in order to maintain the value of the assets.


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1.2 Taxation of resident unitholders/investors in a resident fund

Any distribution by the fund to the investors, whether such distribution comprises income or capital gains, is not considered taxable income of the investor for VAT and income tax purposes.


Capital gains on disposal of fund units are exempt for VAT and income tax purposes, regardless of whether they were issued through public offer or not, for natural local persons and beneficiaries from abroad only.


The income and capital gains on disposal are taxable for turnover tax purposes (a tax on sales proceeds and not on income).


A natural resident unitholder is subject to property tax on open and closed funds units at a flat rate of 0.5 percent or 1.25 percent depending on the total amount of the individual assets. A local company is subject to property tax at the rate of 1 percent in the case of open and closed funds with individual assets.


Also, a (provincial) Inheritance and Gift tax applies in case the unit holder is a resident in the Buenos Aires Province at the moment he receives the fund units as a gift or inheritance, or if he resides in other jurisdiction but the fund that issued the units is a resident in the Buenos Aires Province. When the aggregate value of the assets is lower than ARS60,000 (or ARS250,000 if it is a parent, son/daughter or husband/wife) an exemption is applicable. Otherwise, the rates applicable range from 4 percent to 22 percent, depending upon the taxable base and the relationship with the decedent or the donor.


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1.3 Taxation of resident unitholders/investors in a non-resident fund

A resident is liable to tax on income distributed from a non-resident fund in most circumstances. A resident is not liable to tax on income rolled-up by the fund that is not distributed by it.


A resident is liable to income tax in Argentina on capital gains of a foreign fund distributed by the fund to its unitholders.


A resident individual is not liable to tax on capital gains arising on the disposal of units in a foreign fund. However, a resident company is subject to tax at the rate of 35 percent on such gains. This is subject to a credit for any foreign tax borne on such gains directly by the company, at a rate not exceeding 35 percent.


Unitholders are deemed to receive income when it is distributed by the fund and not when it arises from the fund.


A resident individual must pay property tax at a rate of 0.5 percent or 1.25 percent depending on the total amount of the individual assets.


A local company must pay property tax of 1 percent on units.


Also, a (provincial) Inheritance and Gift tax applies in case the unit holder is a resident in the Buenos Aires Province at the moment he receives the fund units as a gift or inheritance. When the aggregate value of the assets is lower than ARS60,000 (or ARS250,000 if it is a parent, son/daughter or husband/wife) an exemption is applicable. Otherwise, the rates applicable range from 4 percent to 22 percent, depending upon the taxable base and the relationship with the decedent or the donor.


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1.4 Taxation of non-resident unitholders/investors in a resident fund

Distributions from funds to non-resident unitholders are tax-exempt.


Profits arising from the disposal of units in a fund by a non-resident are not subject to tax in Argentina, except for tax haven.


Also, a (provincial) Inheritance and Gift tax applies in case the fund that issued the units is a resident in the Buenos Aires Province. When the aggregate value of the assets is lower than ARS60,000 (or ARS250,000 if it is a parent, son/daughter or husband/wife) an exemption is applicable. Otherwise, the rates applicable range from 4 percent to 22 percent, depending upon the taxable base and the relationship with the decedent or the donor.


The units will be subject to wealth property tax at a rate of 2.5 percent when direct ownership of units belongs directly to either companies or overseas legal entities excluding individuals, and when all the following conditions are met.


  • Bearer shares are permitted in the relevant overseas country.
  • The main activity of those persons, due to their legal nature or by-laws, is to make investments outside their country of origin, and/or cannot make certain transactions and/or investments there.

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1.5 Taxation of fund management/custodian companies

Fund management companies, trustees, and depository companies are subject to income tax at the rate of 35 percent on their income.


There are no tax incentives available to them.


Fund management companies of open funds are VAT-exempt; the fund management companies of close funds are subject to VAT at the rate of 21 percent.


Both open and close fund management companies are subject to turnover tax at the rate of 3 percent to 7 percent depending on the type of income concerned.


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1.6 Entitlement to income

Unitholders are entitled to income only when it is distributed by the fund and not when it arises from the fund.


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1.7 Double tax agreements

Funds are considered to be eligible for the benefits of Argentina’s double tax treaties.


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1.8 Other tax-favored vehicles

Another option in our country is the financial trust (fideicomiso financiero). It is not a mutual fund.


The financial trust is tax-favored as long as the requirements mentioned in 1.1 are met, and the debt certificates and participation certificates are placed by public offering.


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1.9 Transfer taxes, stamp duty, capital duty

No capital duty is payable on the issuance of units by a fund.


There are no taxes levied on the purchase of CIF assessed shares. As regards the issue of assessed shares, the stamp duty is generally not applied in the different provincial jurisdictions due to exemptions for the issues of securities that are allotted by public offer (which would be a CIF‘s case). Finally, as regards the sale of assessed shares, the turnover tax (levied on the sales income and not on the results) is charged in addition to the income tax (which was mentioned before). The turnover tax does not apply to beneficiaries who are abroad.


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1.10 Miscellaneous

As mentioned before, open ended funds and close ended mutual funds are organized in Argentina. There are also funds aimed at specific investments.


The resolutions of the National Securities Commission (CNV) also allow the operation of companies, which issue securities and are incorporated abroad, with the authority to publicly offer such securities in the country, the object of which is to raise money or securities from the public for investment. They are not CIFs.




© 2014 KPMG, an Argentinean Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

 

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