Regulation of procedure to pay Income Tax
Federal Tax Authority ("FTA") General Resolution 4227 (the "Resolution") was published in the Official Gazette on April 12, 2018, regulating the procedure to pay Income Tax on the transfer of shares and quotas of Argentine legal entities (the "Tax"), when both parties are foreign residents.
The Resolution will enter into force on April 26, 2018.
I. Paying the Tax
I.a. New transactions
The Resolution establishes that when the purchaser and the seller of the Argentine shares or quotas are foreign residents, the seller will be liable for making the payment of the Tax.
In this sense, the Resolution establishes that the Tax has to be paid by the Argentine legal representative of the foreign beneficiary, or the foreign beneficiary, if it does not have a legal representative in Argentina.
I.b. Past transactions
It should be noted that in the case of shares or quotas transferred before the entrance into force of Law No. 27,430 (that is, January 1, 2018), the Tax has to be paid by the purchaser of the shares or quotas.
II. Payment mechanism
II.a. Legal representative
If the Tax is paid by the legal representative, it will be remitted to the FTA by means of the system applicable to local withholding and collection agents involved in payments to foreign beneficiaries (General Resolution No. 3726/2015).
II.b. Foreign beneficiary
If the payment of the Tax is made by the foreign beneficiary, it will have to be paid by means of an international wire transfer (expressed in USD or Euros).
II. c. Past operations
In the case of shares or quotas transferred before the entrance into force of Law No. 27,430 (that is, January 1, 2018), the Tax will have to be paid by the purchaser of the shares or quotas by means of an international bank transfer.
III. Indirect transactions
Indirect transactions would also be subject to the Tax, if they are made in relation to shares or quotas acquired after January 1, 2018.
In this sense, local regulations establish that income obtained by non-residents from the sale of a non-Argentine entity will also be subject to the Tax, when the following conditions are met:
- The market value of the shares of the non-Argentine entity, at the time of the sale or in any of the 12 months before its sale, is originated in at least 30% of the value of one or more of the following assets owned directly or through one or more other entities: (i) shares, quotas or the like issued by an Argentine entity; (ii) a permanent establishment located in Argentina; or (iii) other assets located in Argentina.
- The shares of the non-Argentine entity sold by the seller, and by the spouse or partner or other taxpayers related by family links by consanguinity or affinity, including the third degree, represent at the time of the sale or in any of the 12 months preceding the date of the disposition, at least 10% of the net assets of the non-Argentine entity that directly or indirectly owns any of the following assets: (i) shares, quotas or the like issued by an Argentine entity; (ii) a permanent establishment located in Argentina; or (iii) other assets located in Argentina.
If the purchaser is not an Argentine resident, the Tax will be paid by the Argentine legal representative of the foreign beneficiary.
The Tax will not be applicable if the transfer is made within the same economic group, according to the guidelines to be set by future regulations.