The exchange of diplomatic notes relating to an income tax treaty between Argentina and Switzerland occurred 28 October 2015, meaning that the treaty will enter into force within 30 days—that is, the entry into force will be in November 2015.
As explained below, the treaty provides royalties will be subject to taxes withholding, and shares of Argentine companies owned by Swiss shareholders will be subject to Argentina’s wealth tax. The treaty also includes new exchange of tax information provisions.
The provisions of the Argentina-Switzerland income tax treaty, once it enters into force, will be effective:
Argentina and Switzerland first agreed to a tax treaty in April 1997, and while that treaty was “provisionally” in force beginning in 2001, it was never officially ratified and eventually expired in 2012. The Argentine Congress never completed its ratification of the 1997 treaty because a clause in that treaty only allowed taxation by Argentina as the source state if Switzerland also taxed royalties paid to nonresidents. Under Swiss law, no withholding tax would apply to payments of royalties made to nonresidents. Accordingly, the 1997 treaty effectively prohibited Argentina from taxing Argentine-source royalties.
The Argentina-Switzerland income tax treaty provides the following withholding tax rates:
The treaty does not provide relief from the Argentine wealth tax for Swiss shareholders. Swiss shareholders will be subject to the standard wealth tax rate of 0.5% on their investment in Argentine entities.
The treaty’s non-discrimination clause concerning the deduction of interest, royalties, and other expenses provides relief with respect to the deduction of certain expenses.
The treaty’s exchange of information clause allows the two governments to obtain financial information “upon request.”
Lastly, the treaty includes “specific residence” provisions, measures for the elimination of double taxation, and permanent establishment provisions.
For more information, contact a tax professial with KPMG’s Americas Center:
Devon Bodoh | +1 (202) 533-5681 | email@example.com
Alfonso A-Pallete | + 1 (305) 913-2789 | firstname.lastname@example.org
Or contact a KPMG tax professional in Argentina:
Rodolfo Canese | (5411) 4316-5753 | email@example.com
Violeta Lagos | (5411) 4316-5740 | firstname.lastname@example.org
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