Argentina: Income tax treaty with Mexico | KPMG | GLOBAL

Argentina: Income tax treaty with Mexico

Argentina: Income tax treaty with Mexico

The Argentina-Mexico income tax treaty—expected to enter into force in 2018, after the completion of the ratification procedures—generally follows the OECD Model Tax Convention and allows for reduced rates of withholding tax on dividends, interest, royalties, capital gains, and certain other items of income. The treaty also contains a non-discrimination clause that allows taxpayers to fully deduct certain expenses without limitations.

1000

Related content

KPMG observation

The potential implications of the pending income tax treaty need to be considered with respect to financing arrangements, intellectual property ownership, and the rendering of cross-border services both in existing and future structures.

Withholding tax rates

The income tax treaty between Argentina and Mexico provide the following measures concerning the withholding tax rates on:

  • Dividends—10% or 15% (the 15% rate would apply in instances of a less-than-25% ownership). The tax treaty does not provide relief from the application of the Argentine equalization tax.
  • Interest—12%. 
  • Royalties—10% or 15% depending on the type of royalty (e.g., payments for the use of intangibles, certain software licenses, know-how, and technical assistance).
  • Capital gains derived from the sale of shares—10% in the case of a direct participation of at least 25% and 15% in all other instances.

Non-discrimination clause

The treaty’s “non-discrimination clause” provision states that it may be enforced in situations concerning the deduction of interest, royalties, and other expenses, provided that the related contracts are properly registered or authorized in accordance with domestic requirements. Also, the treaty provides that the non-discrimination clause would not apply to allow taxpayers to avoid the application of the thin capitalization rules.

Other provisions

  • The tax treaty include provisions concerning the exchange of information, the elimination of double taxation, and permanent establishment rules.
  • The tax treaty also includes a limitation of benefits (LOB) provision addressing treaty abuse and double non-taxation scenarios.

Ratification provisions, entry into force

The signatory countries must notify each other when the necessary procedures for the treaty’s entry into force under the respective internal laws have been satisfied. The tax treaty would then enter into force 30 days after these notifications have been exchanged, and the treaty’s provisions would be effective from 1 January of the calendar year following the date of the notification exchange. The tax treaty is expected to be effective starting 1 January 2018.

 

For more information, contact a tax professional with KPMG’s Latin America Markets Tax practice or with the KPMG member firm in Argentina:

Devon M. Bodoh | +1 (202) 533-5681 | dbodoh@kpmg.com

Alfonso A-Pallete | +1 (305) 913 2789 | apallette@kpmg.com

Rodolfo Canese | + (5411) 4316-5753 | rcanese@kpmg.com.ar 

Violeta Lagos | + (5411) 4316-5740 | vlagos@kpmg.com.ar

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Request for proposal

 

Submit