TO about to complete six years of the agreement signed with China To avoid double taxation, the Government completed this Friday the process that allows what was agreed upon to come into force. In such a way that, its provisions, They will come into force from January 1, 2025.
It is about the promulgation of law 27,780 through the corresponding decree that incorporates the agreement into local legislation, as published this Friday in the Official Gazette.
In the case of Argentina, the taxes that The objects of the treaty are Income Tax, Minimum Presumptive Income and Personal Assets. In the Chinese case only the first. The important thing is that in addition to this, the agreement iIt includes cooperation on information between treasury authorities in a manner similar to the agreements with the United States and the OECD.
The treaty is part of a broader cooperation agreement between the Chinese and Argentine governments signed on December 2, 2018 on the occasion of Xi Jingping’s visit when Mauricio Macri was president.
Strictly speaking, it is part of a package of 37 agreements that were supposed to facilitate investments for about US$5,000 million. Most of them are memorandums of understanding, which diplomatically are of a lower hierarchy.
The effect of this type of agreements is to facilitate foreign investments. The company that arrives in the country will pay the Income Tax in Argentina, without running the risk that it could also be reached by the Chinese treasury.
As highlighted by the Marval O’Farrell studio, Argentina applies the “worldwide income” criterion, which implies that residents pay on all profits, whether obtained in the country or abroad, and that non-residents pay in the country where the profit is generated.
Based on this criterion, sometimes double taxation occurs, that is, the same taxable event is taxed in two different countries and taxes must be paid twice and for this, treaties are signed to define when a person or company is resident in one of the signatory countries and when he is a non-resident.
The treaty with China provides, among other issues:
- The profits of an enterprise of a Contracting State may be taxed only in that State, unless the enterprise carries on its business in the other Contracting State through a permanent establishment situated therein.
- Withholding in the country of residence of the entity paying the dividends is subject to the following limits: (i) 10% of the gross amount of the dividends, if the beneficial owner is a company that owns no less than 25% of the capital of the company that pays such dividends during a period of 365 days that includes the day on which the dividends are paid; or (ii) 15% of the gross amount of dividends in all other cases.
- Interest may be taxed in the Contracting State in which the person paying the interest resides up to a limit of 12% of the gross amount.
- Royalty payments are subject to: (i) 3% of the gross amount for the use, or the right to use, of news; (ii) 5% of the gross amount for the use or right to use, of copyright on literary, artistic or scientific works; (iii) 7% of the gross amount for the use, by right of use, of containers; or (iv) 10% for other cases not contemplated in the previous parameters.
- The results from the sale of shares or participations in the capital of a company may be taxed in the State of residence of said company.
- The assets of a resident of one country that are situated in the other country, if not ships or aircraft, may be taxed in both countries.
- The mechanism of computing the tax paid abroad as a credit is considered as a method to eliminate double taxation.
It is to be remembered that Regarding the exchange of information, Argentina already has the agreement with the United States in force this year, while the multilateral agreement with the OECD has been in force since 2018. By adding China, the AFIP completes the exchange agreements with the main blocks and countries in the world.
Source: Ambito
