New Regulations for Capital Gains Tax on Sale of Shares by Nonresidents

On April 7, 2018, the Argentine Executive Branch published in the Official Gazette Decree No 279/2018 which implemented the payment mechanism for the capital gains tax on the sale or disposition of shares, quotas or other equity participations in Argentine companies by nonresident sellers. On April 11, 2018, the AFIP issued General Resolution No 4227, which includes supplementary regulations applicable to the same transactions.

On September 23, 2013, Congress passed Law No 26,893, (applicable to taxable events occurring after said date) imposing a Capital Gains Tax on the gains recognized by nonresidents on the sale of shares, quotas or other equity participations in Argentine companies as well as “other securities” of Argentine residents at a rate of 15%. The seller may opt to determine the taxable income subject to tax under one of the following mechanisms:

• A deemed taxable base of 90% of the gross proceeds derived from the transaction. The effective rate is, therefore, 13.5% of the sale price; or
• A calculation of the actual net income by offsetting from the sale price the cost basis and other expenses incurred to purchase the shares.   

Law No. 26,983 further provided that the buyer of Argentine shares, quotas or other equity participations or securities was in charge of paying the tax to the Argentine tax authorities, irrespective of whether the buyer was an Argentine resident or non-resident. An effective mechanism to remit the Argentine nonresident capital gains tax to the Argentine Tax Authority was never created.

Tax reform Law No 27,430 did not substantially modify the tax treatment of this transaction. However, the reform shifted the tax liability from the nonresident purchaser to the nonresident seller. From January 1, 2018, when a nonresident seller sells shares or quotas in an Argentine Company to a nonresident buyer, the seller has to pay the capital gains tax through their legal representative in the country. Please refer to "Capital Gains Tax on the Sale of Shares" for more information on the new tax treatment applicable to the sale or disposition of shares and quotas in an Argentine company.

General Resolution No 4227 establishes a payment mechanism for the capital gains tax pertaining to transactions completed: (i) between September 23, 2013, and January 1, 2018; (ii) between January 1, 2018, and April 26, 2018; and (iii) beginning on April 26, 2018.

Transactions Completed Between September 23, 2013 and January 1, 2018

The regulations distinguish between: (i) transactions executed through an Argentine stock exchange market or authorized agent; (ii) transactions privately executed between a nonresident seller and a resident buyer; and (iii) transactions privately executed between a nonresident seller and a nonresident buyer.

In scenario (i), the stock exchange market or authorized agent are not responsible for paying the capital gains tax unless they actually withheld the tax. In scenario (ii), the resident buyer must pay the tax before June 2018. Finally, in scenario (iii), the nonresident buyer must transfer the tax from their foreign account before June 2018.

Transactions Completed Between January 1, 2018 and April 26, 2018

During this period, in transactions between nonresidents, the nonresident seller is responsible for paying the tax through their legal representative in the country. If the seller does not have a legal representative domiciled in the country, the seller can pay the tax via international wire transfer. If the purchaser is a resident or the transaction is executed through an Argentine stock exchange market or authorized agent and either the former or the latter withheld the tax, they must transfer it to the Tax Authority by June 2018.

From April 26, 2018

In transactions between nonresidents, the nonresident seller is responsible for paying the tax through their legal representative in the country. If the payment of the price for the shares is completed between the 1st and 15th of a given month, the tax must be paid by the end of that month. If the payment of the price is completed after the 15th of a given month, the tax must be paid by the 15th of the following month.

If the seller does not have a legal representative domiciled in the country, the seller can pay the tax via international wire transfer by the 10th day following the date of the transaction.

If the seller is a nonresident and either the purchaser is a resident or the transactions is completed through a stock exchange market or authorized agent, the purchaser or the stock exchange market and authorized agent are responsible for withholding the tax. If the payment of the price for the shares is completed between the 1st and 15th of a given month, the tax must be paid by the end of that month. If the payment of the price is completed after the 15th of a given month, the tax must be paid by the 15th of the following month.