A transfer of technology agreement executed abroad may be subject to the stamp tax

The main issue was to determine whether the agreement had or did not have effects in the province of Buenos Aires, because its Fiscal Code sets forth that any instrument executed abroad is subject to the stamp tax to the extent that it has effects in the province.

The tax payer argued that the agreement only implied a transfer of rights and that such effect was extinguished at the very moment of the execution of the agreement in the U.S.A. On the other hand, it admitted that the agreements derived from this main agreement had effects in the province of Buenos Aires.

The Tax Court made a thorough analysis of the transfer of technology agreement, focusing mainly on its complexity and the moment in which the effects occurred. The highlights of the sentence were the following:

•   The transfer of technology agreement lives beyond its execution and its effectsare extended in the time: The Tax Court concluded that the essence of the agreement implied more than just an authorization to use a trademark or certain information, noticing that effects thereof would occur over a period of time and in a continuous way. This idea of continuity was evidenced by the fact that the parties thereof had agreed on the development of a sales program, a marketing schedule, the transfer of certain confidential information, etc.

•   The effects should be determined in accordance with the complexity of the transaction: The Tax Court concluded that the analysis of the effects of the agreement had to be done bearing in mind that it was a complex instrument.

In this sense, the Tax Court pointed out that a transfer of technology agreement may embrace different types of agreements, such as distribution agreements, purchase and sale of merchandise, the use of a trademark and the transfer of know how. Furthermore, it concluded that transfer of technology agreements may assume different forms, such as license agreements, know how, technical information, technical assistance and technical advice and that the same should all be analyzed together and not isolated in order to comprehend the true nature of the economic substance of the transaction.

In the case under analysis, the sale and distribution of the licensed products took place in the whole country, including the province of Buenos Aires.

•   The results of the business as a payment parameter: The Tax Court noted that the fact that the royalty payments due under the agreement depended on the performance of the sales evidenced that the effects of the agreement went beyond its execution.

•   The registration of the agreement before the I.N.T.I.: Finally, the Tax Court addressed the fact that the tax payer had registered the agreement before the I.N.T.I. (now the I.N.P.I.) evidenced that it had effects in Argentina and that it was not consistent to try to take advantage of the benefits granted by the income tax law on one hand and to argue that the agreement had no effects in the country and was not onerous on the other hand.