Amendments to Income Tax Came Into Force

Law No. 26,893 was published in the Official Gazette on September 23, 2013. It provides amendments to the Income Tax, mainly with regard to the sale of shares and payment of dividends. The amendments are effective as of the date of publishing on the events occurred since that date.

The main amendments to the Income Tax Law are the following:

a) Profits from the sale of shares, securities, bonds and other securities became taxed under Income Tax, regardless of the beneficiary.

b) Profits from the sale, exchange or disposal of public shares, public securities or public bonds are exempted if they are obtained by individuals or undivided estates residents in Argentina.

c) Profits from the sale, exchange or disposal of shares, securities, bonds, obtained by individuals or undivided estates residents in Argentina are not exempted if such securities are privately traded. In this case, the tax rate is 15%.

d) Profits from the sale, exchange or disposal of shares, securities, bonds, obtained by foreign individuals and foreign entities are taxed by Income Tax.

In such cases, the law presumes a net profit of 90% on the amount of the transaction. Since the tax rate is 15%, the effective rate is 13.5%. The entity may choose to pay 15% on the difference between the gross profit of the transaction less the costs incurred in the country in order to obtain and maintain it and the deductions allowed by the Income Tax Law.

Before Law No. 26,893 was issued, profits from the sale, exchange, disposal of shares, bonds and securities obtained by foreign beneficiaries were exempted (Section 78 of Decree No. 2284/1991). Law No. 26,893 abrogates this exemption.

e) When shares, securities or bonds that belong to a foreign individual or entity are purchased, sold to or exchanged with a foreign individual or entity, the buyer is obliged to collect and pay the Tax.

f) Dividends or profits paid by companies will no longer be non-applicable for Argentine residents and will be taxed at a tax rate of 10%. Furthermore, a withholding of 10% as a lump sum payment was set for the cases of payment of dividends or profits that local entities make to foreign individuals or entities.

As a general rule, dividends paid (in cash or in kind) to shareholders (local or foreign) were not subject to withholding tax before the publishing of Law No. 26,893. However, if the amount distributed exceeded the taxable income, such excess was subject to a withholding of 35% (“equalization tax”). The equalization tax will still be applied.