Income Tax on Transfer of Shares and Distribution of Dividends – Regulations

On September 23, 2013, Law No. 26,893 was published in the Official Gazette. This law amended Income Tax, mainly with regard to the sale of shares and payment of dividends. The main amendments consisted of: (i) profits from the sale of shares, securities, bonds and other securities became taxed under Income Tax, regardless of the beneficiary; (ii) dividends or profits distributed by companies will be subject to 10% tax. Before Law No. 26,893 was issued: (i) 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 abrogated this exemption, and (ii) dividends distributed by companies were subject to an equalization tax of 35% for income that came out from profits that were not taxed at a corporate level. 
On February 7, 2014, Regulatory Decree No. 2334/2013 was published in the Official Gazette, and ruled Law No. 26,893.  The main provisions are:

a) The phrase “other securities” refers to the securities which may be commercialized in stock Exchange or Exchange markets. The definition of “other securities” is important, since it determines which securities are subject to tax.
b) Losses originated from the transfer of shares, quotas, securities, bonds and other securities, may be absorbed exclusively by net profits derived from the same source and nature (before this restriction was applicable only to the transfer of shares, quotas and other participations; it did not include securities, bonds and other securities).
c) The law provides that 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 resident in Argentina, in the event that the shares and securities are traded in a stock exchange or publicly traded. The Regulatory Decree provides that this exemption applies if the shares and securities are traded in a stock exchange or publicly traded, authorized by the Argentine Securities Commission (“Comisión Nacional de Valores”), and thus, it does not exempt shares or securities traded in a foreign stock exchange.
d) It will be understood that the moment of payment of dividends or profit distribution is the moment of payment, or when they are made disposable or if they are credited in the account of the owner or if they have been reinvested, capitalized or held as reserve or placed in an insurance fund.
e) Dividends or Profits: A 10% withholding on dividends shall be applied on the amount deducting the amount of Equalization Tax.
f) In the event that the withholding on Dividends is not possible, the withholding agent shall make the withholding and has a right to require the reimbursement from the beneficiaries.
g) Argentine resident individuals who hold shares of foreign companies, which participate –directly or indirectly- in a company registered in Argentina, will consider as non-computable the dividends distributed by the foreign company, assuming that those dividends include dividends already distributed by the Argentine company, which has paid Equalization Tax and the 10% withholding on dividends.
h) Entry into force: It is established that the provisions of Law No. 26,893 will be applied: (i) in the case of the transfer of shares, quotas and other securities: for the transactions whose payment is made as of September 23, 2013; (ii) in the case of dividends or profits: for the dividends or profits which are at the owner’s disposition, as of September 23, 2013.
i) The Regulation does not clarify the proceeding to pay the tax in the case of the transfer of shares and other securities executed in favor of a foreign beneficiary purchaser. The Law provides that the purchaser shall pay the tax, but it does not regulate the specific proceeding.