Tax Havens A View from Argentina

Tax Havens: A View from Argentina

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The term tax haven or its meaning in English “Tax Heaven” has been in trend for several decades, however it has had its peak with the unveiling of the Panama Papers, in the year 2018.

Although the various Tax Administrations and international organizations, such as OECD (Organization for Economic Cooperation and Development) have fought against them because they usually represent a tool that helps to avoid taxes and money laundering of millions of dollars thanks to their lack of fiscal transparency; the truth is that in spite of this, they are still used in the aggressive tax planning of many multinational groups through offshore companies located in these territories.

For this reason, many tax regimes have incorporated specific rules regarding the treatment of operations carried out by their residents with companies domiciled in some tax haven, such as transfer pricing rules or international tax transparency rules.

In the case of Argentina due to the economic crisis, the great tax pressure of this country among other factors that are taken into account by entrepreneurs in order to pay taxes, many of them have seen as an interesting offer to territories or countries considered as tax havens.

Therefore, the Argentine tax legislation gives a special treatment to operations carried out with subjects domiciled in non-cooperating or low or null tax countries (also called tax haven).

What are tax havens and what are their characteristics?

Tax havens are countries, jurisdictions or territories in which tax rates are low or almost zero.

According to the OECD, they have the following characteristics:

  • Null tax imposition.
  • There is a precariousness in terms of fiscal transparency.
  • Laws that do not allow the exchange of information for tax purposes count.
  • The lack of need for real activity by companies.

What is the definition of tax haven provided by the Argentinean legislation?

Articles 19 and 20 of the Income Tax Law establish the definition of non-cooperating countries or territories, as well as those considered as low or null taxing.

Non-Cooperating Countries or Territories

Those who do not have a tax information exchange agreement or a double taxation agreement with Argentina, which stipulates a clause regarding the exchange of information, will be considered as such.

They will also be considered as such, when having these agreements of information exchange is not carried out in an effective way.

It should be noted that these agreements must comply with international standards regarding the exchange of tax information.

Likewise, the Executive Branch may indicate a list of the countries or territories considered as such, according to the characteristics indicated in previous paragraphs.

Low or Null Taxation Countries

It is called as such those countries, jurisdictions, domains or special regimes that have a maximum business taxation that is lower than 60% of the rate or aliquot indicated by the Income Tax Law for the same income.

Is there a list of non-cooperating countries or territories in Argentina?

Yes, the list of non-cooperating countries or territories is as follows:

Bosnia and Herzegovina

Syrian Arab Republic Republic of Madagascar Democratic Republic of East Timor

 Brecqhou

People’s Democratic Republic of Algeria Republic of Malawi

Republic of Congo

Burkina Faso

Central African Republic Republic of Maldives

Democratic Republic of Congo

State of Eritrea

Cooperative Republic of Guyana Republic of Mali

Federal Democratic Republic of Ethiopia

Vatican City State

Republic of Angola Republic of Mozambique

Lao People’s Democratic Republic

State of Libya

Republic of Belarus Republic of Namibia

Democratic Socialist Republic of Sri Lanka

Independent state of Papua New Guinea

Republic of Botswana Republic of Nicaragua

Federal Republic of Somalia

Plurinational State of Bolivia

Republic of Burundi Republic of Palau

Federal Democratic Republic of Nepal

Ascension Island

Republic of Cape Verde Republic of Rwanda

Gabonese Republic

Sark Island

Republic of Côte d’Ivoire Republic of Sierra Leone

Islamic Republic of Afghanistan

Santa Helena Island

Republic of Cuba  Republic of South Sudan

Islamic Republic of Iran

Solomon Islands

Republic of the Philippines Republic of Suriname

Islamic Republic of Mauritania

The Federated States of Micronesia

Republic of Fiji Republic of Tajikistan

People’s Republic of Bangladesh

 Mongolia

Republic of Gambia  Republic of Trinidad and Tobago

People’s Republic of Benin

 Montenegro

Republic of Guinea Republic of Uzbekistan Democratic People’s Republic of Korea

Kingdom of Bhutan

Republic of Equatorial Guinea Republic of Yemen

Socialist Republic of Vietnam

 Kingdom of Cambodia

Republic of Guinea-Bissau  Republic of Djibouti

 Togolese Republic

 Kingdom of Lesotho

Republic of Haiti Republic of Zambia

United Republic of Tanzania

Kingdom of Swaziland

Republic of Honduras  Republic of Zimbabwe

Sultanate of Oman

Kingdom of Thailand Republic of Iraq Republic of Chad

British Overseas Territory Pitcairn, Henderson, Ducie and Oeno Islands

Kingdom of Tonga

Republic of Kenya Republic of Niger

Tristan da Cunha

Hashemite Kingdom of Jordan

Republic of Kiribati Republic of Paraguay

 Tuvalu

Kyrgyz Republic

Republic of the Union of Myanmar Republic of Sudan

Union of the Comoros

 Arab Republic of Egypt

Republic of Liberia Democratic Republic of São Tomé and Príncipe

 

What is the treatment of operations carried out with subjects in tax havens in Argentina?

As indicated above, transactions carried out by a resident in Argentina with any entity domiciled or located in a non-cooperating or low or non-taxable country or territory should be analyzed according to the transfer pricing rules.

Therefore, such transactions must be at market value.

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