Argentina: Income tax treaty with China ratified
The treaty will become effective once Argentina completes its international approval process.
Argentina has ratified an income tax treaty with China, which follows the OECD model tax convention. This treaty introduces capped withholding rates on dividends, interest, royalties, and capital gains, and includes a non-discrimination clause allowing for the full deduction of certain expenses without limitations.
The treaty will become effective once Argentina completes its international approval process. It will be effective in both contracting states as follows:
- For taxes withheld at source, on amounts paid on or after January 1 of the year following the treaty's entry into force
- For other taxes on income and capital, for fiscal years beginning on or after January 1 of the year following the treaty's entry into force
China has already delivered its instruments of ratification of the treaty to Argentina, and Argentina must deliver its instruments of ratification to China by November 30, 2024, for the treaty to enter into force in 2024 and thus take effect from 2025 onwards.
Key provisions
- Cap withholding rates
- Dividends: 10% if the beneficial owner holds at least 25% ownership; 15% in other cases. A 5% rate applies if the beneficial owner is a government-controlled corporation.
- Interest: 12%, with exemptions for interest on credit sales of machinery and equipment between non-related companies, and preferential loans by banks with less than a three-year repayment period.
- Royalties: Rates vary between 3%, 5%, 7%, and 10% depending on the type of royalty.
- Capital gains: 10% if the beneficial owner held at least 25% ownership for one year prior to the sale; 15% in other cases.
- Wealth tax: All types of property may be taxed in the source country.
- Non-discrimination clause: Allows for the deduction of interest, royalties, and other expenses if contracts are properly registered or authorized according to domestic requirements.
- Other provisions: Includes specific anti-abuse measures, exchange of information, elimination of double taxation, and permanent establishment rules.
Impact on multinationals
The new treaty may affect existing cross-border transactions and structures, as well as ongoing planning by multinationals with operations or investments in Argentina and China.
For more information, contact a KPMG tax professional in Argentina:
Violeta Lagos | vlagos@kpmg.com.ar