Argentina - Taxation of cross-border mergers and acquisitions

Taxation of cross-border mergers and acquisitions for Argentina.

Taxation of cross-border mergers and acquisitions for Argentina.


From 2004 to 2006, the Latin American economy grew at a rate not seen since the late 1970s. The 2008 crisis contracted that growth but, since 2010, the rate of growth has recovered and economic strength has returned.

In theory, international acquisitions of Argentine entities may take the form of either the purchase of an equity participation in a target resident company or the purchase of the company’s assets. In practice, most acquisitions by foreign corporations take the form of purchases of equity in the target resident company, so tax due diligence is an essential part of the due diligence process.

In Argentina, investors must bear in mind that merger and acquisition (M&A) transactions are evaluated according to anti-trust law as well as taxation rules. In addition, Argentine laws establish control mechanisms on actions or events that threaten free competition.

This report focuses on M&A-related issues that should be taken into account by parties entering M&A transactions in Argentina.

From September 2019 onwards, strict currency control measures have been established, which are summarized below.


In any case, if the exporter collects the proceeds of the export prior to the mandatory maximum term, it will have to repatriate the proceeds and convert them to pesos within 5 working days or within the mandatory maximum term, whichever occurs earlier.

Special rules are applicable to exports made prior to 1 September 2019.


Under the exchange control regime, amounts collected in consideration for exports of services must be brought into the country and converted to pesos in the local exchange market within 5 working days from the date of collection abroad or in the country, or from the date on which the amount is credited in foreign bank accounts. (See Paragraph 4 of Communication “A” 6770 issued by Argentine Central Bank (ACB).)

Communication “A” 6770 of the ACB does not define the term ‘export of services’, so the meaning of this term is subject to interpretation.

Therefore, it might be construed that ACB will generally adopt the broadest possible definition of the term ‘services’ and will require the repatriation and conversion to pesos of any amount collected by resident persons where the services are rendered to non-resident persons irrespective of the place where the services are effectively rendered. Therefore, the services applied by the Argentinian company to non-resident persons will be subject to mandatory repatriation and conversion to pesos.

In contrast, this will not be applicable to services supplied to Argentine-resident persons.

Sale of non-produced non-financial assets:

Examples of non-produced non-financial assets are sale or transfer of certain intellectual property rights, certain rights on natural resources, etc.

The collection of foreign currency in consideration for the sale or transfer after 11 September 2019 (or arguably, after 23 September 2019) of non-produced non-financial assets is subject to mandatory repatriation and conversion to pesos.

Financial indebtedness:

In the case of loans or other financial indebtedness with non-resident persons, the funds received by the Argentine borrower will have to be repatriated and converted to pesos only if the Argentine borrower subsequently wants to purchase foreign currency in the Argentine Exchange Market to repay the principal of the loan or its interest. In other words, it is not mandatory to transfer to Argentina the proceeds of a loan, and convert them to pesos, if the borrower will not in the future purchase foreign currency in the Argentine Exchange Market to repay the principal or interest.

Capital contributions:

If the funds are received from a non-resident person because of a capital contribution (equity), there is no requirement to transfer the US Dollars (US$) to a domestic bank account and exchange them for pesos. Likewise, there is no requirement to repatriate the US$ and convert them to pesos if such US$ are ‘acquired’ through a transaction with securities (e.g. purchase of Argentine sovereign debt bonds with pesos in the Argentine stock market, transfer of the bonds to a foreign stock market and subsequent sale of the bonds in such foreign market) or any other legally available mechanism to obtain US$.

Outbound: Restrictions to acquire foreign currency to make payments in relation to certain types of transactions.

Argentine companies require the ACB approval in order to acquire foreign currency (i.e. US$, euros or any other foreign currency) for the following purposes:

  • to keep funds in foreign currency for savings investments or operating purposes (deposited in domestic or foreign accounts)
  • to make foreign direct investments (i.e. make capital contributions, or buy shares, in non-resident companies)
  • to make foreign portfolio investments
  • to grant loans to non-resident persons
  • to make other foreign investments
  • to make payments to non-resident related persons in consideration for services
  • to make payments of more than US$2 million per month to non-resident related persons in consideration for goods imported prior to 31 August 2019 if the obligation was outstanding and overdue on that date, or if the obligation was outstanding on that date and the invoice did not have a due date
  • to pay dividends or profits
  • to prepay principal or interest of financial indebtedness with non-resident persons, when such prepayment is made more than 3 days before the due date (although certain exceptions are applicable)
  • to prepay debt arising from imports of goods or services
  • to operate with derivatives (although certain exceptions are applicable).

In addition, Argentine companies may not acquire foreign currency in the Argentine foreign exchange market to make payments to Argentine-resident persons (except in the case of obligations in foreign currency agreed prior to 1 September 2019 stated in notarized contracts or public registries).

In practice, ACB approval is rarely granted. Therefore, in fact, ACB approval works almost as a prohibition or total restriction.

Recent developments

Tax treaties

Argentina introduced an important tax reform in January 2018. The changes introduced by the tax reform are aimed at promoting investment and competitiveness, and moving Argentina towards a more equitable, efficient and modern tax system.

The tax reform measures include changes concerning the corporate income tax rates, dividend withholding tax, taxation of certain financial investments, indirect capital gains taxation, thin capitalization transfer pricing and fiscal transparency rules, among others.

New tax treaties, though still not in force, with China, Japan, Luxembourg, Qatar[1] and Turkey were signed.

Asset purchase or share purchase

An acquisition in Argentina usually takes the form of a purchase of the shares of a company, rather than its business and assets. An asset purchase is subject to income tax (and other taxes, such as value-added tax (VAT) and turnover tax). The buyers are jointly and severally liable, along with the tax debtors, for prior tax liabilities.

Purchase of assets

The acquisition of assets results in a stepped-up basis of the assets to the buyer. However, the step-up is limited to the market value of the assets. The sale price is allocated to the assets, tangible and intangible, net of liabilities. Any additional consideration is attributed to goodwill, which is not deductible for tax purposes.

The asset purchase establishes a limit on the co-responsibility of buyers for non-declared fiscal and social security liabilities, as long as they comply with the requirements in Section 8 subpart e) of Law No. 11,683 to report the transaction to the national fiscal authority. In practice, sellers rarely agree to report the asset transfer because such notification may prompt the tax authorities to subject the seller to a tax examination.

Therefore, it is advisable to perform due diligence on the owner of the asset to be sold to estimate the contingencies that could transfer to the buyer. In defining the scope of the tax due diligence process, bear in mind that the statute of limitations for tax liabilities is generally 5 years, and it usually starts the 1st of January of the following year in which the respective tax affidavit should have been filled.

However, there is no statute or regulation that limits the tax authorities’ power to examine open periods, even those already examined, so the tax due diligence process should cover all open tax years, whether or not examined.

Purchase price

For tax purposes, it is necessary to apportion the total consideration among the assets acquired. It is generally advisable for the purchase agreement to specify the allocation. Normally, this allocation is acceptable for tax purposes, provided it is commercially justifiable. The purchase price of inventories and fixed assets should be calculated based on their market value. It is advisable that such valuation be prepared by an independent valuations professional.


Generally, the tax treatment of intellectual property and other intangible assets is aligned with their accounting treatment. Amortization of goodwill, trademarks and similar intangible assets is not deductible.

At the taxpayer’s option, reorganization costs may either be deducted in the year incurred or capitalized and amortized over a period not exceeding 5 years.


Depreciation of buildings used to generate taxable income may be deducted at a 2 percent annual rate on the cost of the buildings. Other depreciation rates may be used if they are technically supported.

Annual depreciation of all other depreciable assets used to generate taxable income is determined by dividing the acquisition cost of the asset by its estimated years of useful life. The tax law does not include standard depreciation rates.

Other depreciation methods, such as those based on units of production or time of use, may be used where they are technically justified.

Tax attributes

Tax losses and other tax attributes (e.g. industrial promotional benefits) are not transferred on an asset’s acquisition. They remain with the seller because the law does not permit their transfer unless the asset deal is organized as a tax-free operation (i.e. transfer of assets among the same economic group, subject to certain legal requirements). See the section on tax losses on share purchases later in this report.


VAT is levied on a large number of goods and services, although goods and services exported from Argentina are zero rated. The seller charges VAT (output VAT) to the buyer on the transfer of inventories, fixed assets and movable goods. The buyer can use the input VAT as a fiscal credit to offset future VAT charged to customers on domestic transactions, as long as the buyer is registered for VAT purposes in Argentina.

The standard VAT rate is 21 percent. A reduced rate of 10.5 percent applies to the sale of certain capital goods. Although goodwill is not subject to this tax, it may be taxed where it is tied to taxable services rendered as part of the general transaction.

Transfers of goods are exempt from VAT in the case of a tax-free reorganization.

The transfer of a business as a going concern could be treated as VAT-free, provided the transfer is organized as a VAT-free transfer within the same economic group and certain legal requirements are met. Professional advice should be sought where buildings are being sold because complications may arise if the sale occurs within 10 years of acquisition (or completion of construction). Section 11 of the VAT Law prescribes that tax credits computed on time will be refunded.

Transfer taxes

The sale of assets may trigger a turnover tax for the seller. Generally, the tax applies to the transfer of inventories. Transfers of accounts receivable, fixed assets and intangible assets are not usually subject to turnover tax in the same way as transfers of goods when a tax-free reorganization treatment applies (see ‘Reorganizations’).

The turnover tax is a state tax collected by the city of Buenos Aires and other provinces. However, there is the equivalent of a tax treaty among all local jurisdictions to avoid double taxation.

The turnover tax base is similar to that of VAT, but the turnover tax does not generate a tax credit. Turnover tax rates vary among the provinces, ranging from 2.5 percent to 4.0 percent. A reduced rate of 1.5 percent or an exemption may apply in a province where a factory is located.

The stamp duty is a provincial tax levied on legal transactions expressly provided for by statute. Such transactions are documented with public or private instruments. Generally, the stamp duty is assessed at a rate of 1 percent and is applied on the economic value involved in the transaction. The parties signing the agreement/instrument are jointly liable for the payment of the tax.

Transfers of assets, shares or interest held in business organizations are generally subject to the stamp duty when the transfer is completed with a written agreement.

Purchase of shares

Shares in a resident Argentine corporation may be purchased through an existing or newly created local subsidiary of the foreign acquiring corporation. The acquisition may be financed by the subsidiary’s own funds or through loans from the parent foreign corporation or a third party, such as a bank.

Generally, a foreign entity acquires a target Argentine company directly. The deductibility of interest on acquisition debt may be in doubt when a resident holding company structure is used.

Buyers of stock in an Argentine company cannot obtain a step-up in the tax basis of the assets purchased.

Tax indemnities and warranties

Most acquisitions in Argentina are stock purchases.

In a stock purchase, buyers become fully liable for the tax liabilities of the target company until the end of the statute of limitations period. It is customary for the buyer to initiate a due diligence exercise, which normally incorporates a review of the target’s tax affairs.

In defining the scope of the tax due diligence process, bear in mind that the statute of limitations for tax liabilities is generally 5 years. As noted, however, there is no statute or regulation that limits the tax authorities’ power to examine open periods, even those already examined. The tax due diligence process should cover all open tax years, whether or not examined.

The party acquiring the shares of a company usually requests a guarantee that, by buying its shares, the buyer is also inheriting the company’s tax history. As a result, after the due diligence process — with a subsequent purchase audit — an escrow account is usually opened on the buyer’s behalf in case of contingencies. The Argentine tax authorities do not grant clearance certificates stating that a particular taxpayer has no tax outstanding.

Tax losses

Net operating losses may not be carried back but may be carried forward for up to 5 years.

Foreign-source losses are subject to an additional limitation as they may offset only foreign-source income. A similar restriction applies to losses on sales of shares, treasury bonds and certain derivatives transactions.

Changes in the shareholders do not remove the possibility of offsetting the tax losses with taxable earnings of the entity that owns the tax losses.

Under a tax-free reorganization, tax attributes, such as loss carry forwards, can be conveyed from the predecessor company to the surviving company. Tax loss carry forwards (and unused tax exemptions/promotional benefits) are only transferable to the surviving company or companies when the holders of record of the predecessor company or companies retained at least 80 percent of their capital contributions in these companies (unless the shares are traded under self-regulated stock markets) for at least 2 years prior to the date of the reorganization.

Choice of acquisition vehicle

The purchase of shares in a resident Argentine corporation may be made through either an existing or newly created local subsidiary of the foreign acquiring corporation. Tax factors often influence this choice.

Generally, there is no stamp tax on the introduction of new capital into an Argentine entity.

Local holding company

An Argentine company can be used where the buyer already owns another entity located in Argentina.

However, capital gains arising from the disposal of shares of an operating company are taxable at the level of the resident holding company, and the deductibility of interest on acquisition debt may be in doubt where a resident holding company structure is used.

Rules and consequences for foreign shareholders

Supervisory Board of Companies

Note that there must be a minority shareholder holding at least 5 percent of the Argentine company or the company can be re-classified as a branch. In addition, the new Civil and Commercial Code in force since August 2015 allows the incorporation of a company with a single shareholder.

Special-purpose vehicles

Special-purpose vehicles (SPVs) that do not strictly comply with Resolution No. 7 may still be registered as foreign, provided they can demonstrate that the ultimate controlling company of the group complies with the resolution (i.e. has significant assets outside Argentina).

The SPV must submit a certificate stating that its sole purpose in seeking registration is to serve as an SPV of the controlling company. The certificate must be accompanied by documents issued by the boards of directors, management or governing bodies of the SPV and the controlling company. For this purpose, an affidavit executed by the legal representative of the SPV is required with:

  • a corporate organizational chart of the chain of companies that control the SPV
  • certain information about the shareholders of the SPV and the SPV’s parent.

Equalization tax

Dividends are non-taxable where the amount distributed does not exceed the cumulative taxable income. Any excess is subject to a withholding of 35 percent as a one-off final payment. Stock dividends are not subject to withholding.

Specifically, under the Income Tax Law, when individuals and taxable entities (e.g. corporations, branches, partnerships) pay dividends or distribute earnings in cash or in kind exceeding Argentine taxable income accumulated at the end of the fiscal year before the payment or distribution, 35 percent of the excess amount will be withheld as a one-off payment.

However, this 35 percent ‘equalization tax’ is repealed for earnings accrued on or after 1 January 2018.

The 10 percent withholding tax (WHT) applies on gross dividends paid to Argentine individuals or foreign shareholders and was abrogated by Section 75 of the Law No. 27260. However, an additional WHT is levied on distributed dividends. Therefore, a 7 percent dividend WHT rate would apply for distributions on profits accrued for tax years from 1 January 2018 to 31 December 2020.

Due to recent amendments to the income tax law, it could be construed that a 13 percent dividend WHT rate for distributions on profits accrued for tax years starting on or after 1 January 2021 would apply.

Even though it was stated that the income tax rate would be reduced to 25 percent for 2020 and later tax periods, this reduction has been recently suspended, so the income tax rate will stay at 30 percent.

Therefore, for the fiscal years in which the dividend WHT rate is 7 percent, the effective final tax rate would be 34.9 percent: 30 percent (corporate rate) plus 7 percent (WHT on dividends paid to Argentine-resident individuals and foreign beneficiaries).

For fiscal years in which the dividend WHT rate would be 13 percent, the effective final tax rate would be 34.75 percent: 25 percent (corporate rate) plus 13 percent (WHT on dividends paid to Argentine-resident individuals and foreign beneficiaries).

Tax-efficient shareholders

It is essential to structure the acquisition of a target company in Argentina so as to minimize taxes applicable to cash exchanges between the Argentine target company and the foreign-related companies.

Currently, Argentina has tax treaties in force with 20 countries: Australia, Belgium, Bolivia, Brazil, Canada, Chile, Denmark, Finland, France, Germany, Italy, Mexico, Netherlands, Norway, Spain, Sweden, Switzerland, United Arab Emirates, United Kingdom and Russia.

The treaties grant various tax benefits to the foreign beneficiary generating Argentine-source income, such as reduced income tax withholding on the payment of dividends or interest. The treaties also establish rules for determining the deductibility of such payments by the local taxpayer.

Non-resident intermediate holding company

If the foreign country taxes capital gains and dividends received from overseas, an intermediate holding company resident in another territory could be used to defer this tax and perhaps take advantage of a more favorable tax treaty with Argentina. However, the buyer should be aware that Argentine treaties contain treaty-shopping provisions that may restrict the ability to structure a deal in a way designed solely to obtain tax benefits.

Direct transfer of shares

In the case of sale of shares of an Argentine company derived by non-residents, there are two options to calculate the capital gain (election is made by the seller): domestic 13.5 percent on gross or 15 percent on the capital gain taxation. Provisions of double tax treaty should be considered.

The law establishes that the foreign seller, through a representative appointed in Argentina, is the responsible party for paying the tax. This should be further regulated.

Indirect transfers by non-residents

Based on the tax reform established by Law 27430, a non- resident is deemed to obtain Argentine-source income from the sale of shares, units, interests, securities convertible into shares, or any other right representing the capital or equity of the entity, fund, trust or equivalent entity, permanent establishment, appropriated equity, or any other entity established, domiciled or located abroad, when the following conditions are met.

  • The market value of shares, interests, units, securities or rights held by such seller in the entity located abroad, at the time of sale or during the previous 12 months, accounts for at least 30 percent of the current market value of the Argentine assets directly or indirectly owned by the referred seller. Such assets include:
  • shares, rights, units or other interests in ownership, control or earnings of a company, fund, trust or any other entity established in Argentina
  • permanent establishments in Argentina that are owned by one person or entity not residing in the country
  • other assets of any nature located in Argentina or any interests over such assets.
  • Shares, interests, units, securities or rights sold that, at the time of sale or during the previous 12 months, account for at least 10 percent of the equity of the foreign company that directly or indirectly owns these assets.

The tax does apply to participations in foreign entities acquired after the law’s effective date of 29 December 2017.

Local branch

As an alternative to an Argentine holding company, a foreign buyer may structure the acquisition through an Argentine branch. Argentina does not impose additional taxes on branch profits remitted to an overseas head office. Argentine branches and corporations are taxed similarly at the national and provincial levels.

If the Argentine operation is expected to make losses initially, a branch may be advantageous. Subject to the tax treatment applicable in the head office’s country, a timing benefit could arise from the ability to consolidate losses with profits of the head office.

Joint venture

Joint venture structures are not commonly used in Argentina.

Choice of acquisition funding

A buyer using an Argentine vehicle to carry out an acquisition for cash needs to decide whether to fund the vehicle with debt or equity. The principles underlying these approaches are discussed later in this report.


The principal advantage of debt is the potential tax-deductibility of interest (see ‘Deductibility of interest’).

Leveraged buy-outs

In a leveraged buy-out, a new holding company, the acquiring company, typically does not have sufficient capital to acquire the target company, so it arranges to take out a loan from a financial institution or related party.

Where the transaction is limited to the acquisition of capital stock or the merger of the new holding company with the target company, and the acquiring company’s indebtedness is transferred to the target company, then the transaction is characterized as a leveraged buy-out merger. In these circumstances, the target company seeks the interest deduction for the loan, provided that the target has high and stable cash flows. However, the tax authorities have determined that interest arising from loans taken out to finance the purchase of shares is not tax-deductible.

The Argentine tax laws do not have special provisions on financial leverage or leveraged buy-outs. The current provisions on the deduction of interest apply. As a general rule, interest is deductible to the extent that it is related to the generation of taxable income. There are also capitalization rules applicable to loans granted by foreign-related entities under certain conditions.

In Opinion No. 62/03, the tax authorities considered interest accrued in connection with the purchase of the majority of the capital stock of a company that was then absorbed (leveraged buy-out merger). The tax authorities concluded that the purchase was not a part of the merged company’s activities (operating activities) and that the interest was not deductible.

In a later decision, the National Special Tax Court held that “interest accrued from loans taken out to acquire the aggregate capital stock of a company before the merger of such company is an expense which is not necessary to obtain income or maintain the source of income of the company. Therefore, any such interest is not deductible. It is an investment made by the shareholder and, thus, it is the shareholder who will be subject to any applicable tax consequence”.

Thin capitalization rules

For tax years starting on or before 31 December 2017, Argentina’s thin capitalization rules applied to interest on loans granted by foreign-related financial institutions to local companies, denying interest deductions where the debt-to-equity ratio of the local company exceeded a 2:1 ratio. Interest that was not deductible as a result of this rule would be recharacterized as a dividend and treated accordingly. In the case of a treaty country intercompany loan, the thin capitalization rules may not apply, even where the 2:1 equity ratio is exceeded (although opinions differed on this issue).

Although not necessarily a proper practice, the Argentine tax authorities previously sought to apply a regulatory decree stating that interest (other than on loans subject to the 35 percent WHT rate) is not deductible when the debt-to-equity ratio exceeds a 2:1 ratio and should be recharacterized as a dividend. As a result, interest generated by a treaty country intercompany loan may be subject to thin capitalization rules where the 2:1 equity ratio is exceeded.

Based on the above, leverage could be introduced to a target Argentine company by borrowing capital from lenders in treaty countries and also in non-treaty countries, as long as the 35 percent domestic WHT rate can be claimed as a tax credit in the foreign non-treaty country.

For tax years starting on or after 1 January 2018, the tax reform introduced by Law 27430 modifies the regime by providing a new limitation for the deduction of interest arising from financial loans (regardless of the origin) and replacing the previous debt-to-equity ratio exceeding 2:1. This limit is now the greater of the 30 percent of earnings before interest, taxes, depreciation and amortization (EBITDA) and an amount to be fixed by the executive authority (currently 1,000,000 Argentine Pesos (ARS)).

Where the deductible interest amount is less than the deductibility threshold, the unused deduction can be carried forward for 3 tax years.

Similarly, where the interest amount exceeds the limit established, the difference can be carried forward for 5 tax years.

There are some exceptions for the application of the referred limitation. In this sense, for instance, the limitation does not apply if the taxpayer can prove that, for the applicable tax year, the ratio between the interest and the net income of the Argentine taxpayer is lower than or equal to the same ratio applicable for its economic group in relation to debts with unrelated creditors, or if it is evidenced — through reliable means — that the beneficiary of the interest has actually paid tax on such income in accordance with the Argentine law.

Deductibility of interest — temporary limitation

Under section 24 of the Argentine Income Tax Law, interest payments are expenses incurred by local companies holding foreign capital. Such expenses become Argentine-source taxable income for a foreign company that participates, either directly or indirectly, in its capital, control or management, and/or for an entity located in a tax haven. Therefore, the relevant recording in the financial statements for tax purposes can only be made when the expenses are paid within the term fixed for the filing of the tax return of the fiscal year in which the corresponding disbursement accrued (5 months following year-end date).

Therefore, where an Argentine holding company does not pay the interest within such term, the interest is not deductible in the financial statements for tax purposes (otherwise, it is deductible in the year paid).

General Instruction Number 747

With General Instruction Number 747/2005, the Argentine tax authorities attempted to challenge the deductibility of interest and exchange gains/losses arising from loans in foreign currency between companies located in Argentina and foreign companies.

The reasons for these challenges included the lack of a formal agreement between the parties, failure to state the terms for the repayment of principal and/or interest, and failure to include an interest rate in the loan agreement.

In addition, it is important to meet the formal requirements discussed above in the event of leveraged buy-outs to avoid the possibility that the tax authorities may challenge the exchange gains/losses and interest derived from these loans.

Fiscal transparency rules

Non-cooperative and low- or zero-taxation jurisdictions

The new rules in Law 27430 introduce definitions of ‘non-cooperative’ and ‘low-tax or zero-tax jurisdictions’.

‘Non-cooperative jurisdictions’ include any country or jurisdiction that has not entered into an agreement for the exchange of information on tax matters or a tax treaty that provides for the broad exchange of information with Argentina. In addition, countries that have entered into such agreements but do not effectively comply with the exchange of information clause are also considered as non-cooperative countries or jurisdictions. Section 24 of the income tax law regulatory decree lists the non-cooperative jurisdictions.

‘Low-tax or zero-tax jurisdictions’ include countries, domains, jurisdictions, territories or associated states or special tax regimes with a maximum tax rate on corporate income that is below 60 percent of the Argentine rate.

Fiscal transparency rules apply to Argentine companies or individuals that hold shares or interest ownership in foreign companies located in these jurisdictions, under certain conditions.

Taxpayers participating in transactions with entities located in non-cooperating or low- or no-tax jurisdictions may need to analyze the consequences of those transactions from an Argentine transfer pricing standpoint, as well as the special deductibility rules and exclusions from capital gains exemptions, among others.

Payment of withholding tax

Where WHT owing is not paid, the expenses (interest) are not tax-deductible.

Transfer pricing

Under transfer pricing provisions, interest on borrowings between a local company and a foreign-related company must conform to normal market practices on an arm’s length basis.

New rules enacted by Law 27430 affect all imports and exports involving an international intermediary where the intermediary is a related party or the foreign counterparty is related to the Argentine importer or exporter. The intermediary’s fee is determined based on the risks assumed, functions and assets involved. The price must be justified with the most appropriate method.

For exports of goods with known prices, an agreement registration is mandatory where the transactions involve an Argentine exporter and an international intermediary who is either a related party or located in a zero-tax, low-tax or non-cooperative jurisdiction (discussed above).

Further regulatory guidance about this topic has been issued by Argentine Tax Administration through Resolution 4,717.

WHT on debt and methods to reduce or eliminate it

A WHT is imposed on payments of interest to non-residents at the following rates:

  • 15.05 percent where the borrower is a local financial entity, the loan is related to the financing of capital goods imports, or the foreign creditor is a financial or banking institution, regulated by the respective Central Bank or similar institution, located in a country that either:
  • is not considered a low-tax jurisdiction
  • has a treaty with Argentina that contains an exchange of information clause that has no local restrictions regarding information exchange between revenue services.
  • 35 percent for all other cases.

However, interest from the following portfolio investments is not taxed if paid to non-residents:

  • obligations of the Argentine government
  • obligations (bonds) issued by resident corporations and other non-government entities through a public offer.

The existing tax treaties may set lower WHT rates for payments to recipients in the relevant countries.

To obtain WHT relief under a treaty, the foreign beneficiary should submit an affidavit demonstrating that it is a foreign resident, according to General Resolution 3497. The related foreign tax authorities must certify the data in the affidavit, and it must be in line with the Hague Apostille regime.

Checklist for debt funding

  • The tax authorities have determined that interest on loans taken out to finance the purchase of shares cannot be deducted for tax purposes.
  • The use of bank debt may avoid thin capitalization and transfer pricing problems.
  • Meet formal requirements of loans to avoid a possible tax authority challenge regarding the exchange gains/losses and interest derived from these loans.
  • Deductibility of interest from related companies is conditional on the effective payment of such interest.
  • Deductibility of interest limitation rules only apply to any related-party loan regardless of whether the entities are local or foreign. The new limit for the deduction of interest on financial loans is 30 percent of EBITDA or an amount fixed by the executive authority (currently ARS1,000,000), whichever is higher.


Foreign companies usually structure inbound investments into Argentina by using a portion of debt and a portion of equity.

Usually, stamp tax is not applicable to new shares and/or to capital contributions.


Tax-free reorganizations may be structured under an Argentine law that allows tax attributes, such as loss carry forwards, to be conveyed from the predecessor to the surviving company.

Tax loss carry forwards and unused tax exemptions are only transferable to the surviving company or companies where the holders of record of the predecessor company or companies held at least 80 percent of their capital contributions in these companies (unless the shares are traded under self-regulated stock markets) for at least 2 years prior to the date of the reorganization.

The results that may arise as a result of the reorganization will not be subject to income tax. Similar provisions apply with respect to VAT and turnover tax for transfers of assets generated by the reorganization process.

Argentine law defines ‘reorganization’ as:

  • the merger of pre-existing enterprises
  • the division of an enterprise into another or others that continue, together, the operation of the first enterprise
  • the sale or transfer of one entity to another that, although being legally independent, constitute the same economic whole.

For a reorganization to qualify for tax-free treatment, certain requirements must be satisfied.

  • The holder(s) of record of the predecessor company must retain an investment in the surviving company equal to the investment in the predecessor company for at least 2 years from the date of the reorganization.
  • The reorganized companies must have had the same or related activities during the 12 months preceding the merger, and each company must have existed for at least 18 months before the reorganization.
  • The surviving entity must continue its activities for at least 2 years after the date of the reorganization, so that the goods and/or services the surviving company or companies produce and/or trade have characteristics similar to those of the predecessor company or companies.
  • The notice and registration requirements set forth by Law No. 19550 (Law of Companies) and its amendments shall be fulfilled.
  • The reorganization must be communicated to the tax authorities up to 180 days of the reorganization date.

Failure to comply with these requirements causes the tax-free reorganization regime to be inapplicable; therefore, the transaction becomes subject to applicable federal and provincial taxes. M&A transactions are evaluated according to anti-trust laws where they involve economic concentrations through mergers, going-concern transfers, acquisitions of interests in other companies that confer control over them, and transfers of assets that also confer control or a dominant influence on decision-making.


Hybrids, which are instruments treated as equity in the accounts of one party and as debt in the accounts of the other, are not applicable for Argentine income tax purposes.

Discounted securities

No special Argentine tax benefits arise in connection with the issuance of securities issued at a discount.

Other considerations

Labor issues

Where a business is transferred by whatever means, all the obligations arising from the employment contract between the transferor and the employee at the time of the transfer are transferred to the transferee or buyer, including those resulting from the transfer itself. The employment contract remains in full force and effect with the transferee or buyer, and the employee retains the rights vested in all the years of service with the transferor. The transferor and transferee of a business are jointly and severally liable for the related obligations arising from the employment contract at the moment of the transfer.

Sale of shares of stock corporations or quotas of limited liability companies

Under the tax reform enacted on 23 September 2013, capital gains derived by non-residents from the sale of shares or quotas are subject to either a 15 percent tax on gross proceeds or a 13.5 percent tax on net proceeds (at the taxpayer’s option). Where net proceeds are chosen, the Argentine tax authorities would validate the costs.

To the extent that the buyer is an Argentine resident, they would be responsible for collecting the tax. However, if the buyer is a non-resident, the seller would pay the respective income tax.

Sale of interest in limited liability company

The sale of an interest in a limited liability company is treated the same way as a sale of shares.

Company law and accounting

Mergers are regulated by Corporations’ Law 19550 (ACL), and acquisitions of shares/quotas are regulated by the Civil and Commercial Codes.

ACL foresees two types of mergers: a pure or simple merger where two or more companies are dissolved (without liquidation) in order to create a new one; and an absorption merger where an existing company incorporates one or more other companies that are dissolved without being liquidated.

To effect a merger, several steps must be performed:

  • preparation of special merging financial statements
  • board of directors’ meeting approving the merger
  • signing of a preliminary merger agreement ( Previo de Fusión)
  • extraordinary shareholders’ meeting
  • publication of legal notices in the Official Gazette and other main newspapers
  • signing of the definitive merger agreement ( Acuerdo Definitivo de Fusión)
  • registration before the respective Public Registry of Commerce of Buenos Aires City.

ACL allows mergers of different types of companies. It is possible to merge corporations with limited liability companies or commercial and civil entities.

The practical advantage of carrying out a reorganization procedure (merger) rather than an acquisition of shares/quotas is that the companies involved do not need liquidity to merge. When acquiring shares/quotas, the buyer must either have liquidity or obtain financing.

To effect a merger, special merging financial statements must be prepared, which must be audited by a local certified public accountant (CPA). Legal notices and accounting documents must also be prepared.

Third parties and creditors are especially protected by ACL. Before signing the definitive merger agreement, creditors can oppose the merger procedure and request that their debts be paid, and that corresponding judicial recourses are available to them.

Once all requirements have been fulfilled, the documents must be filed before the respective Public Registry of Commerce of Buenos Aires City. Once registered, third parties can still oppose the merger.

Where a merger (or acquisition of shares/quotas) amounts to an abuse of a dominant position in a specific market (or is alleged to do so), the operation (merger or acquisition of shares/quotas) must be submitted to and approved by the Anti-trust Commission in advance. Failure to request such authorization could lead to fines or the prohibition of the merger or acquisition of shares/quotas.

Where shares/quotas are acquired, a purchase agreement must be entered into by the parties and the seller must notify its participants so that they can modify and update their registrations.

Where quotas of a limited liability company are acquired, the purchase agreement must be registered with the Public Registry of Commerce of the relevant jurisdiction and a legal notice must be published in the Official Gazette.

Foreign companies participating in a merger or acquisition procedure must be registered with the Public Registry of Commerce of the relevant jurisdiction under section 123 of the ACL (foreign entity registered to participate as a shareholder/partner of a local company) or section 118 of the ACL (branch of a foreign company) under the penalty of not registering the acts of the participating local companies. Every local jurisdiction also has administrative requirements for foreign companies.

From an accounting viewpoint, it is necessary to distinguish transactions between unrelated parties (business combinations) from transactions within the same economic group (corporate reorganizations) because the accounting treatment depends on this distinction.

For a business combination, both assets and liabilities are stated at fair market value. If there is a difference between fair market value and the price paid, positive or negative goodwill arises. If the useful life of goodwill is indefinite, it is not amortized but annual recoverability analysis is required.

For a corporate reorganization (within the same economic group), assets and liabilities are added to the book value and no goodwill arises.

Group relief/consolidation

Consolidated filing is not permitted. Each entity, even where it belongs to the same owner or affiliated group, must file a separate tax return.

Transfer pricing

Argentina’s transfer pricing regulations are broadly comparable with the Organisation for Economic Co-operation and Development (OECD) guidelines.

There is, however, no hierarchy for the application of the OECD’s accepted transfer pricing methods in Argentina. The selection of the appropriate method depends primarily on the availability of information and the number and magnitude of the adjustments necessary to achieve comparability.

Under these provisions, compensation for services between a local company and a foreign-related company must conform to normal market practices on an arm’s length basis. If not, the tax authorities may make appropriate adjustments, by applying methods and procedures prescribed by the law, to the tax return of the local company, and thus increase its taxable base.

The transfer pricing return (i.e. report certified by a CPA) must be filed 8 months after year-end.

The failure to file the tax returns and related transfer pricing analyses with the tax authorities may result in fines.

Foreign investments of a local target company

For resident corporations, worldwide income is taxable, including the income of foreign branches and subsidiaries, even where such income is not repatriated. Income of foreign subsidiaries is taxable only to the extent of dividends actually paid. However, where the subsidiary is organized in a tax haven country, the Argentine company is taxed on its allocated share of the subsidiary’s income, regardless of whether a dividend is paid.

Comparison of asset and share purchases

Advantages of asset purchases

  • Limits the co-responsibility of buyers for non-declared fiscal and social security liabilities, as long as they comply with Law No. 11,867 and report the transaction to the tax authorities.
  • The purchase price, or a portion of it, can be depreciated or amortized for tax purposes.
  • Possible to acquire only part of a business.

Disadvantages of asset purchases

  • Higher transfer taxes apply (VAT, turnover tax, etc.).
  • Benefits of cumulative tax losses incurred by the seller remain with the seller, because the law does not permit their transfer.

Advantages of share purchases

  • May benefit from tax losses of seller’s company.
  • Lower transfer taxes apply to the operation (no VAT, no turnover tax, etc.) compared to asset purchases.
  • Lower capital payments compared to asset purchases.

Disadvantages of share purchases

  • Buyer assumes all the tax and social security history of the company.
  • Buyer remains liable for any claims or previous liabilities of the entity, including tax, social security and labor obligations.

KPMG in Argentina

Rodolfo Canese
Bouchard 710 First Floor
Buenos Aires C1106 ABL

T: +54 11 4316 5869

This country document does not include COVID-19 tax measures and government reliefs announced by the Argentinian government. Please refer below to the KPMG link for referring jurisdictional tax measures and government reliefs in response to COVID-19.

Click here — COVID-19 tax measures and government reliefs

This country document is updated as of 1 January 2021.


1 This agreement shall enter into force upon completion of the procedures required by domestic law for its entry into force and shall be enforced:

  • with respect to taxes withheld at source, on amounts paid or credited, from 1 January of the calendar year following the effective date of this Agreement, and
  • with respect to other taxes, for fiscal years beginning on or after 1 January of the calendar year following the year in which this Agreement takes effect.