Argentina and France have taken a key step toward modernizing their income tax treaty with the approval of a protocol amending the existing double tax agreement. The changes reduce withholding tax rates on certain cross-border payments while expanding source-country taxing rights in line with current international tax standards (OECD/UN).1
WHY THIS MATTERS
The protocol is expected to lower the tax cost of cross-border investments, financing, and technology transfers between both countries. However, expanded permanent establishment rules and capital gains taxation may increase tax exposure for certain service-based operations and asset disposals.
Multinational groups, particularly those with Global Mobility programs, expatriates, or cross-border service arrangements, could evaluate the impact on assignments, compensation structures, and investment vehicles.
Key Treaty Changes
- Permanent Establishment (PE): Introduction of a services PE rule. Services (including consultancy) performed in the source country for more than 183 days in any 12-month period may create a taxable presence.
- Dividends: Reduced withholding tax rate to 10 percent for qualifying corporate shareholders (≥25 percent maintained for at least 365 days) and 15 percent in other cases.
- Interest: Maximum withholding tax rate reduced from 20 percent to 12 percent, with exemptions for government bodies, central banks, and certain long-term financing.
- Royalties: Reduced rates ranging from 3 percent to 15 percent, depending on the type of royalty (more favorable for copyright, news, and registered technology).
- Capital gains: Expanded source-country taxing rights, especially on gains from shares when value is derived from immovable property (>50 percent test) and certain substantial participations.
- Most-Favoured-Nation clause: Automatic extension of more favorable rates granted by Argentina to other countries in the future.
- Additional Context (MLI): Since January 2026, the Multilateral Instrument (MLI) already applies to the treaty, introducing anti-abuse rules (Principal Purpose Test), a reinforced preamble, and enhanced mutual agreement procedures. The Protocol complements these changes.
KPMG INSIGHTS
KPMG in Argentina states that:
The protocol represents a meaningful modernization of the Argentina-France treaty network and may generate significant withholding tax savings for businesses and investors with cross-border operations.
Employers, taxpayers, and international assignment program managers might wish to consider:
- Review existing Argentina-France assignment, service, financing, and licensing arrangements to identify whether the protocol could affect tax costs or treaty relief positions.
- Assess whether cross-border services performed in Argentina or France could approach the 183-day threshold for services PE purposes.
- Reviewing investment structures involving shares or entities whose value is substantially derived from immovable property.
- Verify whether payroll, withholding, tax equalization, or assignment cost projections may need to be updated once the protocol enters into force.
If assignees and/or their programme managers have any questions or concerns about the scope of the update, its application and potential impacts, and appropriate next steps, they should consult with their qualified professional or a member of the GMS team with KPMG in Argentina (see the Contacts section).
ENDNOTE:
1 Red de Boletines Oficiales (in Spanish), “Convenios - Ley 27814,” published on July 17, 2026.
Contacts
Disclaimer
The information contained in this newsletter was submitted by the KPMG International member firm in Argentina.
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