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Argentina: Guidance (decree) implementing tax reform measures for corporations

Argentina: Tax reform measures for corporations

A regulatory decree—Decreto 1170/18—was published in the official bulletin on 27 December 2018 as guidance for implementing income tax changes introduced by the 2017 tax reform legislation.


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Decreto 1170/18 (Spanish) clarifies:

  • The rules relating to transfer pricing requirements; the taxation of certain financial investments, indirect transfers of stock or assets, and thin capitalization requirements; and regarding fiscal transparency measures
  • The definitions of certain terms under the rules for permanent establishments 

Because the decree relates to the 2017 tax reform changes, multinational entities conducting business activities in (or considering investing in) Argentina need to evaluate the effects of the decree on their current operations and on how their business operations in Argentina have been structured. 

Overview of measures in the decree

  • Transfer pricing: The decree provides additional regulations regarding the analysis of transactions between related parties—for example, instructions for applying transfer pricing methods and various transfer pricing documentation requirements including rules for country-by-country (CbC) reports, Master file, and Local file. Read more in TaxNewsFlash
  • Indirect transfers of stock or assets by nonresidents: The decree provides guidance related to the taxation of indirect transfers of assets located in Argentina—as introduced by the 2017 tax reform legislation. The indirect transfer rules provide an exemption for transfers within the same “economic group.” Regarding this exemption, the decree requires nonresidents to meet a direct or indirect ownership requirement of at least 80% for the two years before the date of the indirect transfer. 
  • Fiscal transparency and low-tax or no-tax jurisdictions: For purposes of determining whether a jurisdiction is a low-tax or no-tax jurisdiction, the decree clarifies that the total tax rate imposed in that jurisdiction must be taken into account, regardless of which government unit (e.g., federal, state, municipal or city) imposes the tax. The decree also provides that a “preferential tax regime” is one that deviates from the general corporate tax system in the subject jurisdiction and results in a lower effective tax rate. 
  • Permanent establishment: The decree clarifies that agents with a significant role in the negotiation of contracts are deemed to create a permanent establishment, and that profits are to be allocated to a permanent establishment in relation to the functions performed, assets involved, and risk assumed.
  • Thin capitalization rules: The decree clarifies that interest subject to withholding tax is not subject to the 30% EBITDA* deduction limitation, even if the withholding tax is reduced to zero by an applicable income tax treaty. However, the 30% EBITDA deduction limitation does apply to foreign exchange differences on the principal of a loan because such differences are not subject to withholding tax. *EBITDA = earnings before interest, tax, depreciation and amortization.
  • Controlled foreign corporation (CFC) rules, substance requirements: The decree provides guidelines for applying the CFC rules and substance requirements pursuant to the 2017 tax reform, and looks to factors such as whether qualified personnel are employed by the entity in question and whether the structure or transactions have economic substance and a valid business purpose.
  • Taxation of financial investments: The decree allows taxpayers that hold and then sell public bonds or publicly traded debt instruments at a loss to “shelter” the interest income generated by the debt instrument.


For more information, contact a tax professional with KPMG’s Latin America Markets Tax practice or with the KPMG member firm in Argentina: 

Alfonso A-Pallete | +1 (305) 913-2789 |

Rodolfo Canese | +(5411) 4316-5740 |

Violeta Lagos | +(5411) 4316-5740 | 

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