The term tax haven has been trending for several decades now, having its highest moment with the uncovering of the Panama Papers in 2018.
Although the various Tax Administrations and international organizations such as the OECD (Organization for Economic Cooperation and Development) have fought against them by usually representing a tool helping tax evasion and money laundering of millions of dollars due to their lack of tax transparency, they continue to be used in the aggressive tax planning of many multinational groups through offshore companies located in these territories.
Therefore, many tax regimes have incorporated specific rules to treat transactions performed by their residents with companies domiciled in a tax haven, such as Transfer Pricing or International Tax Transparency rules.
In the case of Argentina, due to the economic crisis, the great tax pressure thereof, among other factors considered by the businessmen for tax payment purposes, many of them have seen as an interesting offer the territories or countries considered as tax havens.
Therefore, Argentine tax legislation provides special treatment for transactions carried out with parties domiciled in non-cooperative or low or zero taxation countries (also called tax haven).
What are tax havens and 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:
- No taxation.
- There is a precariousness in terms of tax transparency.
- Laws preventing the exchange of information for tax purposes.
- Lack of need for real activity by companies.
What is the definition of a tax haven under Argentine law?
Articles 19 and 20 of the Income Tax Law establish the definition of non-cooperating countries or territories and those considered low or no taxation.
Non-cooperating Countries or Territories
Those not having a tax information exchange agreement in force with Argentina or an agreement to avoid double taxation, which stipulates a clause referring to the exchange of information, shall be considered as such.
Those having information exchange agreements without effectively performing them will be considered as such.
It should be noted that these agreements must be under international standards regarding the exchange of tax information.
Likewise, the Executive Power may indicate a list with the countries or territories considered as such, according to the characteristics indicated in previous paragraphs.
Low or No Taxation Countries
Countries, jurisdictions, domains, or special regimes having maximum corporate taxation lower than 60% of the rate indicated in the Profit Tax Law for the same income are referred to as such.
List of non-cooperating countries or territories in Argentina
Bosnia and Herzegovina
|Syrian Arab Republic
|Republic of Madagascar
|Democratic Republic of the Timor East
|People’s Democratic Republic of Algeria
|Republic of Malawi
Republic of Congo
|Central African Republic
|Republic of Maldives
|Democratic Republic of the 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
|People’ s Democratic Republic of Lao
|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
|Republic of Cape Verde
|Republic of Rwanda
|Republic of Ivory Coast
|Republic of Sierra Leone
Islamic Republic of Afghanistan
Saint Helena Island
|Republic of Cuba
|Republic of South Sudan
|Islamic Republic of Iran
|Republic of the Philippines
|República de Surinam
Islamic Republic of Mauritania
The Federated States of Micronesia
|Republic of Fiji
|Republic of Tajikistan
|People’s Republic of Bangladesh
|Republic of the Gambia
|Republic of Trinidad and Tobago
People’s Republic of Benin
|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
|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
|Republic of the Union of Myanmar
|Republic of the Sudan
|Union of the Comoros
|Arab Republic of Egypt
|Republic of Liberia
|Democratic Republic of Sao Tome and Principe
What is the treatment of transactions performed with parties in tax havens in Argentina?
As indicated above, transactions performed by a resident in Argentina with any entity domiciled or located in a non-cooperative, low, or no-tax country or territory must be analyzed under the Transfer Pricing rules.
Therefore, such transactions must be at market value.