Tax Haven: a Vision from Argentina

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

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.