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Argentinian Budget Overhauls Corporate Tax System

by Mike Godfrey, Tax-News.com, Washington

04 January 2018


Argentina intends to reduce its corporate tax rate by 10 percent by 2020.

The plans were confirmed in the 2018 Budget, which was signed off by the Senate on December 27, 2017, and enacted on December 29.

The bill provides for an immediate tax cut to 30 percent from 35 percent and for a further five percent cut from the fiscal year 2020.

However, while the changes are expected to improve the competitiveness and efficiency of Argentina's corporate tax regime, the corporate tax rate reduction was coupled with an increase to tax on distributed profits. Dividend distributions will be subject to a seven percent tax rate, later rising to 13 percent for profits from January 1, 2020, negating for some corporations the benefits of the corporate tax cut.

Until now, generally, dividends paid to resident corporate shareholders have been exempt from withholding tax. A 35 percent withholding tax – termed an "equalization tax" – was imposed on dividend distributions to both residents and non-residents that exceed taxable profits. The Budget repealed this equalization tax from January 1, 2018.

The Budget also includes financial transaction tax proposals intended to stabilize the local currency, by levying a tax of 15 percent on investment in foreign currencies, a five percent tax on peso-denominated debt, and exempting from tax investment in peso-denominated government bonds. It also extended the so-called "cheque tax," on credits and debits in current accounts.

TAGS: tax | investment | corporation tax | social security | tax reform | currency | Argentina

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