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Spain, Argentina Sign Fresh DTA

by Ulrika Lomas,, Brussels

20 March 2013

Spain and Argentina have recently signed in Buenos Aires a new accord aimed at preventing double taxation and tax evasion with respect to taxes on income and on capital.

The agreement replaces the existing DTA between the Kingdom of Spain and the Republic of Argentina, and the annexed protocol, signed in Madrid on July 21, 1992. Argentina had terminated the agreement unilaterally on June 29, 2012, and the treaty ceased to be effective from January 1, 2013.

According to the Spanish Finance Ministry, the new accord improves and updates the previous text, facilitates cooperation and enhances the exchange of tax information between the two countries. Although the latest agreement introduces minor modifications to provisions relating to the taxation of capital and interest, the rest of the treaty maintains the articles provided for in the old DTA.

Spain and Argentina also signed a Memorandum of Understanding, which contains various clauses limiting benefits, as well as a measure intended to close loopholes and to prevent the misuse of the agreement.

The DTA will enter into force following the exchange of the relevant ratification instruments. The provisions will apply with retroactive effect from January 1, 2013, to guarantee continuity, maintain incentives for investment, ensure legal certainty for companies, and to make sure that the tax burden on businesses does not increase, due to the absence of a treaty.

The Spanish Finance Ministry emphasized that Spain remains committed to renegotiating bilateral treaties, which, due to the passage of time, need to be adapted to new economic realities.

The Argentine Government decided to terminate the convention for the avoidance of double taxation with Spain following a tax dispute with Spanish oil firm Repsol YPF. The Argentine Government confirmed its decision in an order posted in its Official Gazette. The double tax agreement, which set a beneficial legal framework for cross-border business between the two countries, expired on December 31, 2012, exposing economic entities in both countries to substantially higher withholding taxes, while income derived from cross-border trade or investment would no longer have been shielded from the potential for tax liability.

TAGS: Finance | tax | investment | business | double tax agreement (DTA) | interest | agreements | memorandum of understanding (MOU) | withholding tax | Spain | trade | Argentina

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