Argentina: Termination of Argentina-Spain double taxation treaty

On 29 June 2012, the Argentine government notified Spain that it had terminated the Argentina-Spain tax treaty for the Avoidance of Double Taxation (the treaty).

On 12 July 2012, a diplomatic note signed by the Argentine Ministry of Foreign Affairs was published in Argentina’s official bulletin announcing the termination of the treaty. Pursuant to the cancellation provisions contained in Article 29, the treaty will cease to apply as of 1 January 2013. However, the Argentine government has announced its intention to renegotiate the treaty with Spain.

The following represent the primary policy reasons for the termination of the treaty:

  • The Spanish treatment of the tax-advantaged Spanish holding companies (ETVEs). The treatment of tax-advantaged ‘platform companies’ led to a similar termination of the income tax treaty with Chile
  • The exemption from personal asset tax for shares or other equity investments in Argentine companies. In light of the previous terminations of treaties with Chile and Switzerland, this appears to be the primary reason
  • A recent decision by the Argentine Federal Tax Court caused great alarm in the government. A Uruguayan shareholder claimed the application of the benefits of the present treaty with Spain based on the application of the ‘most-favoured nation’ clause of article 48 of the 1980 Treaty of Montevideo. In practical terms, this means that all countries in the Aladi (Asociación Latinoamericana de Intercambio), namely Bolivia, Brazil, Colombia, Chile, Ecuador, Mexico, Paraguay, Peru, Uruguay, Cuba and Venezuela, can now claim the same treatment under the treaty.

Consequences of termination

Executed in 1992, the treaty followed the OECD model with some modifications. The treaty included very beneficial clauses for foreign investors, including an exemption from personal asset tax on the taxation of shares or other participations in the capital of an Argentina entity and reduced withholding rates on royalty, dividends and interest.

Some of the key increased rates that will result from the termination are summarised below.


The current treaty rate on dividends is 10% if the shareholder holds at least 25% of financial interest in the company and 15% in all other cases. With or without the treaty, Argentina does not tax the distribution of dividends in all cases. A tax of 35% is levied whenever profits distributed are not subject to tax prior to payment, even in cases when ‘equalization tax’ of 35% is assessed over the excess of the reported profit over the tax profit.

Royalties and technical assistance payments

The domestic rate for royalties or technical assistance (specific requirements apply), complying with the regulations of the Transfer of Technology Law, is 21% or 28%, depending on the concept, the registration of the contract and whether the advice or consulting is available in the country. If certain conditions and requirements are not met, the applicable tax rate increases to 31.5%.

Copyright-related royalties in the absence of the treaty will now be subjected to withholding tax at a rate of 12.25% or even 31.5% (if certain requirements are not met).

Interest payments

The withholding tax rate on outbound interest payments in the absence of the treaty will vary from 15.5% (generally for loans with financial institutions or financing of equipment imports) to 35% depending on the concept and certain conditions.

Additionally, it should be noted that because of the present provisions of Article 7 of the treaty, which addresses business profits, any Spanish company without a permanent establishment in Argentina that is doing business or providing services to a local company is not taxed. Without the treaty, such activities would be taxed at a rate 
of 31.5%.

table displaying current treaty rate in Argentina and Spain


Argentina’s treaty termination with Spain is significant and may impact existing cross-border structures and planning by multinationals with operations or investments in Argentina. Companies engaged in transactions that may have benefitted from the treaty should analyse the effects of the termination and evaluate potential courses of action in order to mitigate any negative consequences.

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