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Argentina Buenos Aires’ New Stamp Tax Triggered by Two Core Events Buenos Aires’ official gazette on January 19 published Resolution 10/09, the first set of implementing rules for the city’s stamp tax, which was reenacted on January 9 by Law 2997. (For prior coverage, see Tax Notes Int’l, Jan. 26, 2009, p. 294, Doc 2009-822, or2009 WTD 9-2.) The stamp tax, which was limited to real estate transactions until December 2008, was absent from Buenos Aires for more than five years. The stamp tax is a local levy, so each jurisdiction provides its own legislation. Accordingly, the taxable events, exemptions, taxable amounts, tax rates, terms for payment, penalties, and interest vary by jurisdiction. However, the general aspects of the stamp tax are shared by most jurisdictions. Buenos Aires’ stamp tax can be triggered by two core events resulting in the assessment of an instrumentality tax or a financial transaction stamp tax. Instrumentality Tax This tax is triggered by written legal contracts either executed or having effects within the city of Buenos Aires. In general, the term ‘‘effects’’ refers to the execution of the contractual obligations. The fact that the contract is executed outside Argentina does not relieve the parties thereto from their obligation to satisfy the stamp tax because the agreement — though executed abroad — could still have effects in Buenos Aires. The taxable amount is equal to the contractual value during its whole term. However, there are specific rules for contracts subject to automatic renewal or extension terms beyond five years. The new rules provide that in the absence of a fixed taxable amount set forth in the contract, it should be reasonably estimated — with the evidence and data available to the taxpayer when the taxable event is triggered — using, for example, any of the following guidelines: similar past agreements; the forecasted revenue in the relevant jurisdiction; or the COUNTRY DIGEST figures of the developing business. If the local tax authority challenges the taxable amount assessed and proves that the estimation procedure was wrong, fines and interest will be applied. The new legislation provides rules aimed at avoiding double taxation within Argentina. If a contract is executed in one jurisdiction and the assets are located in a different one, taxing powers are granted with priority to the jurisdiction where the assets are located. Tax rates vary depending on the taxable events. The standard tax rate is 0.8 percent, while a higher rate up to 2.5 percent applies to real estate transactions. A reduced rate of 0.5 percent applies to leasing agreements, and a higher rate of 1 percent applies to set contracts involving trading of rights of soccer players. All parties to the agreement are jointly and severally liable before the State Revenue Service for the payment of the full amount of the stamp tax triggered by a given agreement. Like the stamp tax in most provinces, the Buenos Aires stamp tax is governed by the ‘‘instrumentality principle,’’ according to which the taxable event is only triggered when a contract or document is prepared in writing by the parties or the party to the agreement; and such written document sufficiently prove the rights and obligations of the parties — namely when it reproduces the main elements of the contract, disregarding the facts and actions taken by the taxpayers. This instrumentality principle is also stated in the federal coparticipation of taxes law, a law passed by the National Congress that provides for the allocation of tax revenues between the federal government and the provinces. This law imposes a restriction on the taxing powers of the provinces. Some tax planning devices have been used countrywide to avoid payment of the stamp tax. They have mainly consisted of agreements implemented in such a manner that they do not fit within the instrumentality principle. These options are available under the new Buenos Aires legislation, but taxpayers must carefully implement them to ensure that the Supreme Court precedents governing these matters can be reasonably relied upon. There are a number of exemptions available, which should be scrutinized on a case-by-case basis. Some of TAX NOTES INTERNATIONAL FEBRUARY 2, 2009 • 387 (C) Tax Analysts 2009. All rights reserved. Tax Analysts does not claim copyright in any public domain or third party content.
ARGENTINA the most significant exemptions relate to contracts for the incorporation of companies in Buenos Aires, as well as their capital increases and liquidations; all contracts aimed at papering public listing of securities; and guarantee agreements that secure other taxable instruments, life insurance agreements, labor agreements, export related agreements, and so on. Financial Transaction Stamp Tax This tax is triggered on all loans or credits that a financial institution is party to that imply a delivery or receipt of principal (or funds in general) that triggers interest over time and that are registered and recorded by such financial entities. The taxable amount is deemed to be the figures used to calculate the interest times the tax rate, which is the standard one of 0.8 percent per year. So the tax burden is proportional to the term the taxable transaction remains in place: The larger the term, the higher the tax burden. The persons contracting with the financial entities are deemed to be the taxpayers and such entities are deemed to be the collecting agents. Accordingly, they are subject to joint and several liability. Specific exemptions apply to this taxable event, the most significant being that related to transactions subject to the instrumentality tax: To the extent such burden is triggered, even in a different jurisdiction, there will be no financial transaction tax on the same transaction. Also, bank deposits in savings accounts, time deposits, and checking accounts are exempt, as well as mortgage deeds and other security agreements used to secure taxable transactions. As of the enactment of Law 2997, taxpayers are required to monitor the stamp tax legislation in the city of Buenos Aires in conjunction with the one applicable in other provinces to ensure they take advantage of tax planning options or at least avoid double taxation when transactions that are executed in one location have effects in a different one. Bangladesh ♦ Cristian Rosso Alba, Rosso Alba, Francia & Ruiz Moreno, Buenos Aires Government Revokes Import Tax on Renewable Energy Imports Bangladeshi Prime Minister Sheikh Hasina Wajed on January 15 announced that all taxes and duties assessed on imports of solar power generating equipment have been revoked to encourage the use of renewable energy as the country continues to struggle with power shortages. Previously, imports of renewable energy equipment were subject to a 3 percent import duty and a 15 percent VAT. The withdrawal of the import taxes is part of the country’s new renewable energy policy, which was approved in December 2008. The policy also provides for a five-year corporate tax holiday for income from renewable energy projects. The government’s goal is for the country to derive 5 percent of its electricity from renewable sources by 2015 and 10 percent of its overall electric supply by 2020. In addition to commercial-scale solar energy plants, the government also seeks to promote the use of microlevel solar energy for domestic use. More than 300,000 households are using solar energy equivalent to 15 megawatts, accounting for less than 1 percent of the country’s total electricity generation of around 3,500 megawatts. Hasina also heads the Ministry of Electricity, Oil, and Mineral Resources. ♦ Aziz Nishtar, Nishtar & Zafar Advocates, Karachi Cambodia Tax Breaks Targeted to Critical Garment Industry The Cambodian government has announced that it will offer tax breaks targeted to the clothing industry (accounting for 320,000 jobs in a country of 14.2 million) as a way to address the global financial crisis’s impact on Cambodia, according to media reports. Because the Phnom Penh government lacks cash, it reportedly cannot undertake the kind of stimulus packages seen in neighboring countries like Thailand, Malaysia, and Singapore. In addition to the tax breaks, the government plans to invest in infrastructure such as power plants, rural roads, irrigation systems, and telecommunications in an attempt to establish the kinds of structures the country will need when growth returns. According to the Economic Institute of Cambodia (a Phnom Penh think tank), up to 66 percent of the workforce works in the rural sector at some point during the year. The projects are to be funded through donor contributions, according to a January 26 article on Bloomberg.com. Contributor countries in December 2008 pledged $950 million in aid for fiscal 2009, a 40 percent increase over fiscal 2008. The money will go toward Cambodia’s $1.8 billion 2009 budget, which includes the infrastructure expenditures. Cambodia’s fiscal year runs January 1 to December 31. 388 • FEBRUARY 2, 2009 TAX NOTES INTERNATIONAL (C) Tax Analysts 2009. All rights reserved. Tax Analysts does not claim copyright in any public domain or third party content.
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Page 3 and 4: ARGENTINA 387 Buenos Aires’ New S
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