According to the overview: Double taxation and administrative assistance as available on the website of Swiss State Secretariat for International Financial Matters, the Convention between the Swiss Confederation and the Argentine Republic for the Avoidance of Double Taxation with respect to Taxes on Income and on Capital (Hereafter: the DTA) entered into force on November 27, 2015.
Based on Article 27, Paragraph 2 of the DTA (“Entry into Force “) the fact that the DTA entered into force on November 27, 2015 means that provisions of the DTA shall have effect in both Contracting States:
(a) in respect of taxes withheld at source, on income derived on or after the first day of January 1, 2015;
(b) in respect of other taxes on income or capital, for taxes chargeable for any fiscal year beginning on or January 1, 2016;
(c) in respect of Article 25, for information that relates to fiscal years or business years beginning on or after January 1, 2015.
Below we will discuss a selection of provisions included in the DTA of which we think they might interest our readers.
Taxes covered
Based on Article 2, Paragraph 3 of the DTA (“Taxes covered”) the existing taxes to which the Convention shall apply are in particular:
(a) in the Argentine Republic:
(i) the income tax (impuesto a las ganancias);
(ii) the presumptive minimum income tax (impuesto a la ganancia mínima presunta);
(iii) the personal assets tax (impuesto sobre los bienes personales)
(b) in Switzerland: the federal, cantonal and communal taxes
(i) on income (total income, earned income, income from capital, industrial and commercial profits, capital gains, and other items of income); and
(ii) on capital (total property, movable and immovable property, business assets, paid-up capital and reserves, and other items of capital)
Paragraph 4 of Article 2 of the DTA subsequently arranges that the DTA shall apply also to any identical or substantially similar taxes which are imposed after the date of signature of the Convention in addition to, or in place of, the existing taxes.
Permanent establishment
Paragraph 3 of Article 5 of the DTA (“Permanent establishment”) arranges that the term "permanent establishment" likewise encompasses:
(a) a building site, a construction, assembly or installation project or supervisory activities in connection therewith, but only where such site, project or activities continue for a period or periods aggregating more than six months within any twelve month period;
(b) the furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose, but only where such activities continue, for the same and connected project, within the country for a period or periods aggregating more than six months within any twelve month period.
Business profits
Article 7, Paragraph 7 of the DTA (“Business profits”) arranges that notwithstanding the provisions of paragraph 1, profits derived by an enterprise of a Contracting State from the activity of granting insurance or re-insurance covering property situated in the other Contracting State or persons which are residents of that other State, at the time of the conclusion of the insurance contract, may be taxed in that other State, whether or not the enterprise carries on its activity in that other State through a permanent establishment situated therein. However, in such case, the tax charged in that other State shall not exceed 2.5 per cent of the gross amount of the premium.
Associated enterprises
Article 9, Paragraph 2 of the DTA (“Associated enterprises”) reads as follows: “When profits on which an enterprise of a Contracting State has been charged to tax in that State are also included in the profits of an enterprise of the other Contracting State and taxed accordingly, and the profits so included are profits which would have accrued to that enterprise of the other State, if the conditions made between the enterprises had been those which would have been made between independent enterprises, then the competent authorities of the Contracting States may consult together with a view to reach an agreement on the adjustments of profits in both Contracting States.”
Article 9, Paragraph 3 of the DTA contains a statute of limitation clause, which reads as follows: “A Contracting State shall not change the profits of an enterprise in the circumstances referred to in paragraph 1 after the expiry of the time limits provided in its national laws and, in any case, after six years from the end of the year in which the profits which would be subject to such change would have accrued to an enterprise of that State. This paragraph shall not apply in the case of fraud or wilful default.”
Dividends
If the beneficial owner of the dividends is a resident of the other Contracting State Paragraph 2 of Article 10 of the DTA (“Dividends”) maximizes the dividend withholding tax that a Source State is allowed to withhold over dividend distributions as follows:
(a) 10 per cent of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) which holds directly at least 25 per cent of the capital of the company paying the dividends;
(b) 15 per cent of the gross amount of the dividends in all other cases.
Interest
If the beneficial owner of the interest is a resident of the other Contracting Party, Paragraph 2 of Article 11 of the DTA (“Interest”) maximizes the withholding tax that a Source State is allowed to withhold over interest payments to 12 per cent of the gross amount of the interest.
Paragraph 3 of Article 11 of the DTA subsequently reads as follows: “Notwithstanding the provisions of paragraph 2:
(a) interest arising in a Contracting State and paid in respect of a bond, debenture or other similar obligation of the government of that Contracting State or of a political subdivision or local authority thereof shall, provided that the interest is beneficially owned by a resident of the other Contracting State, be taxable only in that other State;
(b) interest arising in the Argentine Republic and paid to a resident of Switzerland shall be taxable only in Switzerland if it is paid in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured under the Swiss provisions regulating the "garantie contre les risques à l'exportation" or by any institution specified and agreed in letters exchanged between the competent authorities of the Contracting States;
(c) interest arising in Switzerland and paid to a resident of the Argentine Republic shall be taxable only in the Argentine Republic if it is paid in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by the "Banco Central de la República Argentina", the "Banco de la Nación Argentina" or the "Banco de la Provincia de Buenos Aires" as is specified and agreed in letters exchanged between the competent authorities of the Contracting States;
(d) interest arising in a Contracting State shall be exempt from tax in that State if it is beneficially owned by a resident of the other Contracting State and is paid with respect to indebtedness arising as a consequence of the sale on credit by a resident of that other State of any industrial machinery or equipment; and
(e) interest arising in a Contracting State shall be exempt from tax in that State if it is beneficially owned by a resident of the other Contracting State and is paid with respect to any development loan granted by a bank to an unrelated party at a preferential rate provided the time period of such loan is no less than three years.”
Royalties
With respect to the withholding taxes that a Source State is allowed to withhold over royalties, Article 12, Paragraph 2 of the DTA (“Royalties”) arranges the following:“However, such royalties may also be taxed in the Contracting State in which they arise and according to the laws of that State, but if the recipient is the beneficial owner of the royalties the tax so charged shall not exceed:
(a) 3 per cent of the gross amount paid for the use of, or the right to use, news;
(b) 5 per cent of the gross amount paid for the use of, or the right to use, copyright of literary, dramatic, musical or other artistic work (but not including royalties in respect of motion picture films and works on film or videotape or other means of reproduction for use in connection with television);
(c) 10 per cent of the gross amount paid for the use of, or the right to use, industrial, commercial or scientific equipment or any patent, trade mark, design or model, plan, secret formula or process, computer software or for information concerning industrial or scientific experience including payments for the rendering of technical assistance; and
(d) 15 per cent of the gross amount of the royalties in all other cases.”
Capital gains
With respect to capital gains Article 13, Paragraph 4 of the DTA (“Capital gains”) arranges the following: “Gains derived by a resident of a Contracting State from the alienation of shares deriving more than 50 per cent of their value directly or indirectly from immovable property situated in the other Contracting State may be taxed in that other State. The provisions of the preceding sentence shall not apply to gains:
(a) from the alienation of shares quoted on a stock exchange established in either Contracting State or on a stock exchange as may be agreed by the competent authorities of the Contracting States; or
(b) from the alienation of shares in a company the value of which consist of more than 50 per cent of immovable property, in which the company carries on its business.”
Paragraph 5 of Article 13 of the DTA subsequently reads as follows: “Unless the provisions of paragraph 4 are applicable, gains derived by a resident of a Contracting State from the alienation of shares or securities representing the capital of a company that is a resident of the other Contracting State may be taxed in that other State, but the tax so charged shall not exceed:
(a) 10 per cent of the gain if it is realized on a participation detaining directly at least 25 per cent of the capital;
(b) 15 per cent of the gain in all other cases.”
Other
The DTA furthermore includes an article arranging for a Mutual Agreement Procedure (Article 24 of DTA) and an article on the Exchange of Information (Article 25 of the DTA).
Furthermore it should be noted that the accompanying protocol a.o. contains interesting Paragraphs regardin Article 7 (Business Profits), Article 10 (Dividends), Article 11 (Interest), Article 12 (Royalties) and Article 25 (Exchange of Information).
Click on the language of your choice to be forwarded to the Swiss – Argentine DTA in that language as available on the website of the Swiss Government. (English, Spanish, German and French)
Are you looking for an other DTA? Then check our section DTAs & TIEAs, a very efficient way to locate numerous DTAs.
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