The income and capital tax treaty between Argentina and Luxembourg was signed on 13 April 2019. It is the first of its kind between the two countries
The treaty covers Argentina income tax and personal assets tax and covers Luxembourg individual income tax, corporation tax, capital tax, and communal trade tax.
The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services within a Contracting State through employees or other engaged persons if the activities continue for a period or periods aggregating more than 6 months within any 12-month period.
Article 7 (Business Profits) includes the provision that profits of an enterprise of a Contracting State derived from insurance and re-insurance activities by insuring property situated in the other Contracting State or persons who are residents thereof at the moment of signature of the insurance contract, may be taxable in that other State, whether or not the enterprise carries on those activities through a permanent establishment situated therein. However, in the absence of a permanent establishment, the tax charged in that other State shall not exceed 2.5% of the gross amount of the premium.
Note - where the payment of royalties is in relation to the transfer of technology, and the transfer has not been registered in accordance with the domestic laws of the source State, then the withholding rate on such royalties will be 15%.
The following capital gains derived by a resident of one Contracting State may be taxed by the other State:
Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.
Argentina applies the credit method for the elimination of double taxation, while Luxembourg generally applies the exemption method. However, Luxembourg applies the credit method in respect of income covered by Articles 10 (Dividends), 11 (Interest), 12 (Royalties), Article 13 (Capital Gains) with respect to shares in resident companies, Article 17 (Entertainers and Sportspersons), and Article 21 (Other Income) with respect to other income not covered by the treaty.
Article 28 (Entitlement to Benefits) provides that a benefit under the treaty shall not be granted in respect of an item of income or capital if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit in these circumstances would be in accordance with the object and purposes of the relevant provisions of the treaty.
The final protocol to the treaty includes the provision that if Argentina concludes an agreement with another State after the date of signature of the treaty with Luxembourg and such agreement provides for a lower tax rate or more favorable treatment than that provide in Article 7 (Business Profits) with respect to insurance and re-insurance, Article 10 (Dividends), Article 11 (Interest), Article 12 (Royalties), or Article 13 (Capital Gains) with respect to shares in resident companies, then such lower rate or more favorable treatment will automatically apply for the purpose of the Argentina-Luxembourg treaty when the provisions of the agreement with that other State become applicable.
The treaty will enter into force once the ratification instruments are exchanged and will apply from 1 January of the year following its entry into force.
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