On 1 December 2018, officials from Argentina and Turkey signed an income tax treaty. The treaty is the first of its kind between the two countries.

Taxes Covered

The treaty covers Argentine income tax and presumed minimum income tax and covers Turkish income tax and corporation tax.

Residence

If a company is considered resident in both Contracting States, the competent authorities will determine the company's residence for the purpose of the treaty through mutual agreement. If no agreement is reached, the company will not be entitled to any relief or exemption from tax provided by treaty except to the extent and in such manner as may be agreed upon by the competent authorities of the Contracting States.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted if an enterprise furnishes services in a Contracting State through employees or other engaged personnel for the same or connected project for a period or periods aggregating more than 6 months within any 12-month period.

Withholding Tax Rates

• Dividends - 10% if the beneficial owner is a company that has directly held at least 25% of the paying company's capital throughout a 365-day period that includes the day of the payment; otherwise 15%
• Interest - 12%
• Royalties (including for technical assistance) -
  • 3% on royalties paid for the use of, or the right to use, news;
  • 5% on royalties paid for the use of, or the right to use, any copyright of literary, musical or other artistic or scientific work (but not including royalties in respect of any cinematographic film, or work on film, tape or other means of reproduction of sounds or images);
  • Otherwise, 10%

Note – The final protocol to the treaty provides that the 5% rate for copyrights only applies if the beneficial owner is the author or his/her heirs. Otherwise, the rate is 15%. The final protocol also provides that the 10% rate will apply on royalties paid under contracts relating to the transfer of technology as long as it is required for the contracts to be registered or authorized according to the regulations of their domestic law. Otherwise, the rate is 15%.

Capital Gains

The following capital gains derived by a resident of one Contracting State may be taxed by the other State:

• Gains from the alienation of immovable property situated in the other State;
• Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State;
• Gains from the alienation of shares or comparable interests if, at any time during the 365 days preceding the alienation, the shares or comparable interests derived at least 50% of their value directly or indirectly from immovable property situated in the other State;
• Gains from the alienation of shares, other than the above, that represent the capital of a company that is a resident of the other State, with the tax rate limited to:
  • 10%, if the alienator, at any time during the 365 days preceding such alienation, held directly or indirectly at least 25% of the capital of the company;
  • Otherwise, 15%; and
• Gains from the from the alienation of motor vehicles, ships, or aircraft registered in the other State, unless operated in international traffic.

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Elimination of Double Taxation

Both countries apply the credit method for the elimination of double taxation.

Limitation on Benefits

Article 27 (Limitation of Benefits) provides that a benefit under the treaty will not be granted in respect of an item of income or capital if it is reasonable to conclude 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 the benefit would be in accordance with the object and purpose of the relevant provisions of the treaty.

Entry into Force and Effect

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.