Argentina Publishes New Dividend Withholding Tax Rules

; posted on
May 28th, 2019

Argentina has implemented new rules for withholding tax on dividends. The tax applies to dividend payments made to both resident individuals and nonresidents (whether legal entities or individuals).

Details

The withholding tax is due on distribution of dividends and similar payments to either resident individuals and undivided estates, or non-resident recipients generally. Under the new regulation, Article 2, the paying entities or dividends and similar profits must act as withholding agents. Management companies or depositories of mutual funds will be also responsible for withholding the tax at the time of redemption and / or payment or distribution.

The tax withheld is considered a final taxation when incurred by nonresident beneficiaries, while it is an advance payment of tax when incurred by resident beneficiaries. The law determines that withdrawals by the partners, shareholders and interest holders are deemed to be a distribution, but the amount of actual distributions for each year is capped at the net profits for that year. Therefore, in case withholding is operated on withdrawals and such withdrawals are then reimbursed to the company, the withholding tax can be claimed for refund using the same electronic reporting systems (with the payer reimbursing the beneficiary and claiming a refund).

Tax Rate and Procedure

The rate of the withholding tax differs based on the period of the distribution dividend. The applicable rate for periods starts as of January 1, 2018 and until December 31, 2019, is 7%. Meanwhile, to the extent the dividend paid during periods that starts on or after January 1, 2020, the rate is 13%.

When the beneficiaries of the dividends are residents of Argentina, withholdings must be reported according to the procedures, terms, and other conditions established for the Sistema de Control de Retenciones, regulated by General Resolution No. 2,233. In the case of foreign beneficiaries, withholdings should be reported according to the form, term, and other conditions established for the Sistema Integral de Retenciones Electrónicas, regulated by General Resolution No. 3,726.

Source: Government of Argentina

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