Argentina: Turnover Tax Withholding for Non–Resident Companies
In an unprecedented move, the Buenos Aires Tax Authorities (AGIP) have formulated two resolutions that will extend its provincial turnover tax to non-resident companies - i.e. foreign entities with no permanent establishment.
Turnover Tax is an indirect provincial tax on gross revenues derived from local activities and applied at a rate of between 3-5%. The new resolutions, when implemented, will create a new withholding system for non-residents in two distinct areas of activity.
The first resolution (no. 593/2014) aims to tax internet service providers on the revenues generated from movies, TV, games, music and other services supplied through the internet and paid to non–resident companies through debit and credit card transactions.
The tax will be applied at a rate of 3% of the net price and withheld prior to the transfer of payment overseas - for reporting purposes, the amount withheld will be acknowledged as the tax payment of the service provider. The new regime will take effect from November 1.
The second resolution (no. 594/2014) covers cultural and artistic activities performed in Buenos Aires by either foreign individuals or entities. The tax will be levied at a rate of 3% of the revenues and the Argentine customers have a duty to withhold the tax from any payments due. The system has been operational since October 1.
We will continue to monitor developments to see whether other regions follow this regime and whether or not the tax will extend to other types of services from non–resident companies.