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Argentina: AFIP changes the list of " cooperating countries " and modifies how investments are taxed

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With the categorization of " cooperating country ," taxpayers can " usufruct preferential tax regimes , without penalties applied to them to investments or business conducted in these countries "

The Federal Public Revenue Administration (AFIP) amended the list of countries or territories considered as cooperating in the exchange of tax information. Each time this happens, the tax treatment changes to business with those jurisdictions.

For two years, the AFIP relegated the definition of "tax haven" in the legislation, since it ignored a roster that included under that heading to countries that have a tiny or no taxation, and enacted another "cooperating countries". Its guiding parameter is to have signed a treaty and effective collaboration for the exchange of tax information with AFIP. But this is not exclusive, as there are countries like Paraguay that do not comply and are whitelisted.

The categorization of "cooperating country," taxpayers can "usufruct preferential tax regimes, without penalties applied to them to investments or business conducted in these countries," said William Poch and Adrian Persson, BDO Argentina.

But the AFIP can modify the status of countries, and thus modify the tax treatment.
In recent days, the most significant was that was included in the list of cooperating countries to Hong Kong, an important jurisdiction for its special scheme for low-cost production.

The following are aspects of tax issues that are altered with the reclassification, listed by  Poch and Persson:

Dividends from investments abroad : the profits of corporations located in countries considered tax havens should be recognized annually and not at the time of distribution of dividends , when 50% or more of the income of the foreign company come from activities considered passive . That is, the mere reclassification of jurisdiction could make income must be recognized before.

Deduction of expenses incurred to subjects residing abroad: the Law on Income Tax restricts the deduction of certain expenses incurred by individuals residing in such countries, which had previously been paid.

Transfer pricing : should be subject to transfer pricing study subjects transactions with tax havens. And subjects who receive funds from these jurisdictions , should sufficiently demonstrate the origin of the same .