During MERCOSUR summit, on July 21st 2017, in Mendoza, Argentina, the authorities of Argentina and Brazil executed an amendment protocol to the treaty to avoid double taxation and prevent tax evasion (“DTT”) between said countries (the “Protocol”).
The main amendments of the Protocol include the following:
- Taxes included: the Protocol has extended the application of the DTT to taxes on assets (in Argentina, personal assets tax) and minimum presumed income tax.
- Limits to the concept of Permanent Establishment (“PE”): excluding expressly the ancillary or preparatory activities (such as warehouse, etc.).
- Dividends: maximum rates are incorporated depending on the applicable country (10 or 15%, respectively).
- Interests: also limited to a maximum rate of 15%.
- Royalties: Maximum limits to 15% for use or licence of trademarks and 10% for any other case.
- Mechanisms to avoid double taxation.
- Limitation of benefits: in accordance with the OECD BEPS project, the benefits of the DTT will not be granted when the purpose of an agreement or transaction was just to enjoy the benefits of the DTT.
- information exchange: a more modern mechanism for automatic exchange is provided in the Protocol.
The Protocol will become effective when the Legislature approves it, in accordance with the procedures established in the domestic law of each of the countries.