On May 28, 2025, Law No. 27,788 was enacted, by which Argentina ratified the “Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent Base Erosion and Profit Shifting” (hereinafter, the “Convention” or “Multilateral Instrument” – “MLI”).
The Convention was signed in France on November 24, 2016, as part of the BEPS Action Plan promoted by the Organisation for Economic Co-operation and Development (“OECD”) and the G20. Argentina was among the signatories of the Convention on June 7, 2017.
Through this ratification, Argentina joins a global framework aimed at modernizing the international tax system and strengthening the fight against aggressive tax planning. The Convention allows for the incorporation of anti-abuse clauses, improvement in the definition of permanent establishment, and optimization of dispute resolution mechanisms between countries. It also enables the introduction of changes to the existing network of double tax treaties without the need to renegotiate each agreement bilaterally.
This could have an impact on corporate structures, business models, and cross-border transactions.
Specifically, the Convention establishes and defines the following aspects:
- Incorporation of anti-abuse provisions: These deny treaty benefits when one of the principal purposes of an arrangement or transaction is to obtain those benefits in an abusive manner.
- Redefinition of permanent establishment: The Convention modifies the concept of permanent establishment to prevent artificial structures used to avoid taxable presence in a jurisdiction.
- More regulated dividends: Reduced withholding tax rates will depend on the shareholding percentage and holding period.
- New rules on transparent entities and dual residents.
- Dispute resolution: Establishes minimum standards for dispute resolution and arbitration mechanisms, enhancing legal certainty.
- Specific procedures for addressing interpretive and implementation doubts: If doubts arise regarding the implementation of provisions of a Covered Tax Agreement (CTA) modified by the Convention, the contracting parties must resolve such matters through the conflict resolution mechanisms established in the Convention. Instead, if the issue concerns the interpretation or application of the Convention itself, the contracting parties must convene a Conference of the Parties, as provided for in the Convention.
- The Convention applies only to CTAs where both jurisdictions have listed each other as covered agreements and have agreed on the specific provisions to apply. Therefore, the actual implementation will vary depending on the position of the other contracting state.
Entry into Force and Effective Application
The Convention will enter into force on the first day of the month following the expiration of three months from the date the instrument of ratification is deposited. As of now, Argentina has not yet deposited the instrument of ratification.
The effective application depends on the type of tax:
- For withholding taxes (on dividends, interest, and royalties): It will apply from January 1 of the year following the entry into force of the Convention between the respective jurisdictions.
- For other taxes: It will apply to fiscal periods beginning six months after the latest entry into force date between the jurisdictions, unless the jurisdictions have agreed to a different date.
