On January 31, 2012 an Argentinean Note (the “Note”) which terminated the application of a Treaty between Argentina and Switzerland (the “Treaty”) was published in the Official Gazette. The Treaty was aimed to avoid double taxation in taxes on income and wealth.
The Treaty was signed on April 23, 1997 and had been in force since January 1st, 2001 under a “provisional implementation” clause that Argentina and Switzerland had subscribed on November 23, 2000. Article 115 of Law No 11.683 allows the National Executive to dispose de provisional implementation of treaties signed with other countries in order to avoid international double taxation. Through the application of this provision, the Treaty had not been ratified by an Act of the Congress, but it came into force in a provisional way through the exchange of protocol notes between both countries.
By means of the implementation of the Treaty, Argentina did not impose retentions in concept of income tax on payments for royalties, and did not charge personal property tax to Argentinean companies for shares owned by Swiss shareholders. The Note does not contain the reasons of its application and does not count with the signature of any official belonging to the Ministry of Foreign Affairs. The note merely expresses that the validity of the Treaty “will go on suspended”.
Section 26 of the Treaty establishes the effects of the cancellation (that must be performed at least six months before) and sets that the cancellation has effects: (a) with respect to taxes retained in the source, on the amounts paid since January, 1st inclusive from the calendar year following to the date in which the cancellation has been notified, (b) with respect to other taxes on income for the fiscal years which start since January, 1st inclusive from the year following the date of notification of the cancellation.
Consequently, regarding the validity of the termination of the provisional implementation of the Treaty, the withholdings on payments maintain their regime until January 1st , 2013 and for taxes on income (gain, minimum presumed income and personal property) the termination will come into force with the exercises starting on January 1st , 2013.