Argentina – New income tax treaty with Chile

Representatives of the governments of Argentina and Chile have completed negotiations and on 15 May 2015 agreed to a new income tax treaty. The new treaty comes two years after Argentina unilaterally terminated the prior agreement between the two countries.

The new Argentina-Chile income tax treaty follows the OECD model tax convention. It also contains a non-discrimination clause that allows for full deductions of certain expenses with no limitations.

Once approved by the countries’ parliaments and ratified by each country, the treaty provisions would be effective beginning from 1 January of the following year, except provisions concerning international transport would be effective retroactively for years beginning on or after 30 June 2012.

The former Argentina-Chile income tax treaty was signed in 1976 and entered into force in 1985. Its provisions did not follow the OECD model tax convention, but followed Andean Pact provisions. The Argentine authorities formally notified the Chilean authorities of that treaty’s termination on 29 June 2012.

Under the treaty, relief from Argentine wealth tax for Chilean shareholders (previously exempt under the old treaty) has been eliminated, and the wealth tax exemption would not apply under the new treaty.

A non-discrimination clause, concerning the deduction of interest, royalties, and other expenses, would be enforced if contracts were properly registered or authorized in accordance with the domestic law requirements.

The new income tax treaty includes specific anti-abuse, exchange of information, elimination of double taxation and permanent establishment rules. The new tax treaty also includes a limitation on benefits (LOB) clause and a section regarding assistance in collection efforts.