Argentina introduces progressive corporate income tax

By Rodrigo Marabi, LM Abogados, Buenos Aires

On June 2, the Argentine Congress approved a corporate income tax reform replacing the 30% fixed rate with a progressive tax rate. Depending on the amount of a corporation’s accumulated net taxable income, the reform could result in an increase or decrease in the corporate income tax rate.

The reform, which should be published in the Official Gazette soon, also extends the 7% withholding tax on dividends for tax years beginning 1 January 2021 and thereafter.

Under the progressive corporate income tax, a 25% tax rate will apply on net taxable income for accumulated net taxable income up to ARS 5,000,000 (approx. USD 53,000).

For accumulated net taxable income from ARS 5,000,000 to ARS 50,000,000 (approx. USD 530,000), the progressive scale will apply a fixed tax of ARS 1,250,000 (approx. USD 13,300) plus a 30% tax rate on accumulated net taxable income exceeding ARS 5,000,000.

Finally, for accumulated net taxable income exceeding ARS 50,000,000, the progressive scale will apply a fixed tax of ARS 14,750,000 (approx. USD 157,000) plus a 35% tax rate on accumulated net taxable income exceeding ARS 50,000,000.

Under Argentine income tax law in force from 2018 until this reform, a 30% fixed tax rate applied to corporate income in tax years beginning between January 2018 and December 31, 2020, combined with a 7% withholding tax rate on dividends accrued in those years.

For tax years beginning 1 January 2021 and thereafter, however, the law in effect prior to this reform would have applied a 25% fixed corporate income tax rate, combined with a 13% withholding tax on dividends.

– Rodrigo Marabi is a partner at LM Abogados, Buenos Aires, Argentina.