International Services Under Value Added Tax

Author:Ms María Inés Brandt, Walter C. Keiniger, Sergio Daniel Vergara and Ignacio Aberastain Diz
Profession:Marval O'Farrell & Mairal

Law No. 27,346 introduced amendments to Value Added Tax Law and designated as substitute obligors certain tenants, borrowers or intermediaries of foreign individuals that lease or render services taxed within Argentina. As a result of the aforementioned amendment, the treatment of the provision of services with international components (parties, place of rendering the service or place of use or effective exploitation) in Value Added Tax ìs analyzed briefly.

On December 27, 2016 the Argentine Official Gazette published Law No. 27,346 that designated as substitute obligors for the payment of the Value Added Tax (hereinafter, the "Tax") the following: "tenants, borrowers or intermediaries of foreign individuals that leases or renders services taxed within the country, in their character of substitute taxpayers".[i] This amendment completes what could be considered a legal loophole regarding the taxable person when the service is rendered in Argentina by a non-Argentine resident.

By virtue of this amendment and although regulation is pending, it could be asserted that the way in which the Tax affects the rendering of international services is now completed.

  1. Services rendered in Argentina.

    1. Used or effectively exploited in Argentina

      The taxable event related to the rendering of services is set forth in section 1, subsection b) of the Value Added Tax Law (the "VAT Law"), stating that the lease and rendering of services in Argentina are within the scope of the Tax. As a general principle, it should be said that services that are materially executed within  Argentine territory fall under the scope of the Tax and, thus the residence of the lender (Argentine resident or non-Argentine resident) is irrelevant.

      In this sense, a service rendered materially in Argentina is taxed, whether it is rendered by an Argentine resident or non-Argentine resident. However, if the lender has residence abroad, until the amendment introduced by Law No. 27,346 -as yet unregulated- in practice what occurred is that the non-Argentine resident rendering the service in Argentina was not able to register as an Argentine taxpayer, as well as to assess and pay the Tax. Under the new regime, this practical impossibility would be overcome, since the substitute obligor will be able to assess, pay the Tax and compute the corresponding tax credit

      On the other hand, if the taxed service is rendered by an Argentine resident, the new regime would not apply, and the resident is considered to be...

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