Israel – Argentina Tax Treaty

Business Activity in Argentina

Argentina is recognized for its abundant natural source of food and for having developed different sectors of the economy, including agriculture, mining, and energy. The country is home to a highly educated middle class and an entrepreneurial community that makes a strong contribution to the economy.

Argentina has recently become a tech and investment hub in Latin America, creating a strong environment for growth. Ongoing improvements in regulations, the economy, labor, and energy are expected to attract more international investors in the near future.

Agribusiness is the pillar of the Argentine economy with the country being a global leader in the grain and food sector. It ranks first as the world’s producer of soybean, maize, wheat, sunflower, sorghum, and livestock products, with an area of 42 million hectares of arable land. Further to their production figures, they are exporting fruits as well. Such a great performance sustained in a situation where drought has been a cause of a decrease in agricultural productivity by about 40% for a few years does not always recur, but the sector is still reliable, regularly producing an export volume of about $32 billion.

Additionally, technology and fintech have shown excellent prospects in Argentina, thanks to a supportive workforce and tax and regulatory systems. Especially, the technology sector has seen the growth of many tech startups, while the fintech ecosystem, despite difficulties in the overall economic scenario, still shows a stable rise in employment and transactions in recent years.

Argentina ranks high in world tourism, where the country’s diverse climate, landscape, and cultural heritage attract tourists from all over the world. For instance, in 2023, Argentina welcomed 6.7 million overseas visitors, bringing home a revenue of over 4 billion dollars.

Bilateral Agreements Between Argentina and Israel

Several agreements were signed between Israel and Argentina:

1. International Investment Agreement
2. Free Trade Agreement

Reciprocal Promotion and Protection of Investments

The Argentina-Israel Investment Treaty signed on 22 July 1995 and ratified on 9 April 1997, is looking to help and protect investors with the two treaty signatories’ investments in each other’s lands. It does this by setting down the legal standard so that investments are treated fairly and equitably, protection against expropriation without adequate compensation, and the free transfer of investment-related funds. Also, it provides different ways to handle disputes, all of which are often international arbitration.

Applicability of the MLI

Israel has signed the “Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent Base Erosion and Profit Shifting” (MLI). Both Israel and Argentina signed the agreement on June 7, 2017; while Israel ratified it on September 13, 2018, Argentina has not yet proceeded with the reification process.

Free Trade Agreement

Israel and Mercosur signed the Free Trade Agreement (FTA) on 18 December 2007. Argentina is a full member of the Mercosur (a.k.a Mercosul) – a South American trade bloc established by the Treaty of Asunción in 1991 and Protocol of Ouro Preto in 1994 comprised of Brazil, Argentina, Uruguay and Paraguay. The Israel-Argentina FTA entered into force on 09 September 2011.

To access the text of the Agreement in English, click here.

Residency for Tax Purposes in Argentina

Residence of an Individual

According to the Argentinian law, an individual is considered a tax resident in Argentina if they qualify in one of the following categories:

• Argentinian nationals who currently live in Argentina.
• Argentinian nationals who work abroad for a maximum of 13 months.
• Foreign nationals who have worked in Argentina for more than five years
• Foreign nationals who have resided in Argentina for more than 12 months.

To read about how an individual is considered a resident of Israel, click here.

Residency of a Company

A company will be considered resident in Argentina if its management or economic activity is located in the country.

To learn about how a company is considered a resident of Israel, click here.

The Tax System in Argentina

Argentina’s Tax Authority is called Administracion Federal De Ingresos Publicos.

Income taxation:5%, 9%, 12%, 15%, 19%, 23%, 27%, 31%, 35%

Taxation of Companies and Branches:25%, ARS 3,575,302.30 + 30%, ARS 42,188,567.16 + 35%

VAT: 10.5%, 21%, 27%

Capital gains tax: 13.5%, 15%, 25% to 35%

Withholding Tax

Inheritance Tax and Estate Tax in Argentina

There is no federal gift and inheritance tax in Argentina. Only the province of Buenos Aires applies gift and inheritance taxes based on certain conditions and amounts.

Relocation to Argentina

Argentina is home to many benefits and advantages that make the country a favorable residence option for foreigners who wish to relocate to a new country. The local economy is diverse and provides many opportunities in sectors such as agriculture, energy, health, infrastructure, information technology, and mining.

The living standards in the country, also provide convenience, public services, and affordability. For instance, the New Mercer Quality of Living Survey ranks Buenos Aires very well in terms of safety and affordability if compared to other mega-cities in Latin America. The facilities for health care in Argentina are satisfactory and include public clinics and hospitals with essential and emergency services; however, when provided in addition to private health insurance services, the coverage of services is complete.

Education in Argentina starts with non-compulsory kindergarten, compulsory basic education starting with first grade at age six, and secondary education, which includes 57 schools that offer the I.B Diploma and several schools that are bilingual. Thus, Buenos Aires has numerous international schools, serving the French, German, Italian, Japanese, and English-speaking populations so that expats’ children’s schooling is not interrupted.

The Jewish community in Argentina is estimated to be around 175,000 Jews, the largest in Latin America and the seventh-largest globally. The Delegación de Asociaciones Israelitas Argentinas is the formal Argentinian affiliate of the World Jewish Congress.

Real Estate Taxation in Argentina

Argentina does not levy a federal tax on real estate but instead is included in the wealth tax. The real estate tax is levied by each of the 24 (twenty-four) jurisdictions in Argentina, where the local authorities of these provinces determine the rates based on the fiscal valuation of the asset and the tax rates in force under the annual tax law.

In addition, Argentina applies the Stamp tax, which by general rule is levied at 1%; however, likewise, the real estate tax, each of the 24 jurisdictions in Argentina determines the specifics of these tax.

Transfer of Funds from Israel to Argentina

According to section 170(a) of the Israeli Income Tax Ordinance, any transfer of payment to a non-Israeli resident is subject to a 25% withholding tax. The tax authority may allow, under certain circumstances, a reduction or dismissal of the withholding tax. Our firm handles withholding tax matters with the Israeli Tax Authority.

Since both countries have a tax treaty, one can submit a declaration form (statement regarding a payment to a foreign resident that is exempt from withholding tax), and under certain circumstances, it is possible to transfer the payment without the withholding tax and the approval of the Tax Authority.

In providing advice regarding the transfer of money abroad, in addition to the issue of withholding tax, our firm handles the requirements of foreign banks, such as an accountant’s approval regarding the payment of taxes, and examines additional actions required in light of the uniform standard of CRS between the countries –automatic exchange of information between countries which is carried out first through the banks and then between the tax authorities of each two countries.

Banks raise many difficulties and charge high fees for converting shekels into other currencies, so it is important to consult before transferring the funds – Contact us.

For more information on money transfers abroad click here.

Types of Business Entities in Argentina

The main types of business entities in Argentina include:

Corporation (Sociedad Anónima, or “S.A.”)

Shares must be registered, non-endorsable, and classified into common or preferred shares. Shares can be one or more shareholders, and their liability is limited to their capital. The minimum capital required is ARS 100,000. Foreign business associations holding shares must file their articles with the Public Registry.

Shareholders must hold a regular meeting annually to approve financial statements, distribute profits, and designate directors and statutory auditors. Certain stock corporations subject to state supervision may have their own supervisory position.

Simplified Shares Company (Sociedad por Acciones Simplificadas – ‘S.A.S’)

In 2017, Argentina introduced the Simplified Stock Company to make easier the procedures of setting up a business. This legal structure offers several advantages: it can have a single shareholder (either an individual or a company), requires low minimum capital (twice the minimum wage), and can be formed in just 24 hours. The S.A.S. has played a major role in boosting commercial interest in Argentina recently. Along with other investor-friendly reforms, this has encouraged more foreign investment, contributing to the growth of the economy.

Single Owner Corporation (Sociedad Anónima Unipersonal or “SAU”)

The New Civil and Commercial Code permits the incorporation of a Single Owner Corporation (SAU), requiring a single owner, no other entity, and a shareholder. The SAU must state its name, contribute 100% upon creation, and undergo continuous government audits.

Limited Liability Company (Sociedad de Responsabilidad Limitada or “SRL”)

A Limited Liability Company (SRL) has members who limit their liability to the par value of quotas they subscribe to which should be at least 2 and not exceed 50. Quota transfers must be registered with the Public Registry, and foreign individuals and entities can be partners. There is no minimum capital required.

Branch of a foreign company (Sucursal)

Foreign companies must be legally organized, have head offices abroad, register bylaws, appoint legal representatives, keep books separately, and file financial statements. Capital allocation is not required for Argentine branches.

Incentive Laws in Argentina

Argentina’s Law 27,742 created the Régimen de Incentivo para Grandes Inversiones (RIGI) to attract large local and foreign investments in key sectors like forestry, infrastructure, mining, energy, technology, tourism, oil, and natural gas. The RIGI offers several benefits to investors, including a lower 25% corporate income tax rate, faster depreciation, indefinite tax loss carryforward, reduced withholding taxes on dividends and foreign payments, VAT relief, and exemptions from import/export duties. To qualify, projects must be worth at least $200 million and set up through a Special Purpose Vehicle.

The law guarantees investors stability by protecting them from tax and customs changes for 30 years and allows any disputes to be resolved through international arbitration.

Argentina also provides specific incentives in different industries. For example, mining projects enjoy a 30-year tax stability agreement, VAT refunds, and tax credits. Renewable energy projects can recover VAT early, carry forward losses long-term, and receive provincial tax breaks. In free trade zones, imports of construction materials and equipment are duty-free, while the knowledge-based industries benefit from tax cuts and export duty exemptions.

Double Tax Treaties in Argentina