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International digital services and their Value Added Tax (“VAT”) treatment.

International digital services and their Value Added Tax (“VAT”) treatment.

Among other issues, Law No. 27,430 incorporated into the subject-matter of the Value Added Tax Law those digital services rendered by individuals residing or domiciled abroad that are to be actually used or exploited in Argentina.

Thus, digital services are understood to be, regardless of the device used for downloading, displaying or using thereof, those services provided over the Internet or any adaptation or application of the protocols, platforms or technology used on the Internet or any other network through which equivalent services may be rendered that, in view of their nature, are basically automated and call for minimum human action.

Executive Decree No. 354/2018 (published in the Official Bulletin on April 24, 2018), has regulated several aspects relative to the application of such tax, mainly focusing on digital services rendered by individuals abroad.

In this regard, it has been established that a general 21% tax rate shall apply and the taxable event shall occur at the time the provision of services concludes or at the time of payment, either totally or partially, of the price by the service recipient, whichever is earlier. It has also been stipulated that, in the event an intermediary residing or domiciled in Argentina is involved in the process of payment abroad (for example: credit card companies, Mercado Pago, PayPal), it shall become the agent for collection and assessment of the tax amount payable, for as long as the service recipients are not registered taxpayers.

Involvement of the intermediary as collection agent shall occur when digital services provided are paid to those providers listed in Annex II of the recently published General Resolution No. 4240/2018 issued by the Argentine Administration of Public Revenues (AFIP) (published in the Official Bulletin on May 14, 2018), which providers are arranged into two groups. The first group includes certain providers such as Netflix, Spotify and Twitter while AirBNB, Booking and Best Buy are included as providers in the second group. As concerns the latter, VAT collection shall only apply provided the amount paid does not exceed the amount of Ten United States Dollars. AFIP shall update the list of Annex II on a monthly basis. 

For payment and information of collections made, the methods, terms and further conditions set forth in General Resolution No. 2233 issued by AFIP, that is, the Withholding Control System (Sistema de Control de Retenciones) (SICORE) shall be applicable. Notwithstanding the foregoing, collection agents may consolidate transactions into a single monthly collection record per each service recipient, in which case the collection date to be entered shall be the last day of the month in which the assessment is made. For taxable individuals, collections made shall be synonymous with tax paid.

In the event no intermediaries are involved in payments to providers abroad, service recipients shall pay the relevant tax amount until the last day in the month when payment was made to the provider abroad, via the electronic transfer of funds set forth in General Resolution No. 1778 issued by AFIP.

The provisions of General Resolution No. 4240/2018 issued by AFIP shall enter into force as of June 27, 2018, inclusive.

For further information, please contact Leandro H. Cáceres at + 54 11 4319 7100.