Argentina tax to impact sales of digital services by non-residents
Purchasing digital services in Argentina attracts a new tax called 'Impuesto País’, to be charged by the bank/credit card entity involved in the payment.
At the end of 2019, Argentina created a new tax called ‘Impuesto País’ which has a significant impact on the consumption of digital services in Argentina. The general tax rate is 30% of the gross amount invoiced. However, a reduced rate of 8% applies to services that also qualify as digital services for VAT (21%) purposes.
It should be noted that digital services attracting VAT at 21% are those on an existing list first compiled in May 2018 by the Argentine revenue service (Administración Federal de Ingresos Públicos or 'AFIP') - the list (last updated on August 28, 2020) is available here. Now, all digital services sold to consumers based in Argentina effectively attract tax at the rate of 30% (29% if on the AFIP list mentioned previously).
This new tax is levied on the acquisition of services by end consumers in Argentina. It is a tax primarily aimed at protecting Argentina’s US Dollar (USD) reserves. Payments made in cash, or by means of credit card, that ultimately require access to the Argentine FX market (either by the consumer or by via any payment intermediary) are taxed.
‘Impuesto País’ is levied (as an additional VAT) on the Argentine consumer. There is no obligation for the collection and remittance of this new tax on non-resident service suppliers. This new tax is charged by the banking or credit card entity that intervenes in the Argentine consumer’s transaction payment.
To assess the tax, the USD charge must be converted into Argentine Pesos using the selling FX rate published by Banco Nación (the national bank of Argentina). The rate used is the previous working day to the issuance of the credit card or the statement issued by any intervening Argentine payment platform.
Once collected from the consumer, the credit card or payment platform remits the ‘Impuesto Pais’ to the Argentine tax authorities on a weekly basis.
Argentina VAT on digital services background
Argentina had previously announced its intention to tax digital services supplied by non-resident companies back in December 2017.
This was planned under Law 27,430 and was initially effective as from February 1, 2018. However, this date remained irrelevant as there was no collection mechanism in place, this was later implemented under Resolution 4240 and has been in effect since June 27, 2018.
Resolution 4240 provided more information on the collection process. This new regulation placed the liability for the collection and remittance of Value-Added Tax (VAT) on the shoulders of the Argentine consumer’s payment provider. The non-resident digital service supplier was not liable for the payment of the VAT.
Argentina’s Federal Public Revenue Administration (AFIP) also compiled a list of digital services that were affected by these VAT rules. The list, when published, ran to over 180 international digital service companies, including, for example, Netflix and Spotify. Services delivered by these non-resident companies and consumed by customers based in Argentina attracted the 21% VAT.
These digital services need to be consumed in Argentina, this consumption is determined based on the following criteria:
- The SIM card of the cell phone receiving the service is located in Argentina
- The digital service is received via an Argentinian IP address
- The invoicing address of the recipient is one located in Argentina
- The bank account used for the payment or the invoicing address on the credit card statement is one located in Argentina
Note that the download, or access to, e-books were exempt from this VAT law.
The Argentine approach to assigning liability for the collection and remittance of VAT in this new rule is very interesting. The place of supply rules are in place but the liability is not on the non-resident supplier. The liability for the collection and remittance of VAT, in practice, falls on the Argentinian consumer’s payment provider.
This approach differs from the Organisation for Economic Cooperation and Development (OECD) published guidelines. These guidelines place the liability for collection and remittance of VAT/GST on the non-resident supplier. In Argentina, with the enactment of this new regulation, the liability is on the local payment provider.
Another noteworthy element of the new Argentine rules is that not all digital services are in scope. The AFIP have compiled a list of non-resident suppliers. As the list stands today it is not exhaustive as some large companies are absent. Domestic consumers and payment providers can view this list to know the affected services for which VAT should be applied. Here’s a direct link to the AFIP list.
Acknowledgement: Thanks to Luciano Cativa, of FB Tax Legal, Buenos Aires, for his help in researching this article.
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