Argentina: An Argentine Company Does Not Have To Pay Personal Assets Tax Corresponding To A Shareholder Resident Of Uruguay

Last Updated: 14 March 2012
Article by Walter C. Keiniger and Carolina R. DeCicco

In a case where the parties discussed the application of Personal Assets Tax to the Uruguayan shareholders of an Argentine company, the Federal Tax Court decided in favor of the application of the most favored nation clause to taxation and dismissed the application of the tax in that case.

1. General Rules of Personal Assets Tax

Personal Assts Tax Law No. 23,966 creates a tax that applies to assets situated in Argentina and abroad belonging to individuals domiciled in Argentina (the "Tax").

The Tax also applies to assets situated in Argentina belonging to individuals domiciled abroad. Besides, in the case of shares and other equity interest in Argentine companies held by foreign entities, the law presumes that they are held by individuals domiciled abroad and, therefore, the Tax also applies in such cases.

Law No. 25,585 included an important amendment to the Tax in 2002. From that year Argentine companies were obliged to pay the Tax acting as substitute obligors of the individuals domiciled abroad and/or companies and/or any other legal entity, domiciled abroad, that held shares or other equity interest in those companies. The law established an effective collection mechanism especially for the case of shares or other equity interest in Argentine companies held by foreign individuals or companies.

2. Double taxation treaties and the Treaty of Montevideo

At the time of the amendment of the Tax in 2002, Argentina had two double taxation treaties in force with Spain and Switzerland. Both of them provided that the assets of any person resident in one of the signing countries could only be subject to tax in the country of residency. Therefore, Argentina could not tax shares or other equity interest held by a Spanish or Swiss resident.

The Treaty of Montevideo signed in 1980 by the country members of the Latin-American Integration Association ("Asociación Latinoamericana de Integración" or "ALADI") contains a so-called "most favored nation clause" according to which the assets from the countries members of the treaty shall not enjoy a less favorable treatment in the territory of the other signatory members than the one granted to assets from third countries.

The application of the most favored nation clause of the Treaty of Montevideo generated several inquiries related to the Tax and to Argentine companies acting as substitute obligors. Taxpayers alleged that the residents of the ALADI members should not be subject to the Tax when Spanish and Swiss residents were out of the Tax's scope by virtue of the application of the respective double taxation treaties. In other words, if a Spanish or Swiss resident could not be taxed for the shares or other equity interest they held in Argentine companies, residents of the members of the ALADI should enjoy the same treatment.

The General Attorney issued Ruling No. 170/2006 stating that the most favored nation clause should not be applied to shareholders residents of Brazil, in the understanding that tax matters were not included the Treaty of Montevideo's scope, which only aim was to create a Latin-American common market through the promotion and protection of investments (see "The Tax on Personal Assets is applicable to residents of countries who are members of the ALADI" published in Marval News # 55 of October 31, 2006), i.e. it was understood that the most favored nation clause was not applicable to tax matters.

However, the Federal Taxation Office had issued Memorandum No. 1000/2002 stating that the Tax should not be applicable to residents of Brazil or Uruguay because it was not applicable to Spanish or Swiss residents. Thus, Argentine companies were not obliged to act as substitute obligors of the Tax when their shares or equity were held by residents of Brazil or Uruguay.

3. The "Losa Ladrillos" case

Within that framework, the Federal Tax Court analyzed the case of Losa Ladrillos S.A., an Argentine company. One of the shareholders of that company was TEI&C S.A., a company incorporated in Uruguay. Losa Ladrillos S.A. interpreted that the Treaty of Montevideo prevented the application of the Tax and, therefore, did not act as substitute obligor. The Tax Authorities assessed the applicable Tax and claimed its payment to the company that appealed the decision before the Federal Tax Court.

In its decision of August 8th, 2011, the Court pointed out that the signature of the Treaty of Montevideo did not have the purpose of tax harmonization among its signing members because the ALADI was a free commerce association with the only aim of free circulation of goods and services. The Court stated that the Treaty of Montevideo should be interpreted under the Vienna Convention on the Law of Treaties. Pursuant to article 31 of that convention, treaties must be interpreted taking into account their objects and aims. Therefore, if the Treaty of Montevideo did not exclude tax matters, the Court understood that they should be considered under the most favored nation clause scope. The Court adopts the opinion of the Federal Taxation Office, and rejects the General Attorney's and the Tax Authorities'.

Although the decision refers to the 2005 fiscal period and a particular case, the same conclusions could apply to other fiscal periods and other cases of holders of shares or other equity interest in Argentine companies, residents of other members of the ALADI, as long as there are not specific agreements that set aside the application of the Treaty of Montevideo.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
Email Address
Company Name
Confirm Password
Mondaq Newsalert
Select Topics
Select Regions
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions