Javier Ayuso and Carl O'Shea consider Argentina's new white list and what this means for Argentinean clients and their advisers and whether it will create any new opportunities for jurisdictions such as Jersey and Panama.
After more than a decade of fighting against international financial centres (popularly referred to as "tax havens" by governments and the media), mainly through the imposition of the adverse discriminatory treatment of Argentine residents making use of offshores structures and vehicles from jurisdictions set out in a lengthy list,1 Argentina has recently enacted a liberal white list based predominately on the existence of tax information exchange mechanisms in place or being negotiated.2
From the offshore perspective this is a much-welcomed move by Argentina as it is acknowledgment of the hard work being undertaken by jurisdictions such as Jersey and Panama for increasing transparency and cooperation.
Argentina's Income Tax Act's ("ITA") enabling Decree No. 1344/1998 ('Decree 1344') sets out that the low and zero tax jurisdictions3 that will enforce their respective tax information exchange agreements ("TIEAs") signed with Argentina would be removed from the black list, provided that compliance with information requests being made by Argentina would not be prevented based on banking, stock exchange or confidentiality regulations.
Despite the widely-publicized policy of actively seeking to enter into TIEAs, doubts arose as to whether their becoming operative would result in the offshore contracting state being automatically removed from Argentina's black list, or whether it would be necessary for the offshore jurisdiction to take subsequent steps in order to secure this expected positive outcome. It is generally anticipated by a contracting offshore jurisdiction that by executing such an agreement it would be removed from the black list.
On 28 July 2011 Jersey and Argentina entered into a TIEA that came into effect on 9 December 2011 and was published in the Argentine official gazette on 10 January 2012. According to a 1st February 2011 letter sent by the Argentine tax authorities to the Jersey Treasury and Resources Minister, the official position of the Argentine Government was that the coming into effect of such TIEA would not be sufficient in order to exclude Jersey from Argentina's black list, as an amendment to the ITA's enabling decree would also be required. In the letter Argentina committed to amending the decree and removing Jersey from the black list once the TIEA came into force and importantly when there was 'strong evidence of its effective application with respect to banking information'.
Decree No. 589/2013 was published on 31 May 2013 ('Decree 589') and it repealed the low or zero tax jurisdiction list which had been in force since November 2000 and announced its replacement with a 'white list,' which would include all jurisdictions or special regimes deemed as 'cooperative for fiscal transparency purposes.' The new system would apply as from the date in which the federal tax authority would publish the white list, which occurred on 7 January 2014.
During the last few years Argentina adopted a policy of actively seeking to enter into TIEAs with countries having low or zero tax rates.4 Eager to increase tax collections, Argentina expected TIEAs to assist in hunting down tax dodgers.
Accordingly, Decree 589 provided that the inclusion in the white list would depend on the execution (or initiation of negotiations towards the execution) of a TIEA with Argentina, or of a double taxation agreement containing a wide tax information exchange clause, provided that information exchange requests are actually satisfied.
The Argentine perspective coincides with that of the OECD in the sense that international cooperation is a key factor in ensuring the enforcement of countries' tax laws and the effective prosecution of persons engaged in cross border tax evasion. Predictably, the view has been taken that the primary incentive for the blacklisted international financial centres to enter into such agreements is to reach the OECD-magic number: 12 TIEAs.
At the time of writing Jersey has signed 34 TIEAs and 9 Double Taxation Agreements ("DTAs") whilst Panama has signed 19 TIEAs and 16 DTAs. A recent case in Jersey involving a request for information under a TIEA with Norway demonstrates how carefully Jersey trust companies and the Jersey courts will consider a notice to provide confidential information so as to avoid contracting countries simply applying a wide interpretation to the production provisions of the TIEA and thereby engaging in 'fishing expeditions'.
Argentina's White List
For all the good news that the enacting of Argentina's white list brings for previously blacklisted jurisdictions, a few doubts and concerns still remain. For one, outside the tax realm other regulations5 still refer to the original blacklist set out in Decree 1344, the relevant provisions of which have not been formally abrogated but just replaced for tax purposes with the new white list. While consistency would demand – in principle - an analogous treatment across different fields of law, a case by case analysis is advisable.
An additional source of concern is the stability of the new white list. Given that Decree 589 requires not only a tax information exchange mechanism, but also that information requests are actually met, this cooperation requirement subjects the white list to potential review by Argentina's revenue authority based on facts that are not likely to become public. The list was published electronically only and, thus, may be easily altered at any time with no prior notice. However, Argentina's revenue authority resolution No. 3576/2013 has clarified that, for income tax purposes, the white list applicable in any given fiscal year will be the one in effect at the beginning of such period, which provides some certainty to an otherwise unstable scenario.
Jersey And Panama's Expectations
In general terms, international financial centres have an important role to play in asset protection, cross border transactions and bringing investment in a structured way to their 'onshore' friends. With regard to Argentina, it is reported that for the brave and aggressive investor there are currently interesting investment opportunities in Argentina and therefore, at this early stage of the new white list, for jurisdictions such as Jersey and Panama it is hoped that they will be positively welcomed by the Argentina authorities and advisers whilst simultaneously being able to assist locals and potential non-resident investors achieving their required objectives in an efficient, advantageous and compliant way.
Overall, removing a good number of jurisdictions from a blacklist is welcomed and should provide advisers and potential clients with more choice. However, taking a slightly different view, bearing in mind it is often stated that further change is still required in Argentina, it will be a little while longer before jurisdictions such as Jersey and Panama see a significant increase of activity involving new Argentinean residents or international investors wishing to use offshore structures in respect of Argentinean assets.
1 For a review of such treatment based on Argentina's previous blacklist, see Ayuso, J. E. and Lipovetzky, E., 'Argentina's Treatment of Investment from Offshore Financial Centers,' Practical Latin American Tax Strategies, June 2011, vol. 14, Nbr. 6, ps. 3 to 7.
2 Argentina's current white list as of 7 January 2014 comprises the following jurisdictions: Albania, Andorra, Angola, Anguilla, Armenia, Aruba, Australia, Austria, Azerbaijan, Bahamas, Belgium, Belize, Bermuda, Bolivia, Brazil, BVI, Cayman Islands, Canada, Chile, China, Czech Republic, Colombia, Costa Rica, Croacia, Cuba, Curaçao, Denmark, Dominican Republic, Ecuador, El Salvador, Estonia, Feroe Islands, Finland, France, Georgia, Germany, Ghana, Greece, Greenland, Guatemala, Guernsey, Haiti, Holland, Honduras, Hungary, Iceland, India, Indonesia, Ireland, Isle of Man, Israel, Italy, Jamaica, Japan, Jersey, Kazakhstan, Kenia, Kuwait, Latvia, Liechtenstein, Lithuania, Luxembourg, Macao, Macedonia, Malta, Marruecos, Mauritius, Mexico, Moldova, Monaco, Montenegro, Montserrat, Nicaragua, Nigeria, New Zealand, Norway, Panama, Paraguay, Peru, Philipines, Poland, Portugal, Qatar, Rumania, Russia, San Marino, Saudi Arabia, Sint Maarten, Singapore, Slovaquia, Slovenia, Spain, South Africa, South Corea, Sweden, Switzerland, Tunisia, Turks and Caicos, Turkmenistan, Turkey, UK, Ukraine, Uruguay, USA, Vatican City, Venezuela and Vietnam.
3 The following jurisdictions were blacklisted pursuant to Section 21, § 7, of Decree 1,344 indistinctly as 'tax havens,' 'offshore financial centers' or 'low or nil tax jurisdictions': Anguilla, Antigua and Barbuda, Netherlands Antilles, Aruba, Ascension, the Bahamas, Barbados, Belize, Bermuda, Brunei Darussalam, Campione D'Italia, Gibraltar, Dominica, the United Arab Emirates, Bahrain, Grenada, Puerto Rico, Kuwait, Qatar, Saint Kitts and Nevis, Luxembourg -regime applicable to Holding Corporations pursuant to the Law of 31 July 1929-, Greenland, Guam, Hong Kong, Azore Islands, Channel Islands, Cayman Islands, Christmas Island, Keeling Islands, Cook Islands, Isle of Man, Norfolk Island, Turks and Caicos Islands, Pacific Islands, Solomon Islands, Saint Pierre et Miquelon, Qeshm Island, British Virgin Islands, US Virgin Islands, Kiribati, Labuan, Macau, Madeira, Montserrat, Niue, Patau, Pitcairn, French Polynesia, Andorra, Liechtenstein, Monaco, Uruguay -regime applicable to Financial Corporations, Law 11073-, Tonga, Jordan, Swaziland, Albania, Angola, Cabo Verde, Cyprus, Djibuti, Guyana, Panama, Trinidad and Tobago, Liberia, Seychelles, Mauritius, Tunisia, Maldives, Marshall Islands, Nauru, Sri Lanka, Vanuatu, Yemen, Malta, Saint Helena, St. Lucia, St. Vincent and the Grenadines, American Samoa, Western Samoa, San Marino, Oman, Svbalbard, Tuvalu, Tristan Da Cunha, Trieste (Italy), Tokelau Islands, Ostrava Free Zone (Czech Republic).
4 For an analysis of the constitutional regime applicable to, and other aspects of the TIEAs executed by Argentina, see Ayuso, J. E., Lipovetzky, E. and Rey, D., 'Argentina's Network of Tax Information Exchange Agreements with Low-Tax Jurisdictions,' Bulletin For International Taxation, October 2012, Vol. 66, Nbr. 10, ps. 553 to 555.
5 See Ayuso and Lipovetzky, 'Argentina's Treatment of Investment from Offshore Financial Centers,' op. cit.
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