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ARGENTINE
AMERICAN CHAMBER OF COMMERCE
TAX ON INTEREST PAID REPEALED
Andres Edelstein, PricewaterhouseCoopers LLP,
New York
Gabriel Bisio, Piper Marbury Rudnick & Wolfe LLP,
New York
In the last months, the Argentine government has
taken several measures designed to stimulate economic
growth in Argentina.
From a tax perspective, one of the most significant
of those measures was instrumented through Law
25,402, published in the Official Gazette on January
12, 2001, and consists of a reduction in the rate
levied upon the payment of interest (Tax on Interest
Paid and Financial Cost of Business Indebtedness
or "TIPFCBI"). The TIPFCBI, introduced by the
1999 tax reform, is imposed on interest payments
on local borrowings and locally issued corporate
bonds (Obligaciones Negociables) and payable by
the borrower or issuer, respectively. The rational
behind the TIPFCBI, which creation was recommended
by the IMF in February 1998, was to dissuade Argentine
borrowers from abusive resort to the international
capital markets.
Law 25,360, published in the Official Gazette
on December 12, 2000, reduced the original 15%
tax rate by 5 percentage points with respect to
interest paid on or after January 1, 2001, and
further reduced by 2 percentage points with respect
to interest paid on or after July 1, 2001.
In addition, Law 25, 402 complemented such new
tax scheme by establishing a schedule for further
reduction of the tax rates aimed to the total
repeal of the tax for interest paid on or after
July 1, 2002. The following are the new tax rates
established by the new legislation:
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Interest
Payment Date
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Tax
Rate
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January
1st, 1999 Ð December 31st , 2000
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15%
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January
1st, 2000 Ð June 30th, 2001
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10%
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July
1st, 2001 Ð September 30th, 2001
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8%
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October
1st, 2001 Ð December 31st, 2001
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6%
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January
1st, 2002 Ð March 31st, 2002
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4%
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April
1st, 2002 Ð June 30th, 2002
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2%
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As
from July 1st, 2002
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0%
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This measure, together with the country-risk reduction
experienced after the agreement with the IMF,
should help Argentine companies accessing better
funding conditions and represents an important
step towards reestablishing investor confidence
in the Argentine market.
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