Digital Services: Tax Treatment

I. Introduction

Law No. 27.430 introduced a new taxable event related to the provision of digital services by individuals or entities domiciled abroad whose use or effective exploitation is carried out in Argentina, as long as the customer is not subject to the tax of other taxable events and is not a registered taxpayer. Last month, the Argentine Executive issued Decree No. 354/2018 regulating the taxable event.

Resolution No. 4240/2018 (“Resolution”) regulates several aspects of this taxable event.  

II. Principal amendments

The Resolution establishes that if an intermediary, whether resident or domiciled in Argentina, intercedes in the payment, the intermediary will act as a reverse withholding mechanism agent as long as the payment is made to subjects resident or domiciled abroad included in Section A of Annex II of the Resolution.

The Resolution also regulates the different mechanisms of payment of the tax.

If the payment of the digital service is made through a credit or charge card, the reverse withholding must be made on the date of payment or liquidation of the bank statement. If the payment is partial, the reverse withholding must be fully made.

If the payment of the digital service is made through a debit, prepaid or a similar card, the reverse withholding must be made on the debit date.

If the digital service is paid through a collecting entity, the reverse withholding must be made when the collecting entity receives the payment.

Additionally, the entities facilitating or managing payments abroad, should also act as a reverse withholding agent when:

            1.  The digital services are paid to subjects included in Section B of Annex II of the Resolution.

            2. It is a payment of ten dollars (USD 10) or less.

            3. The borrowers of the digital services are not registered taxpayers.

If no intermediaries resident or domiciled in Argentina are involved in the payment, the borrower of the digital services must pay the tax on the AFIP´s website.