Latin America - How to obtain tax benefits when licensing IPRs in Argentina

If you are thinking about internationalising your business into the Argentine market, and your services could imply the licensing of IP rights, providing technical assistance or know-how to an Argentine resident, here we point out some local rules you may watch-out for.

In common with other countries of the Latin American region, as a way order to foster the development of local industry and allowing access to new technologies and knowledge, Argentina has established a system of tax exemptions to benefit the foreign provider of an IP right or new technology or knowledge.

Under Argentine Income Tax Law, the regular applicable income tax withholding on payments for services provided by a non-resident is 35% of the gross payment.

However, if the service provided by the non-resident party involves the licensing of a mark, patent, industrial design, copyright, or consists in training of staff in relation to a new technical innovation, knowledge or technology that is not available, or it is better than the one existing in Argentina, the income tax withholding applicable could be reduced between 21% and 28% of the gross payment for the services.

It is import to highlight that this benefit will only be granted by the Argentine tax authority if the contract is registered with the INPI (the Argentine Trademark and Patent Office) before any payment is made.

Another factor that it must be taken into consideration is whether there exists a Convention for the avoidance of double taxation between Argentina and the country of origin of the European SME. If so, the INPI will apply the income withholding tax established in the Convention, which usually is lower than the one established in the Argentine legislation.

Set forth below you may find some examples of countries that have executed Conventions for the avoidance of double taxation with Argentina, and in each case the income withholding tax that has been established.

• Spain: 10% of income withholding tax
• Italy: 18% of income withholding tax
• Germany: 15% of income withholding tax
• France: 18% of income withholding tax
• Belgium: between 10% and15% of income withholding tax

It should be borne in mind that no sanction exists for non-compliance with the registration. In other words, not registering the contract with the INPI will not affect the enforceability of the same, but it will imply the loss of the tax benefit.

It is strongly advised to obtain professional assistance from a local IP expert before proceeding to register a contract as Technology of Transfer so as to obtain the tax benefit and avoid objections from the INPI. Moreover, when doing business with Latin America, do not forget that the Latin America IPR SME Helpdesk provides EU SMEs with free-of-charge expert advice on how to protect and enforce their IP in or relating to countries of this region.

Authors:

Elis Salis

Founding Partner at Disain IP

Sebastián Cortina

Senior Associate Intellectual Property Attorney at Kors Noviks