Tax Treaty Case Law around the Globe 2016

S. 305Chapter 26 Argentina: Source-Country Approach: Article 7 versus Article 12

Axel A. Verstraeten

26.1. Introduction

When first introduced, under the income tax in Argentina, the source rule for services was determined by the place where the services are rendered. Later on, the source rule was extended and two situations were included and considered Argentine source: (i) fees paid to board members of local companies providing services from abroad and (ii) fees paid for technical, financial or any other type of advisory services rendered from abroad.

Over the years, the tax authorities have tried to extend the scope of application of this extension of the source rule to situations that, in principle, should reasonably not be included, generating legal uncertainty. The courts contributed to confusion with poor decisions.

The Rovafarm case, even with its errors, brings the discussion back to basics and should serve as an example for future decisions.

26.2. Facts the case

Rovafarm Argentina SA, an Argentine-resident company, is dedicated to the elaboration of pharmaceutical products. Basically, Rovafarm imports raw material (tracheas and cartilages from fowl and cattle) from foreignS. 306 providers, w...