New Double Taxation Treaty between Austria and Argentina effective from 1 January 2027

At Argentina’s initiative, the former double taxation treaty (DTT) was terminated as early as 2008. In 2019, Austria and Argentina successfully concluded negotiations and signed the new DTT. While Austria had already ratified the treaty in 2020, Argentina completed its ratification process successfully in summer 2026. The new DTT between Austria and Argentina will therefore enter into force on 1 January 2027.

This once again creates clear and attractive tax conditions for companies and investors. For certain cross-border payments, the DTT provides for a reduced withholding tax burden.

The new DTT is largely based on the 2017 OECD Model Tax Convention (OECD MTC 2017). Key OECD standards from the BEPS project, such as a Principal Purpose Test, were implemented, and comprehensive administrative assistance provisions were introduced. At the same time, at Argentina’s request, content from the UN Model Tax Convention (UN MTC) have been incorporated. 

Key features of the treaty at a glance

• Reduced WHT rates
  • Dividends: where there is a minimum shareholding of 25% held for at least 365 days, the withholding tax rate is 10%; otherwise 15%.
  • Interest: the WHT rate is generally 12%. Exceptions apply for government institutions and export promotion.
  • Royalties: depending on the type of licence or remuneration, WHT rate ranges from 3% to 15%. In line with the UN MTC, the term royalties includes payments of any kind received as a consideration for the use of, or the right to use, industrial, commercial or scientific equipment.
• Gains from the disposal of shares or comparable rights, such as rights in a trust, are subject to different WHT rates depending on the level of shareholding:
  • 5% WHT on disposals by a Contracting State
  • 10% WHT where at least 25% of the shares have been held directly for a period of 365 days prior to the disposal, with certain events such as restructurings being disregarded in calculating that period
  • 15% WHT in all other cases

Irrespective of the above, under the immovable property clause, capital gains may be taxed in the state where the property is located if more than 50% of the value of the shares or comparable rights is derived directly or indirectly from immovable property.

• Avoidance of double taxation:
  • Austria applies the exemption method with progression, while the credit method applies to certain types of income, such as dividends, interest and royalties.
  • Argentina applies the credit method. 

Particularities

• Permanent establishments
  • The definition of a PE follows the UN MTC insofar as it includes supervisory activities connected with a building site or installation project. Moreover, unlike the OECD MTC, a construction PE is created after only six months, rather than twelve months.
  • In addition, in line with the UN MTC, the DTA includes the concept of a service PE . Accordingly, services, including consultancy services, are deemed to constitute a PE, if the activity is carried out for more than six months within a twelve-month period.

• AOA-light: The provision on the allocation of profits between a PE and the head office follows the pre-2010 version of the OECD MTC, in line with Austria’s objection to the OECD Commentary.
• Own allocation rule for independent personal services.
• A WHT of 2.5% applies to the gross amount of premiums from insurance and reinsurance activities relating to property situated in the source state or persons resident in the source state
• Other income may be taxed in the source state.
• The DTT does not contain an arbitration clause for dispute resolution, meaning bilateral tax disputes must be resolved through a mutual agreement procedure.
• Most-favoured-nation clause in favour of Austria: If Argentina agrees with other states on lower WHT rates or, for example, more favourable treatment regarding PEs, these will automatically also apply in relation to Austria. Argentina needs to inform Austria within six months about any such case.

Outlook and take-aways

The new DTC will make a significant contribution to promoting economic relations between the two states, as it provides a solid tax law framework for companies engaged in cross-border transactions and projects.

Since the new DTT contains elements of both the OECD and UN Model Tax Conventions, a number of particularities will need to be considered in future, such as the above-mentioned WHT provisions, which cover not only interest, royalties and dividends, but also disposals of shares, as well as the Service PE rule/clause.

For Austrian companies and investors with Argentine activities and business relationships, we therefore recommend analysing the tax implications in view of the entry into force on 1 January 2027