Today, the Lower House of the Argentine Congress passed the Act on the avoidance of double taxation between Argentina and Brazil, which will benefit Argentine SMEs and entrepreneurs exporting knowledge-based services.
As a result, Argentine entrepreneurs and businesses exporting services to Brazil will now be able to deduct their income tax payments, avoid paying double tax and thus be more competitive.
Brazil's market offers vast potential for Argentina, as its service imports amount to around USD 13 billion yearly. Knowledge-based services are Argentina's fourth main export and account for 10% of total exports of goods and services.
The agreement on the avoidance of double taxation between Brazil and Argentina was signed in 1980, before the development of the technological innovations that substantially changed international trade in knowledge-based services by enabling the rendering of such services remotely.
Services of this kind (such as those related to accounting, legal counseling, architecture, engineering, audiovisuals, advertising, computing, research and development, consultancy and business services) are exports of great added value, as they create jobs and foster innovation and technological development.
It is estimated that 46 thousand national businesses exporting services to Brazil may benefit from this new regime.
Argentina and Brazil signed the document on the elimination of double taxation last July, within the framework of the Mercosur Summit held in Mendoza. The bill was approved by the Senate last March and then sent to the Lower House, where it was approved today.
This new Act introduces a mechanism for avoiding double taxation that enables both countries to deduct from their income tax an amount equal to that withheld in the other country. In addition, it provides for caps on income tax ranging between 10% and 15%.
Knowledge-based services are the most dynamic sector in world trade. They also contribute to diversifying the export offer and have acquired a key role in Argentina's economy. Knowledge-based services are currently Argentina's fourth main export and account for 10% of total exports of goods and services.
In 2017, knowledge-based service exports increased enormously: they totalled USD 6.8 billion, and so far this year they have increased by nearly 30%. The accumulated surplus of the last four quarters is the largest surplus in four years. In addition, knowledge-based services created 9,800 jobs in 2017.