ARGENTINA – MEASURES RELATING TO TRADE IN GOODS AND SERVICES REQUEST FOR THE ESTABLISHMENT OF A PANEL BY PANAMA
Document: REQUEST FOR THE ESTABLISHMENT OF A PANEL
Date: 14 May 2013
Document codes: WT/DS453/4
Complainant: Panama
Respondent: Argentina
Third parties: Australia, China, Ecuador, EU, Guatemala, Honduras, India, U.S., Brazil, Singapore, Oman, Saudi Arabia
Dispute stage: Appellate Body
Agreements cited: Art. II:1, XVI, XVII, I:1  Services (GATS)Art. I:1, III:4, XI:1  GATT 1994Art. XVII, XVI:1, XVI:2(a), XVI:2(e)  Services (GATS)

ARGENTINA – MEASURES RELATING TO TRADE IN GOODS AND SERVICES
REQUEST FOR THE ESTABLISHMENT OF A PANEL BY PANAMA
The following communication, dated 13 May 2013, from the delegation of Panama to
the Chairperson of the Dispute Settlement Body, is circulated pursuant to Article 6.2 of the DSU.

On 12 December 2012, Panama requested consultations with Argentina pursuant
to Article 4 of the Understanding on Rules and Procedures Governing the Settlement of
Disputes (“DSU”), Article XXII of the General Agreement on Tariffs and Trade 1994 (“GATT 1994”)
and Article XXII of the General Agreement on Trade in Services (“GATS”) with respect to certain
measures imposed by Argentina that affect trade in goods and services between Argentina
and specific countries listed in Decree No.1344/98, as amended by Decree No.1037/00,
including Panama (hereinafter "listed countries").
1

Consultations were held in Geneva on 5 February 2013, but did not settle the dispute.
Consequently, pursuant to Articles 4.7 and 6 of the DSU, Article XXIII:2 of the GATT 1994
and Article XXII of the GATS, Panama requests the DSU to establish a panel to examine the
matters described below.

1. Less favourable tax treatment in the collection of profits tax on certain
transactions involving the listed countries

When assessing profits tax, Argentina accords certain transactions between Argentine
residents and persons based in the listed countries tax treatment less favourable than that
accorded to like transactions between Argentine residents and persons based in other countries.
As can be seen from Article 93 of Law No.20.628 ( Ley de Impuesto a las Ganancias -
“Income/Profits Tax Law”), with regard to credit, loans or placement of funds, when the creditor is
a banking or financial institution based abroad
2, Argentina presumes that the creditor’s net profit
is 43% of the payments corresponding to intere st or remuneration. On the other hand, if the
creditor is a banking or financial institution based in one of the listed countries, Argentina
presumes against all evidence to the contrary that the creditor’s net profit is 100% of
such payments.
By imposing the 35% rate on the net profit thus determined, Argentina taxes transactions
with persons based in the listed countries at a higher rate (i.e. 35% of the amount of each
payment) than transactions with persons based in other countries (i.e. 15.05% of the amount of
each payment). If it is sought to transfer the tax burden to the Argentine resident, the actual rate
increases, initially up to 53.85% and 17.72% on the amount of each payment, respectively. The
tax is applied in the form of a withholding at the time at which the Argentine resident pays for
the service.

1 The listed countries include Members and countries or territories that are not Members of the WTO. In
this request, the reference to “listed countries” should be interpreted to mean those listed countries that
are WTO Members.
2 Subject to supervision by its respective central bank or equivalent institution in accordance with the
relevant provision in the Income/Profits Tax Law.

Panama understands that Argentina applies this measure pursuant to:
(i) the Income/Profits Tax Law, in particular Articles 15, 91, 92 and 93;

(ii) Decree No.1344/98, in particular the seventh unnumbered article that
follows Article 21;

(iii) Decree No.1037/00; and

(iv) Resolution No.739 of the Federal Admi nistration of Public Revenue (“AFIP”).

In Panama’s opinion, this tax discrimination impairs the conditions of competition
between like services and foreign suppliers of like services by according less favourable
treatment to the services and service suppliers of the listed countries, in a manner inconsistent
with GATS Article II:1.
2. Tax treatment imposed on entry of funds from the listed countries

Argentina applies special tax treatment to the entry of funds from the listed countries,
thereby affecting international trade transactions from and to these countries. When funds enter
from a foreign country in general there are no tax implications in Argentina. However, pursuant to
the unnumbered article that follows Article 18 of Law No.11683 (“Law on Tax Procedure”), if the
funds enter from any of the listed countries, their entry is deemed to be an “unjustified” increase
in wealth and is subject to payment of profits tax, value added tax and the applicable domestic
taxes. Argentina taxes these funds by increasing the amount entering by 10% and applying to this
taxable base the rates corresponding to each of these taxes.

Although this payment is based on a voluntary declaration by the person receiving the
funds, the regulations provide for several negative consequences if a proper declaration is not
submitted or, where it is sought to justify the fu nds entering, in the event of failure to convince
the tax administration that the entry is not unjustified. The consequential effects provided in the
legislation include tax adjustments in the form of taxes to be paid, fines for fraud, payment of
compensatory interest and, if applicable, payment of penalty interest or a term of imprisonment of
two to nine years depending on the amount of tax evaded.

Panama understands that Argentina applies this measure pursuant to:
(i) the Law on Tax Procedure, in particular Article 18 and the unnumbered article added
after Article 18, and, in relation to the consequences, Articles 37, 38, the unnumbered
article added to Article 38, Article 39, the unnumbered article added to Article 39,
Articles 46 and 52;

(ii) the Income/Profits Tax Law, in particular Article 15;

(iii) Decree No.1344/98, in particular the seventh unnumbered article that
follows Article 21, and Article 27;

(iv) Decree No.1037/00; and

(v) Law No.24.769 (“Criminal Tax Law”) with regard to the possible offence of
tax evasion.

In Panama’s view, the measure in question is inconsistent with:
(i) Article II:1 of the GATS, inasmuch as it constitutes a disincentive to contracting
services that imply a transfer of funds from the listed countries (e.g. loan services,
money transfers, insurance), thus distorting the conditions of competition with like
services and service suppliers from other countries. The measure accords services and
service suppliers in the listed countries treatment less favourable than that accorded
to like services and service suppliers from other countries;

(ii) Article XVI of the GATS, the second sentence of footnote 8 to the GATS and
Argentina’s Schedule of Commitments, inasmuch as for the specific commitments on
the supply of services through commercial presence in the financial sector (e.g.
accepting deposits; all types of loan; monetary payments and transfers; trade in
money market instruments, transferable securities and other negotiable financial
instruments and assets; foreign exchange brokerage; and portfolio management) and
non-financial services (e.g. legal, accounting, informatics, construction for buildings,
advertising and postal services, wholesale and retail trade services, franchising
services, hotels and restaurants and travel agencies), this measure accords less
favourable treatment than that provided in Argentina’s Schedule of Commitments and
imposes a restriction on the transfer of capital from a parent company based in a
listed country to the establishment with a commercial presence in Argentina;

(iii) Article XVII of the GATS, inasmuch as, with regard Argentina’s specific commitments
without limitation on national treatment, this measure constitutes a disincentive to
contracting services that might involve any type of transfer of funds from the listed
countries (e.g. reinsurance or retrocession services), thereby distorting the conditions
of competition between services and servic e suppliers from the listed countries and
Argentine like services and service suppliers. Moreover, with regard to the commercial
presence’s financing options, this measure places service suppliers of the listed
countries with a commercial presence in Argentina in a situation less favourable than
that of Argentine suppliers of like services;

(iv) Article I:1 of the GATT 1994, inasmuch as Argentina does not apply the measure to
payments received from non-listed countries in connection with exports to those
countries. This advantage, benefit, privilege or immunity is not granted for exports of
like products to listed countries (giving rise to payments from listed countries).

3. Discrimination in the valuation of tr ansactions with persons from the listed
countries

For profits-tax purposes, when transactions between an Argentine resident and another
person (whether or not domiciled in Argentina) are reported, Argentina considers that the
transactions are in line with normal arms-length market practices or prices unless the relationship
between the parties is such as to raise doubts concerning the real value of the transactions. In the
case of transactions between Argentine residents and persons domiciled, incorporated or residing
in the listed countries, however, as can be seen from Articles 8 and 15 of the Income/Profits Tax
Law and Article 21 of Decree No.1344/98, Argentina does not consider that these transactions are
in any case in line with normal arms-length mark et practices or prices, and requires them to be
valued in accordance with the pricing methods for transfers between related parties.

Compliance with this requirement by taxpayers or those liable to tax in Argentina implies a
significant monetary and administrative burden . For example, determining the value of an
operation on the basis of alternative prices derived from transfer pricing methods requires the
submission of detailed information on the amount of each transaction, together with an estimate of
alternative values derived from applying the various valuation methods set out in Article 15 of the
Income/Profits Tax Law and developed in various articles of Decree No.1344/98. This will very
probably mean hiring an expert. Moreover, as well as the annual supplementary sworn declaration
that has to be submitted, Article 6(b) of AFIP’s General Resolution No.1122 requires the
submission of a report setting out as a minimum the extensive detailed information listed
in Annex II of the Resolution. This report has to be signed by an independent chartered
accountant, whose signature has to be authenticate d by the professional council or association or
body with which the accountant is registered.
3

It should be noted that under Argentine law failure to submit the sworn declaration and
the required information, incomplete submission or substantiation thereof, or a different opinion on
the part of the tax administration regarding the values submitted may give rise to administrative,
and, ultimately, criminal penalties.

3 Panama points out that these rules and procedures also apply to calculation of value added tax, so the
claims in this section also apply to the collection of VAT.

Panama understands that Argentina applies this measure pursuant to:

(i) the Income/Profits Tax Law, in particular Articles 8 and 15;

(ii) Decree No.1344/98, in particular Article 21 and the unnumbered articles
following Article 21 (before Article 22);

(iii) General Resolution No.1122 of the AFIP;

(iv) Decree No.1037/00;

(v) the Law on Tax Procedure, as far as the negative consequences are concerned, and in
particular Articles 37 and 38, unnumbered continuation of Article 38, Article 39,
unnumbered continuation of Article 39, Articles 46 and 52; and

(vi) the Criminal Tax Law regarding the possible offence of tax evasion;

In Panama’s opinion, this situation is inconsistent with:
(i) Article I:1 of the GATT 1994, inasmuch as Argentina accords imports of products from
any non-listed country the possibility of being valued as transactions in line with
normal market practices or prices without making them subject to determination of
transfer prices, whereas the same advantage, immunity, benefit or privilege is not
extended immediately and unconditionally to imports of like products from listed
countries. Likewise, Argentina accords exports of products to any non-listed country
the possibility of being valued as transactions in line with normal market practices or
prices without making them subject to this measure, whereas the same advantage,
immunity, benefit or privilege is not extended immediately and unconditionally to
exports of like products to listed countries;

(ii) Article III:4 of the GATT 1994, inasmuch as this measure lays down rules and
requirements that place products imported from listed countries in a situation less
favourable than that applicable to domestic like products, to which the requirements
in question do not apply;

(iii) Article XI:1 of the GATT 1994, inasmuch as this measure lays down criteria that
restrict the import of products from listed countries. Likewise, this measure imposes
restrictive conditions on exports to listed countries;

(iv) Article II:2 of the GATS, inasmuch as this measure leads to disincentives that accord
to services and service suppliers domiciled, incorporated or based in the listed
countries treatment less favourable than that accorded to like services and service
suppliers in other countries; and

(v) Article XVII of the GATS, inasmuch as, with regard to Argentina’s specific
commitments without limitation on national treatment for financial services (e.g.
insurance and retrocession services, consultancy and transfer of financial information
services) and non-financial services (e.g. legal and accounting services, wholesale
trade services), this measure constitutes a disincentive to purchasing services or
contracting suppliers domiciled, incorporated or located in the listed countries, thereby
placing them in a situation less favourable than that applicable to like domestic
services and like domestic suppliers.

4. Discriminatory criteria with respect to deductions

For the purposes of profits tax, Argentina establishes different criteria concerning the
possibility given to taxpayers or those liable for tax to deduct expenses incurred in transactions
with parties abroad. In general terms, these deduct ions should be governed by the “accrual” rule
at the time at which the underlying obligation is contracted. According to Article 18, last
p a r a g r a p h , o f t h e I n c o m e / P r o f i t s T a x L a w , h o w e v e r , i f t h e c o u n t e r p a r t i s a r e s i d e n t o f o r
incorporated, based or domiciled in a listed count ry, the deduction cannot be made in accordance
with the accrual rule but according to the time at which payment of the obligation is actually

made. The same restriction does not exist in the case of deductions for transactions with other
parties abroad.

Panama understands that this measure arises from:
(i) the Income/Profits Tax Law, in particular Article 18;

(ii) Decree No.1344/98; and

(iii) Decree No.1037/00.

In Panama’s opinion, this measure is inconsistent with:
(i) Article II:1 of the GATS, inasmuch as, by limiting the possibility of being able to
deduct payment for services provided by suppliers from the listed countries, this
measure accords these and their services treatment less favourable than that
accorded to like services and service suppliers from other countries; and

(ii) Article XVII of the GATS, inasmuch as, with regard to Argentina’s specific
commitments without limitation on national treatment (e.g. legal, accounting and
financial consultancy services), the limitation on the possibility of being able to deduct
payment for services provided by suppliers from listed countries accords these
suppliers and their services treatment less favourable than that accorded to like
domestic services and service suppliers.

5. Measures affecting trade in the reinsu rance and retrocession services sector

Despite having bound the reinsurance and retrocession services sector in the cross-border
trade mode, without market access limitation, under Resolution No.35615/2011 of the National
Insurance Supervisory Authority (“SSN”), Argentina does not allow foreign suppliers to provide
such services under this mode. Argentina does allow foreign suppliers to provide such services
through a subsidiary or branch duly established in Argentine territory, but excludes suppliers of
reinsurance services in listed countries from this possibility.

Furthermore, despite the general limitation, Argentina provides that in certain cases,
because of the extent and the particular features of the prevailing risks, reinsurance services may
be provided by foreign suppliers without a commer cial presence in Argentina, subject to prior
approval and registration of the foreign reinsurer by the SSN. This possibility is, however, denied
to suppliers of reinsurance services incorporated or domiciled in the listed countries.

One example of these measures is that pu rsuant to Resolution No.36173/2011 the SSN
cancelled the registration and licence of a Panamanian services supplier simply because it “has its
headquarters in the Republic of Panama”.

Panama understands that Argentina applies these measures pursuant to
Resolution No.35615/2011 of the SSN.

In Panama’s opinion, these measures are inconsistent with:
(i) Article II:1 of the GATS, inasmuch as by el iminating both the possibility of establishing
subsidiaries or branches in Argentina and that of providing reinsurance or retrocession
services on an exceptional basis without a commercial presence in Argentina, the
latter accords service suppliers of listed countries treatment less favourable than that
accorded to like suppliers of reinsurance or retrocession services from other countries;

(ii) Article XVI:1 of the GATS, in conjunction with Article XVI.2(a) and Argentina’s
Schedule of Commitments, inasmuch as by not allowing foreign suppliers to provide
reinsurance services through cross-border trade Argentina accords them treatment
less favourable than that set out in its Schedule of Commitments;

(iii) Article XVI:1, in conjunction with Article XVI:2(e) and Argentina’s Schedule of
Commitments, inasmuch as the requirement that foreign suppliers should establish
branches in Argentina in order to be able to provide the service in question through
cross-border trade is a market access restriction not specified in Argentina’s Schedule
of Commitments; and

(iv) Article XVI:1, in conjunction with Ar ticle XVI:2(a) and Argentina’s Schedule of
Commitments, inasmuch as by prohibiting reinsurance service suppliers from listed
countries from setting up subsidiaries or branches in Argentina the latter accords
these suppliers treatment less favourable than that accorded in its Schedule of
Commitments in respect of market access under mode 3.

6. Discriminatory requirements for the re gistration of companies, branches and
shareholders from certain foreign service suppliers

Argentina imposes a series of registration requirements for foreign companies wishing to
set up a branch in the Autonomous City of Buenos Aires. If the foreign company is from a listed
country, however, pursuant to Article 192 of General Resolution No.7/2005 of the Argentine Office
of Corporations ( Inspección General de Justicia - “IGJ”), the requirements are even more
stringent. These include certification that the company is effectively engaged in economically
significant business activities in the place where it was set up, registered or incorporated and/or in
third countries, which requires the fulfilment of certain formalities. Moreover, this rule expressly
stipulates that the IGJ will appraise compliance with the registration requirements restrictively in
the case of companies from the listed countries. On the other hand, foreign companies from other
countries do not need to comply with these additional requirements.

Panama understands that Argentina applies this measure pursuant to:
(i) Law No.19.550 on commercial companies, in particular Article 118; and

(ii) General Resolution No.7/2005 of the IGJ, in particular Article 192.

In Panama’s opinion, the additional requirements for listing in the companies register of the
Autonomous City of Buenos Aires impair the conditions of competition between foreign suppliers of
like services and accord less favourable treatmen t t o s u p p l i e r s o f l i k e s e r v i c e s f r o m l i s t e d
countries, contrary to Article II:1 of the GATS.

7. Measures affecting the re patriation of investments

According to Communication "A" 4662 of the Central Bank of the Argentine Republic
(“Central Bank”), Argentina has exempted from the prior authorization requirement for the
purchase of foreign exchange on its single fr ee exchange market the repatriation of direct
investments by the non-financial sector and portfolio investments of non-residents of Argentina.
According to Communication “A” 4940 of the Central Bank, however, Argentina imposes this
requirement if the beneficiary of the repatriation is a party incorporated or domiciled in the
listed countries.

Panama understands that Argentina applies this measure by means of
Communication “A” 4940, as amended by Communication “A” 4692 of the Central Bank.
In Panama’s opinion, this measure is inconsistent with Article II:1 of the GATS, inasmuch as
it accords foreign service suppliers in listed countries seeking to repatriate investments made in
Argentina treatment less favourable than that accorded to like service suppliers from
other countries.
8. Measures affecting trade in financial instruments

According to General Resolution No.368 of the Argentine National Securities Commission,
certain financial agents and securities dealers may not carry out transactions involving negotiable
securities, forward contracts, futures or options of any nature, or other financial instruments or
products, if such transactions are conducted or ordered by persons incorporated, domiciled or
residing in the listed countries. On the other hand, this prohibition does not apply to any

transactions conducted or ordered by persons incorporated, domiciled or residing in
other countries.

Panama understands that Argentina applies this measure pursuant to the consolidated text
of the National Securities Commission’s rules, as approved by General Resolution No.368 and
updated by General Resolutions Nos.602 and 604.

In Panama’s opinion, this measure is inconsistent with Article II:1 of the GATS inasmuch as
it accords service suppliers in the listed countries seeking access to the Argentine capital market in
order effectively to provide their services treatm ent less favourable than that accorded to other
like service suppliers from other countries.

Panama has identified the rules or acts which, in its opinion, underpin the various measures
in question. Nevertheless, this list is without prejudice to any other regulatory instruments,
administrative or legal decisions, acts, practices, guidance or guidelines issued by Argentina that
may be relevant in examining this dispute. Accordingly, the scope of the request for the
establishment of a panel covers all the aforementioned actions as well as any possible
amendments, extensions or additions where applicable.

Given the inconsistencies described above, pursuant to Article 3.8 of the DSU, Panama
considers that the measures at issue nullify or impair the advantages accruing to Panama under
the various provisions mentioned in this request.

Panama requests that, pursuant to Article 6 of the DSU, the DSB establish a panel to
examine this matter. Panama also requests that the panel be given the standard terms of
reference provided in Article 7.1 of the DSU.

Panama asks that this request for the establishment of a panel be included in the agenda of
the DSB meeting planned for 24 May 2013.