ARGENTINA - MEASURES RELATING TO TRADE IN GOODS AND SERVICES
Document: Request for Consultations by Panama
Date: 19 December 2012
Document codes: WT/DS453/1; G/L/1019; S/L/396
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 Consultations by Panama

 The following communication, dated 12 Dece mber 2012, from the delegation of Panama to
the delegation of Argentina and to the Chairperson of the Dispute Settlement Body, is circulated in
accordance with Article 4.4 of the DSU.

 My authorities have instructed me to requ est 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. These measures apply only to trade conducted with
specific countries listed in Decree 1344/98
1 as amended by Decree 1037/00, which include Panama
(hereinafter "listed countries").

 In accordance with Article 4.4 of the DSU, the reasons for this request, including
identification of the measures at issue and an indica tion of the legal basis for the complaint, are set
out below.

1. Discriminatory assessment of profits tax ( impuesto a las ganancias) depending on the origin
or place of residence of the foreign service supplier

 Argentina establishes different percentages of presumed net profit in respect of the payment
of interest or remuneration to foreign-based cred itors depending on their country of residence.
The presumed net profit is 100% when the creditor is a banking or financial institution based in
certain listed countries, while the presumed net pr ofit is 43% when the creditor is a banking or
financial institution based in any other country. Although the same rate of 35% is applied to both
payments, because of the different percentages of presumed net profit for the determination of the
tax base, each will face a different tax burden, amounting to 35% and 15.05% respectively.

 Panama believes that the measure in question is contained, inter alia , in the
following provisions: (i) Article 93(c)1 and 2 of the Income/Profits Tax Law ( Ley de Impuesto a las
Ganancias - Law 20.628); (ii) Decree 1344/98; (iii) Decree 1037/00.

1 Regulations to the Income/Profits Tax Law (Ley de Impuesto a las Ganancias).

 Under this measure, financial services provi ded by financial service suppliers of certain
listed-country Members are subject to treatment le ss favourable than that accorded to financial
services provided by financial service suppliers in any other country. Consequently, for Panama this
measure appears to be inconsistent with Article II:1 of the GATS. Moreover, in the context of
financial leasing connected with the importation of products, the measure in question accords certain
products from certain listed-country Members less favourable treatment than that accorded to
products from other countries, in a manner that is inconsistent with Article I:1 of the GATT 1994.

2. Discriminatory measures based on an alleged unjustified increase in wealth

 Argentina presumes that the entry of funds from the listed countries, including payments for
exports of goods and services and the transfer of funds in connection with the supply of services,
constitutes an "unjustified" increase in wealth for the r ecipients of the funds in Argentina. As a result
of this presumption, the funds are considered to be a "net profit". For the purposes of determining the
tax base for the profits tax, the total funds are taken into account, plus a 10% increase for income
disposed of or consumed. To that tax base, Argentina applies the tax of 35%.
2

 On the other hand, goods and services transac tions conducted by persons from or residing in
territories other than the listed countries, in cluding transactions involving goods and services of
national origin, are not subject to the presumption of net profit or to the 10% increase in the tax base.

 Panama believes that this measure is contained, inter alia , in the following
provisions: (i) Article without number follo wing Article 18 of the Law on Tax Procedure
(Law 11683), as amended by Law 25.795; (ii) Article 15 of the Income/Profits Tax Law
(Law 20.628); (iii) Decree 1344/98; (iv) Decree 1037/00.

 This measure appears to be incons istent with the following provisions:

 Article II:1 of the GATS, given that in the context of financial services involving a
transfer of funds that would result in the presumption of increased wealth, Argentina
accords to services and servi ce suppliers from listed-country Members treatment less
favourable than it accords to services and service suppliers from other territories;

 Article XI of the GATS, since by presuming a net profit and increasing the tax base
by 10%, Argentina is applying restrictions on international transfers and payments for
current transactions relating to Argentina's specific commitments in services;

 Article XVI and footnote 8 of the GATS, si nce: (i) Argentina limits the cross-border
movement of capital in respect of its mark et access commitments in relation to the
supply of a service through cross-border trade in which the cross-border movement of
capital is an essential part of the service itself; (ii) Argentina limits transfers of
capital into its territory in respect of its ma rket access commitments in relation to the
supply of a service through commercial presence;

2 Panama notes that these funds are also subject to value added tax (VAT) and internal taxes calculated
using the same tax base as the profits tax, so that the complaints raised under this section are also valid as
regards the assessment of VAT and internal taxes applicable to those transactions.

 Article XVII of the GATS, since in rela tion to its specific commitments in the
services area, Argentina accords to services and service suppliers from listed-country
Members treatment less favourable than it accords to its own like services and
service suppliers;

 Article I:1 of the GATT 1994, since in the context of export payments, Argentina
grants an advantage, favour, privilege or im munity to products destined for any other
country that is not accorded immediatel y and unconditionally to the like product
destined for listed-country Members.
3
3. Discrimination in the valuation of transa ctions with parties from the listed countries

 For the purposes of calculating the profits tax, Argentina does not consider transactions
conducted with persons incorporated or domiciled in the listed countri es to be consistent with normal
arms-length market practices or prices. Consequent ly, Argentina resorts to transfer pricing methods
which result in significant costs, for example hiring an independent public accountant to certify
certain information included by the taxpayer in th e transfer pricing report provided for in General
Resolution (AFIP)1122/01, and ultimately in the payment of higher taxes.
4 This practice
(i) discourages the importation of goods and supply of services originating in or coming from
listed-country Members in favour of the purchase of goods or supply of services of other origins,
including goods and services of national origin; (ii) discourages exportation to the territory of
listed-country Members in favour of exportation to other destinations.

 Panama considers that this measure arises, inter alia, from the following provisions:
(i) Articles 8 and 15 of the Income/Profits Tax La w; (ii) Decree 1344/98; (iii) Decree 1037/00, both
from the text itself and from the way it is actually applied.

 Consequently, Panama considers that the m easure in question accords an advantage, favour,
privilege or immunity to impor ted products not originating in the listed countries which is not
accorded immediately and unconditionally to like produc ts originating in the listed-country Members,
in a manner that is inconsistent with Article I:1 of the GATT 1994.

 Similarly, Panama considers that the measure in question accords imported products that
do not originate in listed-country Members treatme nt less favourable than that accorded to like
products of national origin. This would appear to be inconsistent with Article III:2 and III:4 of the
GATT 1994.

 Finally, Panama considers that the measure in question discourages the importation of goods
originating in listed-country Members and the export ation of goods to the listed-country Members.
Thus, the measure would qualify as a restriction on the importation of goods from listed-country
Members, and as a restriction on the exportation of goods to the listed-country Members, in a manner
that is inconsistent with Article XI:1 of the GATT 1994.

3 Alternately, for Panama this m easure appears to be inconsistent with: (i) Article XI:1 of the
GATT 1994, in that it would constitute a restriction on the exportation or sale for export of products destined for
the territories of the listed countrie s; and (ii) Article XIII:1 of the GATT 1994, since it would constitute a
restriction on the exportation of products destined for the territories of the listed countries without Argentina
similarly restricting the exportation of like products destined for the territories of non-listed countries.
4 Panama notes that these rules and procedures woul d also apply to the calculation of VAT, so that the
complaints raised under this section are also valid as regards VAT.

 In the framework of trade and services, Pana ma believes that the measure in question accords
to services and service suppliers of listed-country Members treatment less favourable than that
accorded to the services and service suppliers of ot her countries, in a manner inconsistent with
Article II:1 of the GATS.

 This measure also appears to be inconsistent with Article XVII of the GATS in that, in respect
of its specific commitments in services, Argentin a accords the services and service suppliers from the
listed-country Members treatment less favourable th an that accorded to its own like services and
services suppliers.

4. Measures affecting trade in the reinsurance services sector

 Under Resolution No. 35615/2011, the National Insurance Supervisory Authority
(Superintendencia de Seguros de la Nación - SSN) prohibited foreign rein surance services suppliers
from providing their services to insurers in Argen tina unless they had subsidiaries or branches in
Argentina with a capital of at least Arg$20 million. At the same time, Panama understands that
service suppliers from the listed countries have been denied the possibility of setting up subsidiaries
or branches in Argentina. It appears to Panama that the general limitation and the minimum capital
requirement for subsidiaries and branches of re insurance services suppliers from listed-country
Members are inconsistent with Article XVI:1 of the GATS and Argentina's specific market access
commitments for that sector. Similarly, denial of the permission to set up subsidiaries or branches
of reinsurance services suppliers from listed-c ountry Members means according those Members
treatment less favourable than that accorded to re insurance services suppliers from other countries,
which would appear to be inconsistent with Article II:1 of the GATS.

 Furthermore, in spite of the general limitation, Articles 19 and 20 of Resolution
No. 35615/2011 provide for a number of exceptions for cases in which, owing to the magnitude and
nature of the risks, the reinsurance service cannot be covered by suppliers est ablished in Argentina.
In such cases, reinsurance serv ices suppliers without commercia l presence in Argentina may
provide this type of service pending approval and registration of the foreign reinsurance company
with the SSN. However, under SSN Resolution No. 35726/2011, reinsurance services suppliers
incorporated or domiciled in the listed countries are denied that possibility. Panama considers that
this measure accords less favourable treatment to reinsurance services and services suppliers from the
listed-country Members, which appears to be inconsistent with Article II:1 of the GATS.
5

5. Discriminatory requirements for the registra tion of companies, branches and shareholders
from certain foreign service suppliers

 Under Article 118 of the Law on Commercial Companies No. 19.550, the Argentine Office of
Corporations ( Inspección General de Justicia - IGJ) is responsible for public registration and
inspection of companies incorporated in the territory of the Autonomous City of Buenos Aires
6,
as well as companies incorporated abroad, that are seeking to exer cise their usual activities and set
up agencies, branches or permanent representations to be registered in that jurisdiction. In addition to
the general requirements for the registration of fo reign companies, including agencies, branches or
permanent representations, Article 192 of IGJ General Resolution 7/2005 establishes certain

5 Panama notes that by Resolution No. 36173/2011, the SSN cancelled the registration and licence of a
services supplier from Panama because it "[had] its headquarters in the Republic of Panama", which, in line with
the above, appears to be inconsistent with Article II:1 of the GATS.
6 With the exception of those admitted to the public offering regime, which are subject to inspection by
the National Securities Commission.

requirements, that apply only to companies from the listed countries, for entry in the register of the
Autonomous City of Buenos Aires. These require ments 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 c ountries, which requires the fulfilment of certain
formalities. Moreover, Article 192 expressly stipulat es that the IGJ will appraise compliance with the
registration requirements restrictively in the case of the listed countries. On the other hand, foreign
companies from other countries do not need to comp ly with the additional requirements contained in
Article 192 of IGJ General Resolution 7/2005.

 Panama considers that this measure accords to services and service suppliers of listed-country
Members seeking to establish commercial presence in Argentina treatment less favourable than that
accorded to services and service suppliers of other c ountries. This appears to be inconsistent with
Article II:1 of the GATS.

 Moreover, with respect to all of the sector s in which Argentina has undertaken specific
commitments, Panama considers that Argentina is effectively limiting access to its markets for service
suppliers from listed-country Members seeking to establish commercial presence in Argentina.
This appears to be inconsistent with Article XVI:1 of the GATS.

6. Measures affecting the repatriation of investments

 Communication "A" 4786 of the Central Bank of the Argentine Republic (BCRA) and its
amendments regulate access to the single free ex change market (MULC) for the repatriation of
investments abroad. Communication "A" 4786 stipulat es that in order to purchase foreign exchange
for the purpose of repatriating direct investments a nd portfolio investments, residents from the listed
countries have to obtain prior authorization from the BCRA in order to have access to the MULC,
while residents of non-listed countries do not require such authorization.

 In Panama's view, this restriction implies less favourable treatment for services and service
suppliers from listed-country Members that establis h commercial presence in Argentina and seek to
repatriate investments to their respective countri es than for like services and service suppliers from
other countries. This appears to be inconsistent with Article II:1 of the GATS.

7. Measures affecting trade in financial instruments

 According to the consolidated text of re gulatory provisions of the National Securities
Commission as approved by General Resolution No. 368 and updated by General Resolution No. 611,
certain financial agents and securities dealers can 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 orde red by persons incorporated, domiciled or residing
in the listed countries. On the other hand, th is prohibition does not apply to any transactions
conducted or ordered by persons incorporated, domiciled or residing in other countries.

 In Panama's opinion, by limiting the ability of the service suppliers of the listed countries to
access the Argentine securities market , Argentina is according to services and service suppliers of the
listed countries treatment less favourable than that accorded to the services and service suppliers of
other countries. This appears to be inconsistent with Article II:1 of the GATS.

8. Discriminatory criteria with respect to deduc tions for the cost of goods or services provided
by residents abroad

 For profits tax purposes, Argentina establishes di fferent criteria with respect to the deduction
that residents of Argentina are allowed to make for the cost of goods or services supplied by
residents abroad. These criteria vary according to th e country of residence of the foreign supplier.
If the supplier of the goods or services resides in on e of the listed countries, the Argentine resident
may deduct the cost of the goods or services received only if that cost has been paid prior to the
deadline for submitting the corresponding tax declaration.

 On the other hand, if the supplier of the goods or services resides in a non-listed country,
including Argentina, the Argentine resident may ma ke the deduction even if the cost of the goods or
services has not been paid prior to the deadline for submitting the corresponding tax declaration.

 Panama believes that this measure is contained, inter alia , in the following
provisions: (i) Article 18 of the Income/Prof its Tax Law (Law 20.628); (ii) Decree 1344/98;
(iii) Decree 1037/00.

 In Panama's view, this measure appears to be inconsistent with Article II:1 of the GATS
because, in respect of the determination of the pr ofits tax, Argentina is according services and service
suppliers from listed-country Members treatment l ess favourable than that accorded to services and
service suppliers from other countries. Similarly, with respect to the sp ecific sectors in which
Argentina has undertaken commitme nts, this measure accords foreign suppliers treatment less
favourable than that accorded to national suppliers, in a manner which appears to be inconsistent with
Article XVII of the GATS.

 In respect of the determination of the profits tax, the measure in question also appears to be
inconsistent with Article I:1 of the GATT 1994, sin ce it constitutes an advantage, favour, privilege or
immunity granted to products originating in the non-listed countries which is not accorded
immediately and unconditionally to the like product or iginating in the listed countries. Furthermore,
the measure in question would appear to be in consistent with Article III:4 of the GATT 1994,
since the imported products that originate in the listed countries are accorded treatment less
favourable than that accorded to the like products of national origin.

9. Denial of rebates and drawbacks in relation to VAT

 With respect to exports des tined for the listed countries, Argentina denies rebates and
drawbacks in relation to VAT. On the other hand, if the exports are destined for any other country,
Argentina does provide exporters with such rebates and drawbacks.

 In Panama's view, Argentina is granting products destined for certain territories an advantage,
favour, privilege, or immunity that is not acco rded immediately and unconditionally to the like
product destined for the listed-country Members. In Panama's view, the measure in question therefore
appears to be inconsistent with Article I:1 of the GATT 1994.

 Without prejudice to the measures identified here in, the requested consultations also concern
any other regulatory instrument, guidelines, practices , decisions or administrative and/or judicial acts
that regulate or implement the measures in questi on, including those that could formally amend them
and that were not mentioned previously, as well as specific instances of application.

 Panama also informs Argentina that in the course of the consultations it may be necessary to
discuss other factual or legal points linked to the measures in question and/or raise other issues under
the WTO covered agreements that have not been referred to in this request, including (but not
limited to) Articles I:1, III:2 and III:4 of the GATT 1994 and/or Articles II:2 and XVII of the GATS.

 I look forward to receiving your reply to this request for consultations as soon as possible.
I propose that the date and venue of these consultations be agreed between our two Missions.