(Brief comment on its validity and information exchange mechanisms).

A. On the validity of the Agreement.

The Argentine-Swiss Agreement to Avoid Double Taxation has just been enacted, for which purpose the promulgation rule was published in the Official Gazette of December 11, 2014. It is Law 27,010 that includes the agreement signed by both countries in the City of Bern on March 24, 2014.

The Agreement foresees its validity conditional on compliance with the procedures required by the internal legislation of each country for such purposes. Both countries assumed the commitment to notify each other about compliance with the aforementioned internal procedures at the time they are carried out. From these notifications, the validity of the treaty will begin 30 days after the last notification (Cf. art. 27.1 and 27.2 of the Agreement). Argentina has already gone through the procedural steps required by our legislation for the full validity of the Agreement, due to the promulgation of the Agreement through Decree 2262/14. We do not know, at the time of preparing this Newsletter, the procedural situation in the Swiss Confederation.

Continuing with what is related to its validity, regarding the taxes withheld at the source, the application of the Agreement will fall on the amounts paid from January 1 inclusive of the calendar year in which the validity begins; With respect to other aspects of income and wealth tax, it will be applied to fiscal years beginning on or after January 1, inclusive, of the calendar year following the one in which the Agreement enters into force and in relation to the mechanisms of exchange of information contemplated in art. 25 -which is set out below-, is in force as of January 1, in which the Agreement begins to take effect.

 B. On the scope of the exchange of information.

The great novelty in this new Agreement that our country celebrates lies in the aspects related to the exchange of tax information, exhibiting a careful, detailed, precise and comprehensive treatment of the powers of the States to obtain tax and banking information. The art. 25 of the Agreement, which condenses these powers of the Treasury of both countries, provides for the following:

1. State Commitment: Both states agree to exchange the necessary information for both the application of the Convention and to demand the provisions of the national legislation of both countries.
2. Encumbrances likely to be investigated: The taxes whose control is related to the treaty are not limited to nationals but also to local ones as long as the imposition provided for in it is not contrary to the Convention.
3. Protection of the collected information: The information exchanged must be kept secret and will only be disclosed to persons or authorities (including courts and administrative bodies) of the Governments of Switzerland and Argentina.
4. Use of the information collected: The information obtained can only be used for tax matters.
5. Dissemination of the collected information: Information may be disclosed in public court hearings or in court rulings.
6. Expansion of the use of the information collected: If the internal law of each country allows the use of that information for other purposes, the information received by a Contracting State may be used for those purposes.
7. Refusal of States: The Contracting States are not obliged to: i) adopt administrative measures contrary to their legislation or administrative practice or those of the other Contracting State; ii) supply information that cannot be obtained on the basis of its own legislation or in the exercise of its normal administrative practice and iii) supply information that reveals commercial, industrial, professional secrets, commercial procedures or information whose communication is contrary to public order .
8. Irrelevance of the absence of interest of the State from which the information is requested: It is irrelevant that a Contracting State from which the information is requested is not of internal interest to that State. In any case, you must use the necessary measures to collect the information. However, if the information requires the application of administrative measures indicated in the previous item (that is, administrative measures contrary to its legislation or administrative practice; information that cannot be obtained based on its own legislation and information that reveals trade secrets, industrial, professional, commercial procedures or information whose communication is contrary to public order) in these cases the requested Contracting State may refuse to provide the information.
9. Information held by banks, agents, trustees: The requested Contracting State must provide the information requested by the other State even if it is in the possession of banks, financial institutions, agents or any person acting as a representative or fiduciary. These circumstances are not an obstacle for the requested State to refuse to provide it (unless public order is affected or it is contrary to the domestic law of the requested country).

C. On some limits to these powers of investigation that are contemplated in the Additional Protocol.

The broad powers previously described in the power of the Contracting States are, in some way, adjusted or restricted in the Additional Protocol. Indeed, in relation to art. 25 has:

1. Obligation of the requesting State to exhaust the internal mechanisms of investigation and control: The requesting Contracting State of the information has the obligation to exhaust all the ordinary sources of fiscal information that it has available in its own country and in accordance with its own internal law.
2. Obligation of the requesting State to provide specific data: The requesting Contracting State must provide certain information to the Contracting State from which the information is required, such as: a) identity of the inspected person – it does not clarify whether it is a natural or legal person or both indistinctly because it does not use the term taxpayer, which would encompass everyone; b) period for which the information is requested; c) indication of the nature and form in which the information is to be received; d) fiscal purpose pursued; e) as long as they are known, you must indicate the name and address of any person in whose possession the requested information is believed to be in possession.
3. Prohibition of fishing excursions: The expression used by the Convention “predictably relevant” implies that the information must be as broad as possible and that it is requested not for speculative purposes (the Protocol expressly refers to fishing expeditions) nor to request information that is unlikely to be relevant to the tax affairs of a given taxpayer.
4. Emphasis on the prohibition of fishing excursions: The Convention expressly prohibits fishing expeditions.
5. Prohibition of the automatic exchange of information: The exchange of information does not oblige the Contracting States to exchange information automatically or spontaneously. This is not the purpose of art. 25 of the Convention.
6. Protection of the constitutional rights of the investigated taxpayer: All rights and guarantees relating to taxpayers provided for in the requested Contracting State must be safeguarded.
7. Protection of the due legal process of the investigated taxpayer: The due process of the taxpayer is guaranteed as well as the speed in the exchange of information.

D. Conclusion.

The Tax Administration of our country has enrolled in the most current international tax control guidelines for operations that transcend the country’s borders. The Agreement to Avoid International Double Taxation between Argentina and the Swiss Confederation is located along these lines, specifically with regard to the exchange of information of tax interest.

These lines are only concerned, as indicated at the beginning, of specifying the entry into force of the norm and the scope of the exchange of information with a country with a long banking tradition where banking secrecy has been one of the relevant banners of such a system.

The Convention, in its Art. 25 and even more so in the Additional Protocol, try to confer certainty to legal operators about the scope of this issue, which is not exempt from interest and sensitivity in the tax matters of all countries and ours in particular.

Alejandro C. Altamirano