|
By
Marshall J. Langer, London, UK
The South American Continent comprises 12 countries and French Guiana, an overseas department of the French Republic. The countries are (alphabetically) Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana (formerly British Guiana), Paraguay, Peru, Suriname (formerly Dutch Guiana), Uruguay and Venezuela. Of these countries, Argentina, Brazil, Chile, Ecuador and Venezuela have the most active tax treaty programmes and each of them has a significant number of tax treaties in force. Four South American countries – Bolivia, Colombia, Ecuador and Peru – are currently parties to the multilateral Andean Community tax treaty. French Guiana, as an overseas department of France, is covered by French tax treaties.
The Andean Community was previously called the Andean Group. It has a multilateral income tax treaty that currently covers Bolivia, Colombia, Ecuador and Peru. Venezuela was also a signatory to the 2004 Andean Community income tax treaty but it withdrew from the Andean Community in 2006. Venezuela may now seek to negotiate bilateral tax treaties with the other members of the Community.
Argentina has 18 tax treaties in force; two other treaties have been signed but have not entered into force. It has 13 tax treaties in force with European countries – Austria, Belgium, Denmark, Finland, France, Germany, Italy, the Netherlands, Norway, Spain, Sweden, Switzerland, and the UK. Four of these have been amended by subsequent protocols, including those with Germany and Italy. Argentina’s 1979 treaty with France was amended by a 2001 protocol that took effect in January 2008. Its 2006 protocol with Switzerland is not yet in force. Its 2001 treaty with Russia has not yet entered into force.
Argentina also has tax treaties in force with Australia, Bolivia, Brazil, Canada and Chile. Its 1976 treaty with Chile was amended by a 2003 protocol that applies provisionally. Argentina signed a proposed tax treaty with the US in 1981. At that time, Argentina had a territorial tax system, that is, it taxed only income from Argentine sources. The US Senate consented to ratification of the treaty later that year, subject to two reservations and an understanding that were never approved by Argentina. It is obvious that this proposed treaty will never enter into force, at least not without substantial further revision.
Bolivia is one of four countries covered by the multilateral Andean Community treaty that also applies in Colombia, Ecuador and Peru. Bolivia also has tax treaties in force with six other countries – Argentina, France, Germany, Spain, Sweden, and the UK.
Brazil has 28 treaties in force, more than any other South American country. It has also signed tax treaties with a few other countries that are not in force, and one Brazilian tax treaty – with Germany – was terminated in 2006. Like Argentina, more than half of Brazil’s tax treaties are with European countries. These are in force with Austria, Belgium, Denmark, Finland, France, Hungary, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, and Ukraine. In addition, Brazil’s 1986 treaty with Czechoslovakia now applies in both the Czech Republic and the Slovak Republic. Brazil’s treaty with Belgium was amended by a 2002 protocol that took effect in January 2008. Its 2004 treaty with Russia was recently approved by Brazil’s Congress but it is not yet in force.
Brazil also has tax treaties in effect with Argentina, Chile and Ecuador in South America, as well as recent treaties with Paraguay, Peru and Venezuela that are not yet in force. In North America, it has treaties in force with both Canada and Mexico. Its proposed 1967 tax treaty with the US never entered into force and never will. Brazil did sign a TIEA (tax information exchange agreement) with the US in 2007 that is not yet in force but is expected to take effect in due course. A Joint Declaration attached to the Brazil-US TIEA noted that these two countries have a strong and important bilateral economic relationship that the business community has long complained requires a tax treaty, but that the governments diverge on a number of important areas of tax treaty policy. The governments stated that they hope that the signing of the TIEA would be the first step leading to a full tax treaty. Some optimists believe that the TIEA may lead to a new treaty with the US that can be successfully ratified by both countries. On this issue, I remain a pessimist.
Elsewhere in the world, Brazil has tax treaties in force with China (PRC), India, Israel, Japan, Korea (ROK), the Philippines, and South Africa.
Chile had relatively few treaties until 2000; almost all of its 16 treaties have entered into force during the 21st century. Several other recent treaties are not yet in force. In South America, Chile has tax treaties in force with Argentina, Brazil and Peru. Chile’s only very old treaty, with neighbouring Argentina, has been amended by a 2003 protocol that applies provisionally. Chile’s recently signed treaties with Colombia and Paraguay are not yet in force. In North America, it has tax treaties with Canada and Mexico, but none yet with the US.
In Europe, Chile has tax treaties in effect with Croatia, Denmark, France, Norway, Poland, Spain, Sweden, and the UK. Chile and Belgium signed a tax treaty in December 2007 and Chile also has pending treaties with Ireland, Portugal and Russia. Elsewhere, Chile has tax treaties with Korea (ROK) and New Zealand, and pending recent treaties with Malaysia and Thailand. The proposed treaty with Malaysia would deny treaty benefits to Labuan offshore companies.
As already noted above, Colombia is a party to the multilateral Andean Community treaty with its neighbours, Bolivia, Ecuador and Peru. It has no other tax treaties in force, but it has pending recently signed treaties with Chile and Spain. It also signed a 2001 TIEA with the US that requires ratification by Colombia’s Congress and is not yet in force. The proposed TIEA replaced an earlier 1993 proposed TIEA that never entered into effect.
Ecuador is another party to the multilateral Andean Community treaty which is in effect with its neighbours, Bolivia, Colombia and Peru. It also has 11 other tax treaties in force, seven of which are with European countries. These are with Belgium, France, Germany, Italy, Romania, Spain, and Switzerland. Its other four tax treaties are with Western Hemisphere countries – Brazil, Canada, Chile, and Mexico.
Guyana (formerly British Guiana) is a party to the CARICOM (Caribbean Community) treaty which also covers ten Caribbean countries – Antigua and Barbuda, Barbados, Belize, Dominica, Grenada, Jamaica, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, and Trinidad and Tobago. Guyana also has tax treaties in force with Canada and the United Kingdom and a TIEA with the US.
Paraguay has no tax treaties in force. It has signed a 2005 tax treaty with Chile that is not yet in force. A 2000 tax treaty with Brazil is not yet in force either. Paraguay had also signed a 1994 tax treaty with Taiwan (ROC) that never entered into force.
Peru is another party to the multilateral Andean Community treaty which is in effect with its neighbours, Bolivia, Colombia and Ecuador. It also has two other tax treaties in force, with Canada and Chile. Peru also signed treaties with Brazil and Spain in 2006 that are not yet in force. An old 1966 Peruvian tax treaty with Sweden was terminated in 2007. Peru has a TIEA in force with the US.
Suriname (formerly Dutch Guiana) has only one tax treaty in force – with the Netherlands. It applies only to the Netherlands in Europe but provides that it could be extended to the Netherlands Antilles. Suriname has also signed a 2003 tax treaty with another former Dutch colony, Indonesia, but that treaty is not yet in force.
Uruguay has only two tax treaties in force – with Germany and Hungary. A 1991 tax treaty between Uruguay and Poland has not entered into force.
Venezuela has 23 tax treaties in force and several others pending. Until a few years ago, Venezuela taxed only income from sources within the country; it now taxes income on a worldwide basis. It has 14 tax treaties in force with European countries – Austria, Belgium, the Czech Republic, Denmark, France, Germany, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the UK. A 2003 treaty with Russia is not yet in force. In the Western Hemisphere, Venezuela has tax treaties in force with Barbados, Canada, Cuba, Trinidad and Tobago and the US, and pending tax treaties not yet in force with Brazil and Mexico. Elsewhere in the world, Venezuela has tax treaties in effect with China (PRC), Indonesia, Iran and Kuwait, and pending treaties with Korea (ROK), Malaysia and Qatar that are not yet in force. Venezuela’s tax treaty programme is active and its treaties mentioned above with Austria and Iran took effect in January 2008. Venezuela’s pending 2006 tax treaty with Malaysia has been approved by Venezuela’s parliament. The treaty with Malaysia does not appear to deny treaty benefits to Labuan offshore companies. Both countries have approved ratification of the 2006 tax treaty between Venezuela and Qatar and it should enter into force shortly.
The Falkland Islands is a British dependent territory off the coast of South America whose territory has also been claimed by Argentina. It has only one treaty currently in effect, a 1997 tax arrangement with the UK. The Falkland Islands used to be a party to extensions of UK treaties with several other countries. The 1954 extension of the 1950 Denmark-UK treaty was terminated in 1998. The 1963 extension of the 1954 Switzerland-UK treaty was terminated in 1997. The 1958 extension of the 1945 US-UK treaty to the Falkland Islands was terminated by the US as of the end of 1983.
Finally, French Guiana, as an overseas department of France, is covered by all or substantially all French tax treaties.
Please send your comments to marshall@mjlanger.com with a copy to editorial@offshoreinvestment.com.
|
