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Argentina Ratifies the OECD Multilateral Instrument (MLI): Key Changes to Double Taxation Treaties

On May 28, 2025, the National Executive Branch enacted and published Law No. 27,788 in the Official Gazette, thereby formally approving the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (commonly referred to as the Multilateral Instrument, the “MLI”), signed in Paris, France, on November 24, 2016.

Regarding the legislative process that led to its approval, it is worth noting that Argentina was one of the original signatories of the MLI on June 7, 2017, in alignment with its commitment to international standards on transparency and the fight against tax avoidance. The bill was submitted to the Senate in October 2024, following initial approval by the Chamber of Deputies. The National Congress gave final approval on May 7, 2025. With its enactment by the Executive on May 28, 2025, and publication in the Official Gazette, the constitutional process required for the MLI’s incorporation into domestic law was completed, granting it full legal effect in Argentina.

Pursuant to Article 34 of the MLI, the Convention will enter into force at the international level, and with respect to Argentina, on the first day of the month following the expiration of a three-month period from the date the country deposits its instrument of ratification with the OECD Secretariat.

Once effective, the provisions of the MLI will apply in accordance with Article 35 as follows:

• With respect to withholding taxes (e.g., on dividends, interest, and royalties), the MLI will apply from January 1 of the calendar year following the latest date on which the MLI enters into force for both Contracting Jurisdictions. If such date occurs during 2025, the provisions will become applicable as of January 1, 2026.

• With respect to other taxes (such as income taxes assessed by means of tax returns, e.g., Corporate Income Tax), the MLI will apply to taxable periods beginning six months after the latest date of entry into force between the two jurisdictions, unless an alternative date is notified in accordance with Article 35.

Domestic Implications of the MLI

Argentina’s adoption of the MLI is part of a global initiative led by over 100 jurisdictions under the OECD/G20 BEPS Project, aimed at rapidly and consistently updating the network of international tax treaties and minimizing opportunities for tax avoidance by multinational groups.

The MLI is designed to counteract aggressive tax planning strategies that erode tax bases and shift profits artificially to low or no-tax jurisdictions. Its implementation enables Argentina to simultaneously update its existing Double Tax Treaties (“DTTs”) without having to renegotiate each agreement bilaterally.

The MLI will modify Argentina’s DTTs with jurisdictions such as Spain, Italy, Mexico, the Netherlands, Switzerland, and the United Kingdom, among others, in order to curb treaty abuse by arrangements lacking economic substance, consistent with Argentina’s international commitments to tax transparency and anti-avoidance measures.

Key Anti-Abuse Provision: Principal Purpose Test (PPT)

One of the main reforms introduced by the MLI is the Principal Purpose Test (“PPT”).

The PPT provides that treaty benefits—such as reduced withholding tax rates—may be denied if, considering all facts and circumstances, it is reasonable to conclude that one of the principal purposes of an arrangement or transaction was to obtain that tax benefit, unless it is established that granting such benefit would be consistent with the object and purpose of the treaty.

The MLI also amends the preambles of Covered Tax Agreements to reinforce their anti-abuse objective. Article 6 mandates the inclusion of the following text:

"Intending to eliminate double taxation with respect to the taxes covered by this agreement without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance (including through treaty-shopping arrangements aimed at obtaining reliefs provided in this agreement for the indirect benefit of residents of third jurisdictions)".

Such wording will be added in the absence of an equivalent preamble or will replace an existing one that does not sufficiently express this objective. Jurisdictions that already include a substantially equivalent preamble may opt out of this modification.

Practical Implications of the PPT

• The PPT will apply automatically unless a jurisdiction makes a reservation (which Argentina has not done).
• It does not require proof of fraud or tax evasion—only the existence of a principal tax purpose.
• Tax authorities may deny treaty benefits where aggressive tax planning or artificial structures without substance are detected.
• The burden of proof shifts to the taxpayer, who must demonstrate valid economic reasons for cross-border transactions.

Alternative to the PPT: Simplified Limitation on Benefits (S-LOB)

In addition to the PPT, the MLI allows jurisdictions to apply a supplementary rule known as the Simplified Limitation on Benefits (“S-LOB”).

This provision restricts treaty benefits to specific “qualified residents,” including:

• Individuals;
• Governments, political subdivisions, local authorities, and their wholly owned agencies or instrumentalities;
• Companies whose shares are regularly traded on recognised stock exchanges;
• Pension funds and non-profit entities that are regulated and recognized as such by the contracting jurisdictions.

However, Argentina has not yet adopted the S-LOB clause, making the PPT the sole anti-abuse rule applicable under the MLI.

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Please contact us at tax@tavarone.com should you require further information or wish to assess the implications of the MLI on specific structures or transactions.

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