Argentina Response to Airline Crew Tax Proposal

UNCLAS BUENOS AIRES 001557 SIPDIS SIPDIS EEB FOR MEGAN WALKLET-TIGHE TRANSPORTATION FOR BRIAN HEDBERG PASS NSC FOR DPRICE AND MSMART PASS FED BOARD OF GOVERNORS FOR PATRICE ROBITAILLE TREASURY FOR LTRAN AND MMALLOY USDOC FOR 4322/ITA/MAC/OLAC/PEACHER,EALFORD US SOUTHCOM FOR POLAD E.O. 12958: N/A TAGS: EAIR ECON KTIA EINV ETRD AR SUBJECT: Argentina Response to Airline Crew Tax Proposal Ref: State 75577 -------------- Summary -------------- ¶1. (U) Summary: On June 11, Post delivered via diplomatic note the reftel message to the Ministry of Foreign Affairs regarding the possibility of the GOA signing a multilateral Convention on Reciprocal Tax Exemption of Airline Crews. In response, on July 20, the MFA sent a diplomatic note proposing instead to approach this issue bilaterally, by updating an existing bilateral 1987 agreement on double taxation of aircraft crew. End summary. -------------- GoA Prefers Bilateral Approach -------------- ¶2. (U) MFA contacts say it is easier, more practical, and less time-consuming for them to resolve these tax issues bilaterally. They have no problems with the proposed USG multilateral document text as proposed if it could be made bilateral. The GOA also indicated that it does not have other such reciprocal tax exemption agreements in place, and sees our proposal as a new and complicated approach. Finally, the GOA said that it has two specific issues that it wants to discuss, which it indicates could be better done bilaterally: deciding what constitutes the residence of the flight crew, and the tax treatment of aircraft leasing companies that make both domestic and international flights. ¶3. (U) The GOA expressed its willingness to meet in Washington or Buenos Aires to finalize such an agreement. The text of the GOA note follows. -------------- GoA Diplomatic Note (Informal Translation) -------------- ¶4. (U) (Complimentary opening) The Bureaus of North American Affairs and Hemispheric Affairs of the Ministry of Foreign Affairs replies Diplomatic Note Number 452, June 11, 2007, in which the U.S. Embassy proposes to sign a Convention on reciprocal tax exemptions for aircraft crews. To that end, the National Tax Bureau within the Ministry of Economy proposes to amend the "Agreement to Exchange Notes Between the Government of Argentina and the Government of the United States Modifying the Agreement to Avoid the Double Taxation of Income Generated from Ships and Aircraft Operations, of July 20, 1950," negotiated in December 1987, for the purpose of incorporating the provisions of interest for both countries on that bilateral agreement. With respect to the proposal to avoid taxation on aircraft crew rendering services for international transportation, the National Tax Bureau notes a different approach between the agreement proposed in the Diplomatic Note number 452 (derived from Secstate 75577) and the agreement with other countries signed by Argentina. The former proposes to use the criteria of residence of the crew, whereas the latter attributes the rents/income of the crew to the state where the international transportation company pays its taxes. Additionally, it is of interest to Argentina to amend the way the current agreement grants to the aircraft leasing operators, for the cases in which the lessee company (renter) uses the aircraft for both international transportation as well as domestic flights. Given the above, the Ministry of Foreign Affairs proposes to hold a meeting with the corresponding authorities of both countries to discuss the amendments to the mentioned bilateral Agreement, in a place and time to be determined in common agreement. (Complimentary closing) WAYNE