New key precedent: services rendered abroad but used in Argentina fall outside the scope of Income Tax – Barreiro

Important precedent: services rendered outside Argentina but used in the country – their non-taxability for Income Tax purposes

The National Tax Court (Chamber B) has issued a particularly significant ruling for all companies that outsource operational services abroad. In the case of DirectTV Argentina S.A., ARCA made an ex officio assessment of Income Tax withholdings on payments to foreign beneficiaries, regarding payments made to two Colombian companies (Telecenter Panamericana LTDA and Multienlace S.A.S.) for call center services between February and December 2016.

1. The Tax Authority’s position

The then-AFIP argued that:

The income was Argentine-source because the service was “economically used” in the country.
The call center operated connected to infrastructure located in Argentina.
The service directly contributed to the generation of DirectTV’s revenues in Argentina.

On that basis, it concluded that DirectTV should have acted as a withholding agent for Income Tax (applying the 31.5% rate).

2. The Tax Court’s analysis: the service was rendered in Colombia

The National Tax Court revoked the ex officio assessment after a detailed analysis showing that:

The staff of the service providers was entirely located in Colombia.
The relevant infrastructure (telephone plant, equipment, computers) was also located in Colombia.
The service was purely operational, with no technical advice or transfer of know-how.
Calls were routed from Argentina, but the actual performance of the service took place abroad.
The income was treated as Colombian-source income and was taxed in that country.

3. Legal framework: sections 5, 13 and 124 of the Income Tax Law

The Court reaffirmed classic principles:

Section 5 ITL: for services, source rules require that the activity be carried out in Argentina.
Section 12 (now 13): services rendered abroad are considered Argentine-source only when they involve technical advice.
In the absence of such advice, the general rule applies again.
Section 127 (now 124): if the act or activity is carried out abroad, the income is foreign-source.

4. Significance of the precedent

This ruling is key for several reasons:

a. It reaffirms limits against expansive interpretations of “economic use”

In recent years, AFIP had interpreted that if there was use in Argentina, there was also local source. The Court reminds that the “economic use” concept in section 5 applies only to goods, not to services.

b. It provides predictability

The Court reinforces that mere connection, supervision or routing from Argentina does not convert the service into a local one.

c. It affects multiple industries

This precedent is relevant for companies with:

offshore call centers
outsourced operational services
back-office abroad
low-complexity technical support
automatic or semi-automatic services
outsourced customer care or loyalty processes

d. It confirms that section 13 ITL is a true exception

Only when the service from abroad includes technical advice does the law presume Argentine-source income. That was not the case here.

5. Conclusion

The Court concluded that the service provided from Colombia was operational, not technical, and was performed entirely outside Argentina. Therefore, the payments corresponded to foreign-source income, not subject to local withholding.

This clear and well-reasoned precedent sets an important line of analysis for future controversies where the “location of the service” and the “source of the income” become critical points of discussion.