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Cablegate: Argentina Response to Airline Crew Tax Proposal

VZCZCXYZ0000
RR RUEHWEB

DE RUEHBU #1557/01 2220859
ZNR UUUUU ZZH
R 100859Z AUG 07
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC 8876
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/USDOC WASHINGTON DC
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC
RHMFIUU/HQ USSOUTHCOM MIAMI FL
RUEHAC/AMEMBASSY ASUNCION 6433
RUEHMN/AMEMBASSY MONTEVIDEO 6645
RUEHBR/AMEMBASSY BRASILIA 6291
RUEHSG/AMEMBASSY SANTIAGO 0656
RUEHPE/AMEMBASSY LIMA 2134
RUEHBO/AMEMBASSY BOGOTA 1613
RUEHLP/AMEMBASSY LA PAZ AUG CARACAS 1399

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

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