Doing Business in Argentina - Deloitte
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Brochure / report title goes here | Section title goes here Contents I. II. III. IV. Main Economic Doing Business Legal Taxation Variables in Argentina System Page 24 Page o4 Page 08 Page 18 Contacts Page 30 03
Brochure / report Doing Business title goes inSection here | Argentina May 2021 title goes here GDP 2020: 382.7 million USD GDP Growth (Annual % change, original figures) 2019 2020 2021P 2022P Position in the world 31/193 -2.1 -9.9 6.5 2.7 Macroeconomic Environment (figures at the end of 2020) Benchmark Unemployment Exchange GDP per capita Inflation Population FDI rate rate rate 8,433 38.0 36.1 11.0 84.15 45.4 3.4 Million Billion USD % Annual % % ARS/USD people USD Fiscal Primary Government Current International Reserves Trade balance, balance, balance, debt, account, Reserves % of external % of GDP % of GDP % of GDP % of GDP % of GDP % of GDP public debt -8.5 -6.5 104.7 0.8 4.0 10.2 23.1 % % % % % % % 05
Doing Business in Argentina May 2021 Competitiveness Position in the world 83/141 (WEF, 2019) Ease of Doing Business Position in the world 126/190 (WB, 2020) Corruption Perception Index Position in the world 78/179 (TI, 2020) Source: WB, WEF, TI and INDEC. 06
Brochure / report Doing title goes Business here | inSection Argentina title goes May 2021 here Foreign trade (major trading goods, 2020) Foreign trade (major trading goods, 2020) Product Value (million USD) Share Country Value (million USD) Share Exports 54,884 Exports 54,884 Vegetable products 14,589 26.6% Brazil 7,956 14.5% Food and beverages 11,035 20.1% China 5,242 9.6% Products of animal origin 6,272 11.4% United States 3,267 6.0% Oils and fats 4,806 8.8% Chile 2,887 5.3% Transportation material 3,937 7.2% Vietnam 2,852 5.2% Others 14,246 26.0% Others 32,680 59.5% Imports 42,356 Imports 42,356 Industrial inputs 16,765 39.6% China 8,656 20.4% Spare parts of capital goods 7,592 17.9% Brazil 8,659 20.4% Capital goods 7,374 17.4% United States 4,366 10.3% Fuels 2,640 6.2% Paraguay 2,218 5.2% Spare parts of 1,614 3.8% Germany 1,988 4.7% transportaton equipment Others 6,371 15.0% Others 16,479 38.9% Source: World Bank, World Economic Forum (WEF), Transparency International (TI) e Instituto Nacional de Estadísticas y Censos (INDEC). Plant related products represent the largest share of exports, while industrial supplies account for the largest share of imports. Brazil and China are Argentina’s major trading partners 07
Brochure / report Doing title goes Business here | inSection Argentina title goes May 2021 here General Profile Argentina´s population is largely young. Argentina is As a matter of fact, 55% of its inhabitants As regards the size of the economy, are younger than 35 years old. As regards the third largest Argentina’s GDP amounted to USD 382.7 bn in 2020, and it is the third largest education, almost 80% of its inhabitants make it to the secondary school. economy in economy in Latin America and 31st in the world ranking. GDP per capita amounted As regards higher and university education, the rates hover around 45%. Latin America to USD 8,433 per inhabitant. As a result, the population between 25 and 59 years old currently has, on average, and 31st in the Argentina has comparative advantages 11,2 years of schooling, and as such is world ranking in sectors such as agro-business and one of the highest rates in Latin America technological services, with a high (second only to Chile). penetration rate in major international markets. Moreover, the country has Regarding English language skills, Vaca Muerta, the second largest shale Argentine ranks 25th (out of 100 gas reserve in the world, and the fourth countries) in the world in the “EF English largest shale oil reserve. Another highlight Proficiency Index”, which measures the is the outstanding quality of its labor force. English language average quality of its population. According to this measure, As regards population, it has 45,4 million Argentine ranks first in all Latin America. inhabitants, the fourth largest population in Latin America, with a 32nd position in Argentina currently has 19 international the global population ranking. A large trade agreements in force. Twelve of them portion of its inhabitants (around were executed thanks to Argentine being 14.3 million) live in the Buenos Aires part of the Mercosur (the trading block metropolitan area. This accounts for 32% formed by Argentina, Brazil, Uruguay and of the country’s inhabitants in just 0.5% of Paraguay), six of them were executed the country’s total area. The other more bilaterally and one upon entry into the densely populated areas are the rest of World Trade Organization (WTO). the province of Buenos Aire (6.3 million), Córdoba (with 3.5 million inhabitants), Santa Fe (3.5 million) and Mendoza (2,0 million). 09
Doing Business in Argentina May 2021 Political Regime Constitution Federal Branches of Power Rule of Law The National Constitution of the The Executive Power is led by a The Rule of Law in Argentina is most Argentine Republic is the supreme citizen holding the title of President clearly evidenced in the State’s law and prevails over the rest of of the Argentine Nation. He/she is separation of powers, the recognition the country’s laws which, therefore, the supreme head of the country, the of human rights and the system of cannot contradict it. International chief of government and is politically checks and balances that balances treaties signed by the Argentine State responsible for the country’s overall and limits the authority of each of the regarding human rights rank equally administration, and issues the three powers, as provided for in the with the Constitution. The National instructions and regulations necessary National Constitution. Constitution sets forth the essential for the enforcement of the Nation’s rights and guarantees of all those laws, taking care not to alter their spirit As a consequence, unlike the who inhabit Argentina and the State’s with regulatory exceptions. amendment of ordinary laws, division into different branch powers. constitutional reforms call for a The Legislative Power is represented special procedure and special The purpose of the National by the National Congress, which is majorities. Constitution is to form a national composed of two Houses: the union, guarantee justice, secure House of Deputies and the Senate. domestic peace, provide for the common The Congress exercises its legislative defense, promote the general welfare functions by deliberating and enacting and secure the benefits of freedom laws upon considering the common to all the country’s inhabitants. well of all inhabitants. The National Argentina adopts the federal republican Constitution establishes the Congress’ Argentina adopts the federal prerogatives, the matters over which republican representative form of government and the provinces retain it may and must legislate as well as its limitations. In addition to law-making, representative form all of the power not delegated to the federal government by the National the Congress exercises control over the Executive Power. of government Constitution. As a consequence, each province has its own Constitution Finally, the Judicial Power is composed which cannot contradict any of the of the Supreme Court of Justice and rights, guarantees and duties established such other lower courts (courts of in the National Constitution. appeals, oral trial courts, lower court judges, etc.) established by the National Congress. The Supreme Court and the country’s lower courts are in charge of hearing and deciding on all litigations concerning matters ruled by the Constitution and the country’s laws. 10
Brochure / report Doing title goes Business here | inSection Argentina title goes May 2021 here Economic Structure Chart 1 GDP Breakdown by Sector GDP is the sum of all goods and services (million of USD and % contribution) produced by a country and the most important measure to estimate the GDP 2020 Value % GDP production capacity of any economy. The three major economic sectors of Argentina’s GDP are: Total 382,549 Primary sector: extractive agriculture, cattle raising, forestry development, Primary 26,151 6.8 hunting and fishing. Secondary sector: Industrial Secondary 77,258 20.2 transformation, mining, construction and manufacturing. Manufacturing 53,022 13.9 Tertiary sector: Services and wholesale and retail consumption. Mining 11,843 3.1 In Argentina, the tertiary sector is the major component of the GDP (with a Construction 12,392 3.2 56.6% share in 2020). Six percent of the labor force works in the agricultural sector; 26% in the industrial sector; and 68% in the tertiary sector. Tertiary 216,565 56.6 Wholesale and Retail Sector 56,790 14.8 Real Estate Sector 38,434 10.0 The service sector is the largest Education and Health 36,958 9.7 component of Public Administration and Defense 24,292 6.4 GDP and the most important in terms Transportation and Communication 19,926 5.2 of employment Financial Services 17,220 4.5 Tourist Services 4,360 1.1 Other Tertiary 18,586 4.9 Taxes 62,574 16.4 Source: INDEC. The item “Other Tertiary Sectors” includes electricity, gas and water; Other activities of community, social and personal services; Private homes with household services. To calculate the nominal benchmark Exchange rate we used Communication “A” (wholesale) reported by the BCRA AR$/USD average for 2020. 11
Doing Business in Argentina May 2021 One of Argentina’s Manufacturing industry One of Argentina’s advantages is its Given its comparative advantages in competitive relation between the quality advantages is the the primary and agribusiness sector, (in terms of average years of education competitive relation Argentina has become a major food producer (one of the ten largest producers and English level) of its labor force and the labor cost for the companies. Currently, between the quality and exporters of food in the world). Production of chemicals also has a the minimum salary is 20,587 Pesos per month (equal to 230 USD at the official (in terms of years relevant role within the manufacturing sector in the country. exchange rate), one of the lowest in Latin America (only higher than Venezuela, of schooling and Brazil and Mexico). Food and beverages is the most important English level) of its sector at the industrial level, with a 32% labor force and share, followed by chemical production, basic metals, machinery and equipment. the labor cost for companies Figure 1 Manufacturing industries (Contribution to total output, %) Food and beverages Chemicals 19% Basic metals 32% Machinery & equipment Rubber & Plastic 4% Non-metal minerals 4% Metal products 4% Paper products 5% Motor Vehicles Others 5% 15% 6% 6% Source: INDEC. Data at the end of 2020. 12
Brochure / report Doing title goes Business here | inSection Argentina title goes May 2021 here FX inflows into the Foreign Direct Investment (FDI) Finally, USD receipts generated by country experienced a decline in 2020, in line tourism (international travelers) have also with the developments all over the world, increased over the past years, except Exports of primary and agribusiness as a result of the outbreak of COVID-19. in 2020, when the pandemic brought products are the main source of FX Thus, in 2020, it represented nearly 1.0% this sector to a halt all over the world, receipts into Argentina (which of GDP, below the 1.5% reached during given the closing of borders and mobility represented 9.9% of GDP in 2020). the previous year and the 2.3% of 2018. restrictions. In the medium term, the wide The country’s comparative advantages, array of tourist offers in the country (not coupled with strong investments in The exports of knowledge-based services only the City of Buenos Aires, but also technology made by the sector, led to a have gained ground over the past years in the northern and southern regions of the significant increase in agribusiness output, terms of generating FX receipts, reaching country), added to a Peso that has sharply thus generating larger volumes available 1.6% of the GDP in 2020. depreciated against the USD, will continue for exports. to be attractive to large numbers of The country’s high quality human resources, international tourists towards Argentina. Exports of manufactured products also mainly in relation to the development of play a major role in generating USD for the software and disruptive technologies (some country, as they represented a 3.5% of the largest market cap tech companies of of GDP in 2020. the region were born in Argentina) and an improved regulatory framework created the conditions for tech exports to take off over the past years. Chart 2 Major Sources of USD Receipts in Argentina (Millon USD) FDI Technological Services Energy Tourism 21.000 Agribusiness (right axis) Manufacturing (right axis) 50.000 18.000 45.000 40.000 15.000 35.000 12.000 30.000 9.000 25.000 6.000 20.000 3.000 15.000 0 10.000 2020 2017 2018 2019 2015 2016 2013 2014 2011 2012 2009 2010 2006 2007 2008 Note: All segments include solely USD receipts into the country. Oil and manufacturing are stated in export USD; tourism includes FX receipts derived from international travelers; FDI represents USD receipts into the country. Source: INDEC, BCRA. 13
Doing Business in Argentina May 2021 Investment & Foreign Chart 2 Trade FDI Breakdown, by country (Billion USD, aggregate 2015 - 2019) Foreign Direct Investment comes mainly from the following sources: • Spain: 26% • USA: 19% • Netherlands: 8% Total Spain USA Netherlands France • France: 4% 44.7 11.5 8.5 3.6 1.8 Most foreign investments into Argentina are concentrated in the financial sector 26% 19% 8% 4% (17% between 2015 and 2019). It is followed by the oil sector (13%), where Source: INDEC, Cepal and BBVA. the discovery of Vaca Muerta oil field has contributed to the recent rise in foreign investments into the sector. In addition, mining has managed to be among the sectors that receive more FDI, with a 13% share of aggregate FDI between Graph 3 2015 and 2019. Main investment sectors (Billion USD, aggregate 2015 - 2019) Most foreign investments into Financial Oil Mining Car Manufacturing Services Argentina are 7.8 5.9 5.7 5.4 concentrated in the financial sector 17% 13% 13% 12% Source: INDEC, Cepal and BBVA. Monetary and fiscal policy Monetary policy is not expressly inflation On the other hand, the country’s FX targeted, nor does it set interest rate or regime is flexible, with capital controls. The Argentine Central Bank (BCRA) is monetary aggregate targets. However, independent from the Executive Power the current Management of the monetary As regards the fiscal policy, Argentina and its mandate includes promoting authority (who took office in December has a “Stand By” agreement in force monetary and financial stability, 2019) defined its medium-term goal as a with the IMF, which defined the public employment and economic development sustainable balance between these three account goals in 2018 and 2019. Then, with social equity. variables, so as to boost economic activity since Alberto Fernandez took office in and credit, under conditions of nominal December 2019, the national government stability. has been negotiating a new relationship with the IMF and other foreign multilateral organizations. 14
Brochure / report Doing title goes Business here | inSection Argentina title goes May 2021 here Ease of Doing Graphic 3 Business Historic development of Argentina’s position in the Doing Business Ranking The Doing Business report prepared by the World Bank measures how easy it is to do 133 business in Argentina, based on several variables. Currently, the country ranks 126 out of 190 countries assessed in 2020, with 126 126 126 124 124 a 59-point score. 121 119 As shown in the following chart, the 118 119 117 116 country gets its best rating in “Starting a 115 113 113 business”, followed by “Electric Power” and “Cross-Border Trade”. On the other hand, 112 109 the worst rated items include “Discharge from Bankruptcy”, “Tax Payment” and “Access to Credit”. 105 Pursuant to the World Bank, over the 98 past two years Argentina has improved 2018 2019 2020 2016 2017 2014 2015 2012 2013 2008 2009 2010 2011 management of construction permits, cross-border trade and contract performance. Source: Doing Business, World Bank, 2020. Chart 4 Doing Business en Argentina (Argentine Ranking in the World —general index and variables—and score) Argentina Ranking 126 141 155 111 123 104 61 170 119 97 111 Rating 80.4 70.0 67.1 62.0 * The ranking 59.0 56.4 56.7 57.5 classifies Argentina against 190 50.0 49.3 other countries (the nearer to 1, the better, and 40.0 vice-versa). Scores range from 1 to 100 points, and they measure each of the variables (the nearer to 1, the better, and vice-versa). Starting a Dealing with Getting electricity Registering Total business construction permits property Getting credit Protecting minority investors Paying taxes Trading across borders Enforcing contracts Resolving insolvency Source: Doing Business, World Bank, 2020. 15
Doing Business in Argentina May 2021 Current Economy Chart 5 GDP Growth (annual % change) and contribution of each component of aggregate demand (in percentage points) 15.0 15.0% 10.0 10.0% Contribution, in percentage points 5.0 5.0% Annual % change 0.0 0.0% - 5.0 -5.0% Private Consumption -10.0 Government Consumption -10.0% Investment -15.0 Net Exports -15.0% GDP (right axis) -20.0 -20.0% 2020 2017 2018 2019 2014 2015 2016 2011 2012 2013 2008 2009 2010 2005 2006 2007 2003 2004 2001 2002 Source: INDEC. At the end of 2020, private consumption Considering the historic volatility that has The major guidelines soughtby the accounted for 69% of GDP and 57% of characterized Argentina, in terms of its tax government are the following: the country’s aggregate demand. On its situation and government debt levels, the • Principal reduction, measured part, exports representend mearly 17% National Government is currently working in relation to GDP (today 105%, of demand, even though imports made a to reach a sustainable public debt, seeking although considering only the slightly higher contribution, and thus a medium/long term solution to this issue. private sector and international the net trade balance was negative. This is vital for Argentina’s current and future organizations, the ratio declines to Gross fixed capital investment accounted economic development. In this respect, 64%), bringing it closer to figures for 14% of aggregate demand and in August 2020, Argentina managed to of sounder emerging countries government consumption totalled 12%. restructure its dollar denominated debt with (around 30%/45% of the GDP). GDP has been on a downward trend the private sector (both with foreign and • A decline in annual financing since 2018 and has shown an erratic local creditors) and it is currently seeking to needs, from a high percentage development over the past eleven years, reach an agreement with the IMF and the over the past years (5%/10% of with five years of economic expansión and Paris Club. It restructures USD 65 billion in GDP) to ratios of around 3%. six of contraction, and an anual average bonds issued under NY Law, with principal growth rate of 0.1% since 2010. and interest savings worth USD 30 billion. 16
Brochure / report Doing title goes Business here | inSection Argentina title goes May 2021 here Chart 6 External Public Debt (% of GDP) 69% 48% 42% 44% 32% 24% 22% 23% 17% 17% 15% 18% 12% 11% 12% 13% 14% 2020 2018 2019 2014 2015 2016 2017 2011 2012 2013 2009 2010 2006 2007 2008 2004 2005 Source: INDEC. On the internal front, the country has Chart 7 been recording annual inflation of more Retail Inflation 54% than 20% over the past ten years, and this (average anual % change) has become a structural problem for the domestic economy. In 2020, as a result of 41% 42% business activity grounding to a halt due 39% to the outbreak of COVID-19, the freezing 34% of service rates and a gradual, though managed, rise in the official exchange rate, 25% 25% 28% 26%25% price increases have slowed to 41.0%, 24% from 53.5% on average one year before. 21% The Central Bank’s policy in 2020 14% 16% sought to stabilize the FX market. The monetary authority implemented 10%11% a policy involving a gradual increase in 4% the official exchange rate, with an annual cumulative depreciation of 39.9%, slightly above accumulated inflation of 36.1% at 2019 2020 2016 2017 2018 2013 2014 2015 2010 2011 2012 2008 2009 2004 2005 2006 2007 year-end 2020. Parallel FX markets (freely accessible) Source: INDEC. remained under stress during part of the year, with the USD in these markets more than two-folding the official exchange rate at the end of 2020, although the gap was partially narrowed by year end to around 60%. 17
Doing Business in Argentina May 2021 III. Legal system 18
Brochure / report Doing title goes Business here | inSection Argentina title goes May 2021 here Legal persons Legal persons are defined as “all entities empowered by law with the ability to acquire rights and assume obligations in order to pursue the corporate purpose established Main corporate types when organized.” (Section 141, Argentine Civil and Commercial Code) The main corporate types used in Argentina are the following: Legal persons may be state-owned or privately-owned. Privately-owned legal • Sociedad Anónima (S.A.) persons are those governed by the (Corporation) Argentina Companies Law No. 19550 and • Sociedad Anónima the Support for Entrepreneurial Activity Unipersonal (S.A.U.) Law No. 27349. The corporate types are (Simplified Corporation) the following: • Sociedad de Responsabilidad Limitada (S.R.L.) (Limited • Sociedad Anónima (Corporation) Liability Company) • Sociedad de Responsabilidad Limitada (Limited Liability Note that SRL cannot be owned by a Company) single person. • Sociedad por Acciones Simplificada (Simplified In all of these corporate types, Corporation) shareholders may be foreign persons. • Sociedad de Capital e Industria (Capital and Labor Partnership) • Sociedad Colectiva (General Partnership) • Sociedad en Comandita Simple (Limited Partnership) Companies under Section IV of the Regarding the relationships with third • Sociedad en comandita por Argentine Companies Act parties, any of the partners is able to acciones (Limited Partnership Companies under Section IV of the represent the company by showing the with Share Capital) Argentine Companies Act are those social contract to them, but the provision companies which are not incorporated of the social contract can be opposed if In addition to the companies governed according to any of the types contemplated it is proven that the third parties actually by the Business Companies Act and the in Chapter II of the ACL (e.g. corporations, knew it at the time of the beginning of the Support for Entrepreneurial Activity Law, limited liability companies), do not meet legal relationship. the Civil and Commercial Code governs the the essential requirements, or fail to following private legal persons: comply with the formalities required by The partners are jointly liable in equal the ACL. parts with respect to third parties, unless • Civil associations solidarity with the corporation or between • Foundations In the event that a social contract has them, or a different proportion, result been signed, it will be binding among the from: (i) an express provision regarding a In this respect, business companies are partners who signed it. In relation to third relationship or a set of relationships ; (ii) those that are organized for an essentially parties, the contract - and, therefore, a provision of the social contract; and (iii) economic purpose, while civil associations the existence and characteristics of the the common rules of the type of entity that and foundations have a non-profit purpose. company - can be invoked against them they claim to adopt and with respect to if it is proven that they actually knew it which substantial or formal requirements Notwithstanding the possibility of adopting at the time of contracting and it can also are not met. any of the business types mentioned be invoked by third parties against the above, foreign companies may carry company, partners and administrators. out their business in Argentina through branches or representative offices. 19
Doing Business in Argentina May 2021 Sociedad Sociedad Anónima Sociedad de Responsabilidad Anónima (S.A.) Unipersonal (S.A.U) Limitada (S.R.L.) Only one shareholder, either a natural or Shareholders / Minimum: 2 shareholders. a legal person. But, if the shareholder is a Minimum: 2 partners. Partners Maximum: unlimited. legal person, it cannot be a single-owner Maximum: 50 partners. company. There is no minimum capital required for this type of business company but it Corporate The minimum required capital is ARS The minimum required capital is ARS should be adequate to the type of activity capital 100,000 and is represented by shares. 100,000 and is represented by shares. to be developed by the company. It is represented by quotas. The shareholders’ liability is limited, The partners’ liability is limited, in principle, to the total amount of in principle, to the total amount of the The liability of the single shareholder is corporate capital. contributed and paid-in capital. limited, in principle, to the total amount of Liability and Shares carry voting and economic rights. corporate capital. Capital quotas carry voting and economic corporate capital Furthermore, there may be many different rights. There are no different classes or Contributions should be fully paid-in upon types of capital quotas. classes of shares, so that some may have organization or capital increase. certain higher voting and/or economic The value of each quotas shall be ARS 10 rights than others. each or multiples of ten. The transfer of quotas is free although The transfer of shares is free although Shares are freely transferable. Should it may be limited by specific reasons it may be limited by specific reasons the single shareholder transfer part of its set forth in the company’s bylaws. Even Transfer of shares / set forth in the corporate bylaws. Even shares, and not all, the company is to be though the transfer may be limited, it quotas though the transfer may be limited, it transformed into a different corporate cannot be banned. An amendment to the cannot be banned. Notice of transfer type which allows more than one company’s articles of organization and the should be given to the company. shareholder. subsequent registration with the Public Registry are required. The Administration rests with the Board The Administration rests with the Board The Administration rests with of Directors, which may be formed by of Directors, which is formed by one or Management, which is formed by one or one or more persons (the shareholder Administration more persons, who may or may not be may be member of the Board). The more persons, who may or may not be shareholders. The majority of the Board partners. The majority of Management majority of the Board members should members should be resident in Argentina. should be resident in Argentina. be resident in Argentina. Mandatory appointment of a statutory Appointing a statutory audit committee, audit committee, statutory auditor or statutory auditor or supervisory supervisory committee includes ,but is committee is optional and should be not limited to, the following cases: governed by the provisions of its articles of organization. (i) Where the capital stock exceeds ARS 50,000,000; However, where the SRL’s corporate The SAU is required to appoint a Statutory capital exceeds ARS 50,000,000 such an Supervision (ii) Where the company is listed in the Audit Committee, which may be formed appointment becomes mandatory. stock exchange; by one or more internal auditors. The provisions governing SAs apply Where the company does not meet the complementary to SRLs both when the conditions that require such appointment supervisory board is optional and when it and it decides not to set up such is mandatory. The attributions and duties supervisory body, the company shall of these bodies have to be the same have to appoint alternate members to the as those established for SAs, when the Board. appointment is mandatory. Variable capital (CV) None of these corporate types allows for variable capital. In some jurisdictions (such as USA) this This type of company is used by both type of business company is considered This is the corporate type most commonly natural and legal persons who intend to Purpose used in Argentina for business purposes. be single shareholders. They are used for transparent (partnership) that may allow for choosing a check-the-box modality for business purposes. tax purposes. 20
Brochure / report Doing title goes Business here | inSection Argentina title goes May 2021 here Financial sector h) To protect the rights of financial service users and preserve fair competition Financial entities are regulated by the (anti-trust powers), coordinating its Central Bank of Argentina and the Ministry actions with competent government of Finance of Argentina. authorities in this respect. Central Bank of Argentina Comisión Nacional de Valores It is a self-governed entity. Its purpose is (Argentine Securities Commission) to promote monetary stability, financial The Argentine Securities Commission (CNV stability, employment and economic in Spanish) is the official entity in charge development with social equity to the of promoting, supervising and controlling extent of its powers and within the policy capital markets throughout Argentina. The framework established by the National CNV is a self-governed entity stemming Government. from the Ministry of Finance. Its powers and duties are the following: Financial Information Unit (UIF in Spanish) a) To regulate the functioning of the The Financial Information Unit is a self- financial system and enforce the governed entity with financial autonomy Financial Entities Act as well as the in charge of analyzing, handling and rules and regulations consequently transmitting information for purposes applied; of forestalling and preventing money laundering and the financing of terrorism. b) To regulate the money supply and interest rates, as well as to regulate and channel credit; c) To act as financial agent of the National Financial entities State as well as depositary and agent for the country in its relations are regulated by the Central Bank of to international monetary, bank and financial institutions of which the country is a member; to have an active role in international integration Argentina and the and cooperation; Ministry of Finance d) To build up and manage its gold and of Argentina foreign currency reserves and other external assets; e) To contribute to a good functioning of capital markets; f) To enforce FX policy in accordance with the laws enacted by the Argentine Congress; g) To the extent of its powers, to regulate the payment systems, clearing and settlement houses, fund remittance companies and armored money transportation services, as well as any other activity related to the financial and FX activities; 21
Doing Business in Argentina May 2021 PPP contracts Infrastructure The main laws that govern federal public procurement activities and public works are entered into Public infrastructure projects may be include Executive Order delegated by between National performed through contracts granted by Congress No. 1023/2001 (National State the National State, private investments Procurement Regime); Executive Order Public Sector entities and public-private partnerships (PPPs). As regards contracts with the State, the No. 436/2000 (Regulation on Acquisition, Sale and Procurement of Goods and and bodies, on procurement procedure is subject to a set of rules and parameters so that the Services by the National State); Act No. 13.064 (Public Works); Executive the one hand, and State may comply most adequately with its Order No. 1818/2006 (Public Procurement inherent functions and, at the same time, E-System); Executive Order No. 1545/1994 privately or publicly manage public resources efficiently and (Creation of the New National held companies, with transparency. Procurement Office.) and Act No. 27.328 (Public-Private Partnership Agreement). on the other hand, PPP contracts are entered into between National Public Sector entities and for the purpose bodies, on the one hand, and privately or publicly held companies, on the other Special Investment of developing one hand, for the purpose of developing Vehicles one or more design, construction, or more design, expansion, improvement, maintenance In Argentina, there are several mechanisms and ways to implement investments, such as: construction, works, delivery of equipment and goods, development, operation and financing expansion, activities. It is an alternative method to the public works contracts and public • • Joint-venture agreements Partnership contracts / business improvement, works concession because, under PPP contracts, there is a distribution of • ventures Capital contributions maintenance risks between the State and the private • Trusts i) Financial Trusts contractor who assumes the responsibility works, delivery of for securing a substantial part of the ii) Construction Trusts. iii) Management Trusts. equipment and project financing. • Mutual Funds. goods, development, operation and financing activities 22
Brochure / report Doing title goes Business here | inSection Argentina title goes May 2021 here Foreign Investment (FI) investors and applied to economic tariff barriers across its members and the activities developed in the application of a common external tariff Investments in Argentina are regulated country; and (b) the acquisition on all other countries. Since its creation, by a set of rules, including international of capital interests in an existing trade between its Member States has treaties and local rules, that govern the local company by foreign increased. treatment afforded to foreign investments, investors. the registration of foreign companies, • A “foreign capital local company” rules on monetary policy, FX controls and is defined as any company remittances from and into Argentina. domiciled in Argentina, where natural or legal persons domiciled Foreign investors In principle, there are no restrictions on abroad hold, either directly or foreign investments. However, there are indirectly, more than forty nine may transfer restrictions in respect of certain economic sectors: per cent (49%) of the corporate capital or else hold, either directly their net realized • Government regulated activities or indirectly, the number of votes necessary to have majority in the profits abroad such as banks or insurance companies; Shareholders’ Meetings or board of directors’ meetings. derived from • Acquisition of real property in their investments border areas or security zones; Foreign investors may transfer their net • In relation to special regimes, due realized profits abroad derived from their as well as repatriate • for instance to anti-trust issues; Investment in media companies investments as well as repatriate their investment subject to FX control rules in their investment by foreign investors is limited to 30% (except United States who force. In accordance with Communiqué “A” 6844 BCRA, prior BCRA (Argentine Central subject to FX has an Investment Promotion and Protection Treaty with Argentina). Bank) approval is required to have access to the FX market for purposes of remitting control rules foreign currency abroad in relation to in force Act No. 21382 (Executive Order No. such concepts. 1853/1993) established a legal regime that tends to promote foreign investments Foreign capital local companies may use in the country, based on the principle of internal credit subject to the same rights non-discrimination between Argentine and and terms applicable to national capital foreign investors. local companies. The main provisions of Act No. 21382 Since 1990, and for the purpose of provide that: increasing foreign investment in the country, Argentina has signed Foreign • Foreign investors may conduct Investment Promotion and Protection investments in the country Treaties with more than 60 countries. intended to promote economic In general terms, under those treaties activities or the improvement Argentina has agreed to afford a fair and or expansion of those already equitable treatment to investors from existing, under the same signatory countries and to submit any conditions applicable to national dispute that may arise to international investors, subject to the same arbitration tribunals. rights and obligations that the Constitution and laws grant and Furthermore, during the 80s Argentina impose on national investors in promoted the creation of the Common accordance with Act No. 21382 Southern Market (Mercosur), which has and any other law that may since been formed by Argentina, Brazil, govern special or promotion Paraguay, Uruguay and Venezuela* as full * The Bolivarian Republic of Venezuela is suspended from all rights and obligations inherent to its status regimes. members, and Chile, Colombia, Ecuador, as a State Party to MERCOSUR, in accordance with • A “foreign capital investment” Peru, Bolivia**, Suriname and Guyana the provisions of the second paragraph of Article 5 is defined as (a) capital as associate members. The purpose of of the Ushuaia Protocol. contributions made by foreign Mercosur is the gradual elimination of ** Bolivia is in adhesion process. 23
Doing Business in Argentina May 2021 IV. Taxation 24
Brochure / report Doing title goes Business here | inSection Argentina title goes May 2021 here Tax residence If approved, such provisions shall become apply to fiscal years beginning on or after A company is resident in Argentina if it January 1, 2021. is organized in Argentina. Branches of foreign companies are also considered to Taxable income Outline be residents. The starting point to assess income is the income or loss arising from the financial The most important taxes levied statements, to which certain adjustments on companies doing business in Tax base and rates are made: non-deductible expenses and Argentina are, at a national level, the allowances are added back and non- Income Tax, the Added Value Tax Resident companies are taxed on their taxable income or special deductions/ (VAT) and the tax on bank debits and worldwide income, which includes profits tax reliefs not recorded on the books are credits, as well as contributions to made by branches and subsidiaries substracted. social security. abroad. Taxable income is thus the difference There are also provincial taxes such The branches of foreign companies between income derived by the taxpayer as Turnover Tax, Real Estate Tax and are treated as residents and afforded in the fiscal period and the expenses Stamp Tax. the same tax treatment. Non-resident incurred in obtaining such income and companies without a permanent maintaining and preserving the source of In addition, Argentina has some establishment are taxed only on their income. tax promotion regimes in place for Argentine-source income and the tax specific activities, such as mining, may be applied as a final withholding, Business income (known as third category renewable energy, knowledge depending on the type of income. income) includes all income derived by economy, software and biofuel a company’s business operations (for production. The Income tax rate for resident instance, the sale of goods, shares and/or companies and Argentine branches of real estate, dividends paid out by foreign Argentina has several bilateral foreign companies is 30% for fiscal years companies, interest, royalties, fees, etc.). treaties to avoid double taxation and beginning on January 1, 2020 and they are has signed Information Exchange reduced to 25% for fiscal years beginning All income is liable to corporate income tax Agreements with non-treaty countries on or after January 2, 2021. unless specifically exempted. as part of the BEPS project driven by the OECD. Notwithstanding the above, a new bill Tax Losses was recently announced that seeks to Operating net losses may be carried postpone for a year the application of the forward to future fiscal years over a term 30% corporate income tax rate on joint- of five years, but carry-backs are not stock companies. This bill is expected to be allowed. Certain losses (for instance, due debated by Congress. to the sale of shares or other securities, Argentina has some foreign tax losses, etc.) may only be offset The National Executive Power has also against income/gains of the same type. tax promotion submitted a bill to Congress to modify Foreign Tax Credit regimes in place for corporate income tax by applying a progressive rate scale scheme, whereby Companies may compute a foreign specific activities, companies would pay 25% for the first income bracket (up to $5 million tax credit for similar taxes paid abroad provided they do not exceed the tax liability such as mining, annual profits); 30% for an intermediate income bracket (from $5 million to $20 payable in Argentina on foreign-source income. It is computed on an overall rather renewable energy, million annual profits) and a 35% for than on a country-by-country basis. A tax higher incomes. credit is also available for similar taxes knowledge paid abroad on Argentine-source income in accordance with special provisions economy, software In this respect, this bill provides that bracket income amounts are to be included in double tax conventions. Taxes and biofuel adjusted annually, starting on January 1, 2022 based on the Consumer Price paid by companies directly or indirectly held may be computed as a credit under production Index (CPI) provided by the INSTITUTO NACIONAL DE ESTADÍSTICAS Y CENSOS certain circumstances. Unused foreign tax credits may be carried forward over fiver (National Statitstics Bureau, INDEC). fiscal years. 25
Doing Business in Argentina May 2021 Compliance - Formalities New legislation has been enacted to exempt. A tax of 15% on net income, or introduce new tax incentives that promote 13.5% on the sale price (at the seller’s Fiscal Year the “knowledge economy” in Argentina, option), is applied on the transfer of For legal persons, the taxable year is the which was expected to enter into force on shares in Argentine companies, other fiscal year, which may coincide or not with January 1, 2020 until December 31, 2029, interests in unlisted entities and other the calendar year o comprise another but was later suspended. In February assets, such as real estate. In certain period of 12 consecutive months. 2020, a new bill was sent to Congress with circumstances, indirect transfers of modifications to the original initiative. shares and other equity interests in Tax Return Consolidation Argentine companies may be subject In Argentina, the companies of the same On October 26, 2020, Act 27570 was to the same rules. group are required to file tax returns and enacted, whereby certain amendments pay the tax separately. Under Argentina law, were introduced to the Knowledge tax return consolidation and group relief (by Economy Promotion Regime Act. Dividend payouts offsetting losses across companies of the same group) are not allowed. On December 21, 2020, Executive Order Dividends received by an Argentine 1034/2020 was issued to regulate the company from another Argentine Filing and Payment Knowledge Economy Promotion Regime. company are exempt from income tax. In Argentina, taxes are self-assessed so that legal persons assess their own tax Ruling (SsEC) 03/2021, published on Dividends paid out by a foreign liability and report it on a tax return. the Official Bulletin on January 11, 2021 company are liable to tax but However, the tax administration is entitled by the Undersecretariat of Knowledge taxpayers are given a tax credit for to examine the tax return, require further Economy, established the requirements the underlying tax paid on the income information and/or conduct an audit. that are to be met by the beneficiaries of that was paid out as dividend (under the Software Industry Promotion Regime certain conditions), in addition to a Penalties (Act 25922) to continue being eligible credit for any withholding that may Penalties are applied upon failure to file under the Knowledge Economy Promotion have been applied on the dividends. the tax return or to pay. Late payment is Regime. penalized with interest charged at variable A withholding of 7% is applied on rates, plus fines ranging between 100% and Act 27614 created a Construction dividends paid by an Argentine 200% of the unpaid tax (the fine may be Incentive Regime intended to promote company (or remittances of an reduced). Tax evasion is subject to higher the development of or investment in real Argentine branch of a foreign entity fines and may include imprisonment. estate projects in the Argentine Republic. to its headoffice) to resident natural persons or non-resident persons in Ruling Regime The benefits provided by this Regime relation to income derived from fiscal There is no Ruling Regime in place in include exempting the value of years commenced until January 1, 2021. Argentina, but there is an advance ruling investments made until December 31, regime that is available provided certain 2022 from the personal asset tax base; Although originally an increase to 13% conditions are met. in addition, 1% of the value of such was established for the tax rate on investments may be creditable against the dividends paid out of earnings made in personal asset tax liability. The Regime fiscal years beginning January 2, 2021, Tax Incentives also defers the tax on real estate transfers such rate may remain at 7% if the bills or the income tax in the case of real estate currently being debated by Congress There are tax incentives available for covered by this scheme. are approved. certain activities, such as mining, forestry, renewable energy and biofuel production. There is also a tax-free zone in Tierra del Capital gains Remittances abroad Fuego with special incentives for certain activities being performed there, such In general, capital gains are included Argentine companies that make as corporate income tax exemptions, as part of taxable income and liable to payments to non-resident natural or personal asset tax and excise taxes. income tax paid by companies at the legal persons domiciled abroad are standard rate. Gains on the sale of shares required to withhold the tax and send There are several tax-free zones where of an Argentine company are subject to it off to the Revenue. goos are not subject to ordinary customs income tax. controls and, in general, no tariffs are Companies, acting as withholding applied on goods entering into or getting Gains derived by a non-resident on the agents, are responsible for any wrong out of the country (exported). sale of listed shares or ADRs are tax withholding and/or failure to pay 26
Brochure / report Doing title goes Business here | inSection Argentina title goes May 2021 here and may be subject to additional interest and Royalties of 21%) if the contract whereby such fees fines assessable due to non-compliance. Payments of royalties to non-resident are paid is registered with the INPI and the natural persons for the use of copyrights in services may not be obtained in Argentina. Below, we describe the most common Argentina is subject to a final withholding If the contract is registered with the INPI withholdings applicable: of 35% on 35% of the gross payment, but the services may be obtained in which makes an effective rate of 12.25% Argentina, the effective rate is 28% (35% x Interest provided such works are registered with 80%). If a contract does not fall under the The withholding rate on interest paid to a the National Copyrights Board and other technology transfer act, the effective rate non-resident is 35% and may be reduced conditions are met. Royalties on movies is 31.5% (35% x 90%). to 15.05% where: and TV programs, as well as those related to image or sound reproduction or Technical services fees paid to resident • The lender is a financial transmission, paid to non residents, are companies and natural persons are institution; subject to a final withholding of 35% on subject to a local withholding, but this one • The lender is a bank or financial 50% of the gross payment, which makes an is creditable against the final income tax institution that is not located in effective rate of 17.5%. liability payable. a zero or low tax jurisdiction or it is a jurisdiction that has entered Royalties on patents paid to non-residents International Treaties into an Information Exchange are subject to a final withholding of 35% Argentina has a relatively small network Agreement with Argentina and, on an 80% of the gross payment (effective of bilateral treaties to avoid double furthermore, no bank, exchange rate of 28%) if the contract whereby such taxation but has signed Information or other type of secrecy law royalties are paid is registered with the Exchange Agreements with non-treaty may be claimed in the event of National Institute of Industrial Property countries as part of the BEPS project a request for information by the (INPI in Spanish). Where these conditions driven by the OECD. Revenue Administration; are not met, the effective rate is 31.5% • Interest is related to bonds (35%x90%). As regards income derived directly by registered in countries who have foreign residents in Argentina, double signed an Investment Promotion Royalties paid to resident companies and tax conventions generally provide for the and Protection Treaty with natural persons are subject to a local reduction or elimination of withholding Argentina; or withholding, but this one is creditable taxes on Argentine-source income • The transaction pertains to against the final income tax liability provided several requirements and financing granted by a seller for payable. formalities are met. the purchase of personal property subject to depreciation. Technical Service Fees To qualify for the benefits of tax treaties, Technical assistance fees, engineering the recipient should provide evidence of its Interest paid to resident companies services and consulting services paid residence in the relevant jurisdiction and and natural persons is subject to a local to non-residents are subject to a final meet the conditions so established by the withholding, but this one is creditable withholding of 35% on 60% of the gross respective treaty. against the final income tax liability payable. payment (which makes an effective rate The network of Double Tax Conventions in force in Argentina is shown below: Germany Canada Finland Netherlands Australia Chile France United Kingdom Belgium Denmark Italy Russia Bolivia United Arab Emirates Mexico Sweden Note: The table above lists Double Tax Conventions Brazil Spain Norway Switzerland in force. 27
Doing Business in Argentina May 2021 Indirect taxes A foreign individual with an employment Capital Gains contract for up to five years is taxed Gains earned by an Argentine resident VAT exclusively on Argentine-source income and on the sale of shares, bonds and other VAT is levied on all the supplies of goods on assets located in Argentina, provided this securities not listed or authorized for or services made in Argentine territory individual has a temporary visa. public listing, are taxed at a rate of 15%. unless they are specifically exempt; it In certain cases, inflation adjustments also taxes imports of goods and services Tax base and rates to the acquisition cost are allowed. An provided abroad but with economic use in All persons deriving income in Argentina, exemption is provided for gains derived Argentina. The provision of digital content ( whether they are resident or not, are liable from the sale of shares, securities, that is music, videos, etc.) by non residents for income tax. Residents are taxed on corporate bonds and shares in mutual is subject to VAT in Argentina at the their wordwide income; nonresidents pay funds that are listed or authorized for standard rate. the tax, only on Argentine-source income. listing in Argentina, upon prior compliance of certain conditions. There are four VAT tax rates applicable in Tax Income Argentina: (i) the standard rate of 21%, (ii) an Taxable income includes labor income Sales of real property acquired after January increased rate of 27% applicable to some (so called fourth category income in 1, 2018 are subject to a tax of 15%. The cost utilities, such as certain communication Argentina, which covers most of the of acquisition may be adjusted for inflation. services, electricity, natural gas and water, benefits earned by employees), income Permanent residential dwellings of resident (iii) a reduced tax of 10.5% applicable to obtained from performing an activity individuals are exempt from this tax. capital and other goods, and (iv) zero rate or professional practice, certain capital tax applicable to exports. In the case of gains, dividends, rental income and Foreign Tax Credit zero-rated transactions, VAT is not charged certain interest income. Foreign-source Taxpayers may compute a foreign tax on the sale but the input VAT paid on the income should be included as taxable credit for similar taxes paid abroad which supply may be recovered. Certain supplies income before the foreign withholding, may not exceed the tax liability payable in may be exempt from VAT (por instance, but a credit tax may then be computed Argentina on foreign-source income. It is education, international transportation, etc.) for the foreign tax paid. computed on an overall rather than on a country-by-country basis. A tax credit is Tutnover Tax Deductions also available for similar taxes paid abroad All provinces and the City of Buenos Aires A resident individual is entitled to several on Argentine-source income in accordance levy this tax on the turnover of a company personal deductions from taxable income with special provisions included in double who is engaged in a commercial, industrial, (por instance, non-taxable minimum, tax conventions. Taxes paid by companies agricultural, financial o professional activity. allowance for dependents, etc.) but directly or indirectly held may be computed certain conditions should be met for such as a credit under certain circumstances. Rates vary depending on the activity, but in deductions to operate. Unused foreign tax credits may be carried general they range between 1% and 5%. forward over fiver fiscal years. Subject to certain restrictions, admitted Higher tax rates may apply on certain deductions include medical expenses, services in some provinces; in general, certain donations, mortgage interest or Other Taxes industrial activities are exempt or pay rental payments and the cost of household taxes at lower rates. helpers. Employers’ and Employees’ Contributions to Social Security Rates Both the employer and the employee are Taxes on individuals Rates are progressive and range required to make contributions to social between 5% and 35%, depending on security and union health schemes (obras Residence the income bracket, which is adjusted sociales). The employer’s social security For tax purposes, an individual is resident annually. charges range between 24% and 26.4% of if they live in Argentina (a person with the employee’s salary, depending on the Argentine nationality is considered resident Dividends paid by an Argentine entity activity and the size of the company. but the resident status may be lost if they live to a resident or non-resident individual abroad during more than a certain period out of the profits made in fiscal years The employer withholds a 17% employee of time). Argentine individuals that maintain beginning on or before January 1, 2021 contribution from the employee’s salary, their resident status and foreign individuals are subject to a withholding of 7%. which is then paid into the social security who get their permanent residence or stay The rate will increase to 13% for dividends and union health schemes; for purposes in Argentine for at least 12 months (without paid out of profits earned in subsequent of this computation, the social security computing temporary absences) are fiscal years. minimum and maximum taxable amounts considered to be Argentine residents. should be taken into account. 28
You can also read