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Doing Business in Argentina May 2021
02
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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
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Doing Business in Argentina May 2021
I.
Main
economic
Variables
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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
% % % % % % %
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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.
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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
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Doing Business in Argentina May 2021
II.
Doing
Business in
Argentina
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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).
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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.
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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.
11Doing 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.
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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.
13Doing 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.
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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.
15Doing 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.
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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%.
17Doing Business in Argentina May 2021
III.
Legal
system
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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.
19Doing 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.
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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;
21Doing 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
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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.
23Doing Business in Argentina May 2021
IV.
Taxation
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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.
25Doing 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
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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.
27Doing 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.
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