2. Foreign investment.
The legal regime for foreign investment is governed by the Foreign Investment Act (“Ley de Inversiones Extranjeras”) enacted in 1993. For the purposes of this law there is no distinction between national and foreign investors irrespective of the type of business they get involved in. Foreign investors have the same rights and obligations as local ones under the parameters stated by the National Constitution regarding the development of lawful economic activities in Argentina.
There are no limitations on the participating percentage of foreign ownership in a local entity regardless of the type of vehicle chosen.
Argentina has executed a number of Bilateral Investment Treaties (BITs) with third countries and is a member of the Multilateral Investment Guarantee Agency (MIGA), the Overseas Private Investment Corporation, and the International Centre for the Settlement of Investment Disputes (ICSID).
Treaties in force entered into by Argentina with third countries for the avoidance of double taxation are developed in the Tax section below.
2.1. Direct and Portfolio Investments by non-residents.
Following international standards set forth in IMF Payment Manual, foreign investment in Argentina can be classified as “direct investments” or “portfolio investments”. Direct investments comprises real estate investments and participations in local companies of at least 10% of the ordinary shares or voting rights, while portfolio investments are participations below this cap, in debt or equity securities of Argentine issuers, holdings in Argentine pesos and deposits in Argentine banks.
Direct investments and portfolio investments made after December 16, 2015 should stay in Argentina at least 120 days in order to be repatriated, unless a specific exception applies. New investments made prior to such date are subject to the minimum stay set forth in Decree No. 616/2005 of 365 days.
3. Portfolio investments by foreign residents.
Inflows to the FX Market of portfolio investments by foreign residents are not subject to any restriction. Non-residents can either exchange the foreign currency into Pesos in the FX Market or keep the foreign currency by performing arbitrage among other currencies.
Opening banking and securities accounts by non-residents requires the compliance with the AML -Anti-money laundering- and internal securities regulations which may entail filing of certified copies of incorporation documents, identification of ultimate beneficiaries and granting of special powers of attorney, inter alia. The foreign resident should obtain a non-resident tax ID, known as CDI (Clave de Identificación) - to obtain it a power of attorney should be issued and certain documentation should be filed before the Tax Authority. Also, the foreign company should submit the documentation required by the financial institutions to comply with the FATCA -Foreign Account Tax Compliance Act- (information provided about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest) and CRS -Common Reporting Standard- (information provided to the tax authority about companies with multiple residencies).
4. Repatriations by Foreign residents.
Foreign residents (whether individuals or legal entities) are allowed to purchase foreign currency and transfer funds abroad subject to:
Foreign investments made since December 16, 2015 the non-residents have access to the FX Market without further requirements, provided that the minimum 120-days term has elapsed.
a) Foreign investment made prior to December 16, 2015, the non-residents are allowed to access the FX Market subject to the following requirements:
1. Without any limit, for the amounts collected in Argentina on account of :
i) transactions by international or multilateral credit agencies;
ii) outstanding imports of goods and services or debts related with such imports;
iii) foreign financial debts paid by Argentine residents or local entities in local currency in Argentina;
iv) services and other current transfers abroad;
v) interest payments of Argentine sovereign securities denominated in pesos;
vi) interest and principal payments of Argentine sovereign securities denominated in foreign currency;
vii) recovery of credits allowed in local bankruptcies or reorganization procedures;
viii) inheritances, pursuant to an unappealable heir declaration;
ix) repatriation of direct investments in the private non-financial sector or real estate investments, to the extent that the foreign investor may evidence, with registry of the legal entry of the investment, that he has maintained such investment in Argentina for more than 365 days. This item allows repatriation of investments by foreign investor due to sales of equity, capital reductions, wind-up proceeds, and reimbursement of capital contributions in local entities;
x) damages granted by local courts to non-Argentine residents in a non-appealable decision.
2. Up to US$500,000 per calendar month, for amounts received in Argentina on account of portfolio investments (including interests or other income) and/or resulting from the sale of these investment portfolios, such as stock portfolio, minority participation in local entities, investment in mutual investment funds and local trusts, purchases of bank loan portfolios, investments in local bonds issued in pesos and purchases of other local credits. In all these cases, the foreign investor must evidence, with registry of the legal entry of the investment, that they have maintained such investment in Argentina for more than 365 days.
3. Up to US$5,000 per calendar month, in cash, without further requirement.
5. Foreign Exchange Regulations.
The following is a brief overview on foreign exchange regulations, generally applicable to residents and non- residents, currently in force:
5.1. Financial Debts.
Argentine Central Bank regulations allow Argentine borrowers (whether individuals or legal entities) to transfer abroad and pay principal of cross-border financial debts to foreign lenders through the Argentine Foreign Exchange Market, upon maturity, provided that the borrower evidences:(i) the legal entry and repatriation through the Argentine Foreign Exchange Market of the proceeds of the loan, (ii) that such loans complied with a minimum 120-day tenor (starting from the date of the legal entry of the funds in Argentina or since the renewal of the loans, if applicable) and (iii) that the cross border financial debt has been disclosed in the quarterly indebtedness regime of the Argentine Central Bank. No prior Argentine Central Bank authorization is required.
In addition, Argentine borrowers may prepay principal with foreign creditors (completely or in part) in advance to the relevant maturity date, provided that the minimum 120-days term has elapsed.
5.2. Interest, profits and dividends.
Argentine Central Bank regulations authorize Argentine residents (whether individuals or legal entities) to transfer abroad through the Argentine Foreign Exchange Market accrued interest to foreign creditors, within 15 days prior to the relevant maturity.
Local residents are also allowed to remit profits and dividends to foreign equity holders when resulting from annual financial statements certified by external auditors. To the extent that profits or dividends are declared in annual financial statements certified by external auditor, Argentine Central Bank regulations do not differentiate between dividends paid as a result of retained earnings of previous fiscal years or from the net income of the last fiscal year approved.
There are no material restrictions for Argentine residents or local entities to transfer abroad and pay services rendered by non-Argentine residents or foreign entities not established in Argentina after December 16, 2015 (e.g., insurance premiums, royalties, fees). In some cases, documental evidence of the actual performance of the services has been required.
The Central Bank established a payment schedule with thresholds for the cancellation of commercial debts for unpaid services rendered or accrued by non-residents before December 16, 2015: (i) from 2/01/2016 up to USD 2 million per resident per month; (ii) from 3/01/2016 and until 5/30/2016 up to USD 4 million per resident per month; (iii) as from 6/01/2016 with no amount limitations.
From 1/04/2016 and until 1/31/2016, the cancellation of debts for services rendered or accrued until December 16, 2015 will be reduced from the cap of USD 2,000,000 established for portfolio investments.
5.4. Imports of goods.
The payment for imports could be cancelled by the following payment methods: (i) advance payment; (ii) letter of credit, (iii) D.A.P. (document against payment), and (iv) documents against acceptance.
Imports of goods may be totally paid in advance regardless of the type of product, provided that nationalization of such goods takes place within 180 days following the payment.
Likewise cancellation of debts related to the import of goods may be paid in advance regardless of their maturity date. Evidence of customs and commercial documents related to the import of goods are required.
Commercial debts for unpaid imports -with customs cleared prior to December 16, 2015- may be cancelled as they become due with no restrictions, in the following cases: (i) debt from federal or provincial states, including state-owned companies; (ii) imports secured by letter of credits or bonds issued or granted by local financial entities; (iii) debts owed to official or multilateral credit agencies (ECAs) and/or debts guaranteed by such parties.
The Central Bank established a payment schedule with thresholds for the cancellation of commercial debts for unpaid imports with customs cleared prior to December 16, 2015: (i) until 12/31/2015 up to USD 2 million per importer and per month; (ii) from 1/01/2016 and until 5/30/2016 up to USD 4.5 million per importer and per month; (iii) as from 6/01/2016 with no amount limitations.
5.5. Investment portfolios of Argentine residents abroad.
Argentine residents may transfer abroad up to US$2,000,000 per calendar month, on account of foreign real estate investments, loans granted to non-Argentine residents or foreign entities, direct investments abroad or portfolio investments. In the case of portfolio investments, transfers must be made to accounts opened under the name of the local resident or the company making the transfer, at financial entities incorporated in FAFT-GAFI compliant jurisdictions.
6. Types of Companies.
Operating in Argentina on a permanent basis requires the incorporation of a branch or a wholly or partially owned subsidiary.
The subsidiary may operate under any of the several types of corporate entities available. The most common are (i) the stock corporation (Sociedad Anónima or “S.A.”); and (ii) the general partnership (Sociedad de Responsabilidad Limitada or “S.R.L.”), similar to an LLC, which members cannot exceed 50 partners and it has the advantage that its operations are subject to fewer formalities. Both, Sociedad Anónima and Sociedad de Responsabilidad Limitada limits partners liability to their capital contribution.
7. Tax Considerations.
Argentine taxes are levied at three levels: (i) Federal, (ii) Provincial and (iii) Municipal.
7.1. Income tax.
Income tax is levied on worldwide income obtained by Argentine residents, i.e. income from Argentine and/or foreign source, while non-residents are taxed only on their Argentine source income. Branches and other permanent establishments are considered as residents and taxed accordingly.
Non-resident beneficiaries are liable to 35% income tax withholding on a deemed net income. Withholding rates applicable to the most common cross-border payments are the following:
|Type of Payment|
Subtype of payment
|Portion of Payment Subject to Tax|
|Effective Withholding Rate (%)|
|With Grossing up|
|1. International transportation||1.1. Transport and chartering.||10%||3.5%||3.6269%|
|1.2. Container business. ||20%||7%||7.5269%|
|2. International news agencies|| ||10%||3.5%||3.6269%|
|3. Insurance || ||10%||3.5%||3.6269%|
|4. Film reels, magnetic tapes, radio and TV programs, telex and facsimile transmissions, and any other means used to broadcast or screen images, pictures or sound, or to further disseminate them.|| ||50%||17.5%||21.2121%|
|5. Transfer of technology ||5.1. Agreements in compliance with the Transfer of Technology Act:|| || || |
|5.1.1. Fees for technical assistance, engineering or consulting services not available in Argentina.||60%||21%||26.5823%|
|5.1.2. Patent and trademark royalties and other.||80%||28%||38.8889%|
|5.2. Agreements not in compliance with the Transfer of Technology Act||90%||31.5%||45.9854%|
|6. Copyright royalties (under certain circumstances)|| ||35%||12.25%||13.9601%|
|7. Artists hired by the Federal, Provincial or Municipal Government or non-for profit organizations||For a period not exceeding two months per calendar year.||35%||12.25%||13.9601%|
|8. Interest||8.1. Public bonds||Exempt||0%||0%|
|8.2. Private bonds in compliance with Private Bonds Law.||Exempt||0%||0%|
|8.3. Interests on foreign loans:|| || || |
|8.3.1. Loans granted to the Federal, Provincial or Municipal Government or Federal Central Bank.||Exempt||0%||0%|
|8.3.2. Transactions involving the importation of depreciable movable property (except automobiles) granted by suppliers.||43%||15.05%||17.7163%|
|8.3.3. Loans granted to financial institutions as defined by Law 21,526.||43%||15.05%||17.7163%|
|8.3.4. Loans granted by a Bank or financial institution incorporated in a country not deemed as a low tax jurisdiction, or in a jurisdiction which signed agreements providing for the exchange of information and where bank secrecy or secrecy referring to stock exchange cannot be alleged upon request of information by tax authorities.||43%||15.05%||17.7163%|
|8.3.5. Public bonds registered within two years from issuance in accordance with Law 23,576 in countries with an Investment Protection Treaty.||43%||15,05%||17,7163%|
|8.3.6. Other loans.||100%||35%||53.8462%|
|8.4. Interests on saving accounts, time deposits and other according to Central Bank regulations:|| || || |
|8.4.1. In case it does not result in a transfer of tax revenue to foreign countries.||Exempt||0%||0%|
|8.4.2. In case it results in a transfer of tax revenue to foreign countries.||43%||15,05%||17,7163%|
| || || || |
|9. Salaries, wages and fees ||Paid to individuals (excluding artists on a tour) who work in Argentina for less than six months.||70%||24.5%||32.4503%|
|10. Rentals||10.1 Movable property.||40%||14%||16.2791%|
|10.2 Real estate.||60%||21%||26.5823%|
|12. Sale of assets located in Argentina|| ||50%||17.5%||21.2121%|
|13. Dividends of corporations and profits earned by branches and Limited Liability Companies || ||10%|| || |
| ||Exceeding accumulated and reported taxable income on the previous fiscal year||100%||35%||35%|
|14. Other unspecified payments|| ||90%||31.5%||45.9854%|
Capital gains derived from the trade stock, shares, bonds and securities in general, including limited liability companies’ quotas are taxed at a 15% rate when obtained by non-resident aliens. A presumption of deemed net income of 90% of the transacted amount applies, i.e. the final tax burden amounts to 13.5% of the gross selling price.
Withholding rates in general may be reduced or eliminated on a Double Taxation Treaty scenario or if a Treaty on International Transport applies.
Grossing up shall not apply in case of interests derived from loans applied to industrial, extractive or primary activities.
In certain cases, the foreign recipient may choose to override the deemed income and assess the real income according to the general provisions laid down in the Income Tax Law.
In addition, transfer pricing rules apply when an Argentine company enters into business transactions with related companies or permanent establishments located abroad, or with non-related entities located in jurisdictions not considered as “cooperative for tax information exchange” (i.e. tax havens).
For import/export transactions with independent parties for amounts higher than Ar$ 1,000,000 (approximately US $ 71,000) per year there are a number of information obligations intended to scrutinize the prices involved.
In case the agreed prices are not arm’s length, the Federal Revenue Administration can make transfer pricing adjustments to the Argentine local party.
In this sense, pursuant to Decree No. 589/2013 and General Resolution (AFIP) No. 3576, jurisdictions considered as “cooperative” are those that have signed or are negotiating with Argentina a Double Taxation Treaty with broad information exchange clause, or that have signed or are negotiating a tax information exchange agreement. Currently, the list includes 113 cooperative jurisdictions.
Furthermore, the Tax Procedure Law provides for specific presumptions regarding the receipt of funds by Argentine residents from low tax jurisdictions or tax havens.
7.2. Treaties for the avoidance of double taxation.
Argentina has signed treaties for the avoidance of double taxation and fiscal evasion with the following countries:
|Netherlands||Norway ||Russia ||Spain |
|Sweden ||Switzerland(*)||United Kingdom|| |
(*) Ratification still pending
7.3. Tax on personal assets.
This tax is imposed on assets existing as of December 31 each year held by resident individuals and estates, over assets located in Argentina and abroad; and non-resident individuals and estates, over assets located in Argentina.
Individuals or companies located in the country who are joint owners, or that are vested with the possession, disposal, deposit, custody, safekeeping and/or administration of assets owned by non-residents, must act as substitute taxpayers. The tax rate is 1.25%.
Moreover, non-resident companies and individuals must pay an annual 0.5% tax on their shareholdings, or interest in capital, in Argentine companies. The tax is paid by the local entity, which has the right to be reimbursed by the shareholders for the tax paid; and for that purpose it may withhold and/or request the realization of the assets that originated the tax (i.e. shares, quotas, etc.).
7.4. Valued added tax (VAT).
VAT is levied on all sales of goods or performances of services made within the territory of Argentina in the course of a business, unless they are specifically VAT-exempt. VAT is also levied on all imports of goods and services into Argentina.
The general rate for VAT is 21%, though there are higher and lower rates for certain taxable events.
Payments are made on a monthly basis. To this end, the prior month’s VAT credits (Input VAT) arising from purchases are deducted from the VAT debits (Output VAT) stemming from sales made in the same month. Non-residents are not entitled to compute tax credits, as they are considered end users.
Securities in general are exempted.
7.5. Tax on Financial Transactions (tax on debits and credits in bank accounts and other deals).
This tax is imposed upon any deposited funds either withdrawn or transferred from checking or savings accounts, and is withheld by Argentine banks.
The generally applicable rate is 6‰ for each debit and for each credit in bank accounts, but it becomes doubled on certain taxable events.
A portion of this tax may be credited by Argentine taxpayers against other federal taxes.
7.6. Turnover Tax.
Argentine provinces and City of Buenos Aires levy turnover tax (impuesto a los ingresos brutos) on the gross revenue of any enterprise that carries out commercial, industrial, agricultural, financial, or professional activities.
Tax rates vary depending on the type of activity and the turnover tax act of each jurisdiction, but the average rate is 3%.
The provinces and the City of Buenos Aires have signed an agreement (the so-called “Multilateral Agreement”) to avoid the double taxation of activities performed in more than one jurisdiction.
7.7. Stamp Tax
Stamp tax is a local tax levied on public or private instruments executed in Argentina, or abroad when their effects are produced in one or more relevant jurisdiction within Argentina (provinces and the City of Buenos Aires).
In general, Stamp Tax applies to all acts and agreements (i) executed within the province’s jurisdiction; (ii) executed outside the province’s jurisdiction but when their effects are produced within it; (iii) executed in private form, public deeds or through correspondence, in the cases indicated by law, and (iv) also to monetary operations, registered in accounting records that represent delivery or reception of sums of money that accrue interest, made by financial entities.
Tax rates vary depending on the type of transaction and the regulations of each jurisdiction, but the average rate is 1% in most provinces. In general, the rate is assessed on the economic value of the transaction.
* * *
This document contains general information about doing business in Argentina. It is not intended to provide, and should not be relied on as a source of legal advice.
 The general rule is that loans made prior to December 16, 2015 are subject to a minimum 365-day tenor. A longer term is applicable to exceptional cases.