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Argentinian Republic

1.Country Profile

Argentina is located in the southernmost tip of America. It is the eighth largest country worldwide, and the second largest Latin American country in terms of territorial coverage. It has a mainland surface of 2.8 million square-meters, with 969,000 square-meters spanning over Antarctica. The mainland area spans over 3,694 kilometers North to South (between latitude 21º S and latitude 55º S) and over 1,423 kilometers East to West (between longitude 53º W and longitude 63º W). Argentina has access to the Southern Atlantic Ocean, and to the Southern Pacific Ocean, through the Straits of Magellan. To the East, Argentina borders Uruguay, Brazil and the Atlantic Ocean, while bordering Chile to the West and South, and Bolivia and Paraguay, to the North. Its geographic location offers direct access to a regional market encompassing 240 million people, in addition to its over 40 million inhabitants.

The Argentine Constitution mandates a representative, republican, and federalist form of government.

Under the federalist form of government, there is a division of powers between the federal government and the provincial governments, safeguarding autonomy. Under this form of government, the federal sovereign government—with jurisdiction over the entire Argentine territory—coexists with autonomous provincial governments empowered to establish their own local institutions and constitutions, with jurisdiction over their respective territories only. As concerns its political division, the Argentine territory is divided into 23 provinces and the Autonomous City of Buenos Aires, whose autonomy is ruled by a special arrangement. On the other hand, provincial territories are divided into municipalities, with some of them being also divided into departments.

Argentina’s political organization is based on the traditional division of powers under the republic form of government—the Executive Branch, the Legislative Branch, and the Judiciary.

2. Investments

2.1 Domestic laws and regulations governing foreign investments

In Argentina, investors and foreign investments enjoy broad legal protection by means of an array of domestic and international laws and regulations that afford Argentina safe-harbor status for investments and foreign investors. Under the Preamble of the Argentine Constitution, foreigners are afforded fair and equal treatment and are entitled to the same rights as citizens (Article 20).

The Foreign Investment Act No. 21,382 establishes the legal framework applicable to foreign investment in Argentina. This law is addressed to foreigners who invest capital in Argentina in any of the forms therein stipulated, for the conduction of business activities (industrial, mining, agricultural and livestock, trade, financial, services or other activities related to the production and trade of goods and services), or the expansion or enhancement of existing activities, without the need for any previous approval whatsoever.

Under the Foreign Investment Act, such investors are afforded the same rights and are bound by the same obligations established by the Constitution and other applicable laws for domestic investors

In this regard, the Foreign Investment Act confers foreign investors the rights to: i) transfer abroad the liquid and realized profits derived from, and repatriate, their investments; ii) avail of any legal form of organization afforded by domestic laws; and iii) rely on internal financing enjoying the same rights and under the same conditions as local companies owned by nationals.

2.2 Public Procurement

To be eligible to become a government provider, interested parties shall register themselves under a provider reporting system known as Sistema de Información de Proveedores or SIPRO.

Providers of goods and services wishing to contract with the Argentine public administration are required to register themselves under this system.

A web site ( is available for providers to get information and take part in public procurement processes.

3.Exchange Controls

Argentina’s exchange market is known as Mercado Único y Libre de Cambios or MULC through which agents conduct all foreign exchange transactions (inflow and outflow), at a freely agreed-upon exchange rate, in compliance with the requirements and regulations from time to time established by the Argentine Central Bank (BCRA).

As a result of the efforts to make the exchange market more flexible, exchange transactions are governed by a set of rules on foreign and exchange trades.

Some of the main features of such rules include:

-All individuals, legal entities, estates and other universitas juris, whether resident or not, may freely operate on the Argentine exchange market.

-All foreign exchange, swap and/or arbitrage transactions conducted through the MULC require the intervention of financial or foreign exchange institutions authorized by the BCRA, and shall abide by the rules applicable to each type of transaction.

-Transactions will be conducted at the exchange rate freely agreed upon between the parties.

-Trades among MERCOSUR member states are subject to a local currency payment system known as Sistema de Pagos en Moneda Local, or SML.

-Entities must comply with customer identification requirements and register their transactions with the BCRA.

4.Corporate Forms of Organization

Pursuant to the Argentine law, there are several forms of corporate organization entities may avail of in order to conduct business activities in Argentina, including by way of interests in local companies or otherwise in the form of an Argentine branch established by a foreign company.

Foreign investors should first become familiar with the diverging extent of liability attached to local companies and foreign companies’ branches.

In this respect, foreign companies’ branches are merely a decentralized administrative unit of the parent company, with no legal standing of their own. In other words, neither is the branch a separate legal entity from the foreign company, nor is it a separate unit for attribution of rights and obligations. Accordingly, the foreign company will be financially liable for such obligations the branch may fail to fulfill. Yet, the branch will still have certain autonomy and functional organization and will be led by a legal representative to be appointed by the parent company.

Conversely, local companies are separate entities from their partners/shareholders, with their liability being limited to their equity interests in the company.

That said, below is a brief overview of the most common investment vehicles used to develop business activities in Argentina.

4.1 Establishment of an Argentine branch by a foreign company

A foreign company organized and existing under the laws of its country of incorporation may establish a branch, place of business or any other form of permanent representation in Argentina.

To such end, the foreign company shall: (i) register its by-laws with the Public Registry of the jurisdiction in which it will conduct its ordinary business, which shall be encompassed in its parent company’s corporate purpose; (ii) provide a certificate of good standing in accordance with the applicable laws of its country of incorporation, and evidence that the entity’s main business is developed outside Argentina.

The branch does not need to meet any minimum capital requirement in order to be able to conduct the business activity encompassed in its parent company’s corporate purpose in Argentina, unless otherwise so required by special laws. This is the case, for instance, of financial institutions, insurance companies, and savings and loan associations.

On the other hand, the parent company is required to appoint one or more legal representatives, who shall be the sole individuals lawfully entitled to exercise the rights, and fulfill the obligations, of the branch.

These legal representative(s) must be individuals and will be held liable for their actions. In all cases, their liabilities will be similar to those attached to the directors of a corporation (sociedad anónima). The appointment of at least one Argentine-resident legal representative is advisable to deal with the Argentine tax and administrative authorities.

Finally, the branch will maintain separate accounting records from the parent company and will file its annual financial statements with the pertinent Public Registry. The applicable laws will only govern the local branch set up in Argentina in connection with the business carried on therein.

4.2 Incorporation and/or equity interests in a local company

In order to incorporate and/or acquire an equity interest in an Argentine local company, a foreign business must first register its by-laws with and file a certificate of good standing with the Public Registry of the pertinent jurisdiction.

Following registration, the foreign business may incorporate or acquire equity interests in a local company, under any of the forms permitted by applicable Argentine laws.

In Argentina, the most common forms of corporate organization used to conduct business activities are corporations (sociedades anónimas or SA) or single-shareholder corporations (sociedades anónimas unipersonales or SAU); limited liability companies (sociedades de responsabilidad limitada or SRL), and limited partnerships (sociedades por acciones simplificadas or SAS). These forms of corporate organization are governed by the Argentine Business Companies Act No. 19,550. In particular, SASs are governed by the Venture Capital Advocacy Act. There are other forms of corporate organization under the Argentine Business Companies Act which, by reason of liability concerns or organization drawbacks, have virtually fallen into disuse.

In any case, there are some common features inherent to all forms of corporate organization, including:

-Public Registry – Company’s domicile. Under the Argentine laws, each provincial government is tasked with arranging and maintaining a Public Registry of Commerce, and with exerting oversight duties over certain businesses.

-Number of partners/shareholders Pursuant to the Argentine laws, a local company may have one (SAUSAS) or more partners/ shareholders (SA, SRL or SAS).

-Substantial interest owned by the minority shareholder. The Argentine Corporate Record Office (Inspección General de Justicia or IGJ) has enacted regulations requiring that the minority shareholder hold a substantial interest in companies with two shareholders. This requirement will be deemed met if the minority shareholder acquires an equity interest of no less than 5% in the company.

-Previous registration of foreign shareholders/ partners. To be eligible to become a partner/ shareholder of a local company, the foreign company must have been previously registered. This requirement will not apply to non Argentine-resident individuals; however, an identification code will have to be applied for with the Argentine tax administration (AFIP).

-Capital stock. In all cases, capital stock will have to be fully subscribed at the time of incorporating the local company and paid in by no less than 25%. Capital contributions may be either in cash or in kind.

-Corporate Authorities. The local company’s administrators will be elected upon the company’s incorporation and then, at the respective shareholders’/partners’ meetings. An absolute majority of administrators shall have their domicile of choice established in Argentina, with all of them being required to establish domicile for special purposes in Argentina and apply for a tax identification code.

For SASs, the law provides that at least one administrator shall have domicile of choice established in Argentina, while foreigners will have to apply for a identification code and appoint a representative in Argentina.

Each administrator will have to provide a performance bond. The most common practice is purchasing a surety bond from an insurance company.

4.3 Registration procedure for local companies

In order to incorporate and register a SA, SAU or SRL, registrants will first have to prepare certain documents required by applicable laws, arrange for signatures in the public deed of incorporation (SA and SAU) or have signatures certified (SRL), perfect other documents, publish notices in the Official Gazette, and then make their filings with the respective Public Registry. The length of the registration procedure will depend on the type of application: (i) 24 hours for expedited registration (standard by-laws) or (ii) approximately 15 working days for ordinary registration.

Concerning SASs, expedited registration (within 24 hours) is applied for by electronic means by populating the personal details of partners, administrators, supervisory committee’s members (if any) and/or administrators’ or partners’ representatives (if any). In addition, the registrant shall pay all applicable fees and forms, comply with capital payment requirements, secure the company’s registration and tax identification number (CUIT), and establish a bank account. This procedure is possible to the extent the standard by-laws provided by the IGJ are used.

5.Social Security and Labor Regime

5.1. Employment Contract (Ley 20744)

For purposes of this law, employment is defined as any legal activity rendered in return for pay or remuneration for someone who is entitled to manage it.

There is an employment contract, whatever its form or denomination, whenever a natural person is bound to perform acts, works or render services for another person who hires them during a determined or undetermined period of time in return for remuneration pay. The terms and conditions of such contract are governed by the provisions of the labor law, statutes, collective bargaining agreements or legally binding awards, and uses and practice.

Undetermined term of employment: The employment contract is considered to be undetermined unless its term is expressly fixed or its term results from the nature of its tasks or activities.

Trial period: The employment contract for an undetermined term is considered to be a trial contract during the first THREE (3) months of its effective term. Any of the parties may terminate it during this term without cause, without a right to severance pay on termination, but with the obligation to give notice in advance.

Determined term of employment: The employment contract for a fixed term shall be effective for the term agreed upon, which cannot exceed five (5) years.

Required Notice in Advance – Conversion of Contract The required notice in advance varies, depending on whether the employment contract is for a determined or undetermined term.

Dismissal of employee before termination date gives rise to severance pay under the terms and conditions established by law.

Remuneration: It is the consideration to be received by the worker/employee as a result of their work. Such remuneration may not be lower than the minimum base salary. The employer is obliged to pay the remuneration to the worker/employee even if this one does not provide services for the sole reason of having made their services available to the employer. The value of the minimum base salary in Argentina is fixed by the salary council, who fixed it at ARS 12,500 in July 2019. This amount in Pesos is approximately USD 284 (at an exchange rate of ARS 44 to the USD).

Moreover, the employer is bound to pay the so called thirteenth salary, which amounts to one twelfth (1/12) of the aggregate remuneration earned by the worker/employee throughout the calendar year.

The thirteenth salary (called supplementary annual salary or SAC in Spanish) is paid in two (2) installments: the first one due in June 30 and the second one on December 18, each year.

The Employment Contract Act defines the labor-related entitlements granted to the worker/employee and the corresponding terms: vacation, special leaves, maternity leave, etc.

5.2. Social Security Act No. 24241

The Social Security System covers all persons who provide services under employment relation within the Argentine territory, on a permanent or temporary basis.

Every month, local employers are required to deposit employers’ and employees’ contributions to the National Social Security System and National System of Union Health Plans (Obras Sociales).

Employer’s contributions, paid by the employer, are computed on all gross salaries paid less a non-taxable threshold, which for 2019 amounts to ARS 7003.68.

Employer’s contributions rates are fixed at 26.40% on gross salaries for companies engaged in the services or trade sectors and who are not considered to be SMEs (small and medium sized companies). For the rest of the companies the percentage of employer’s contributions stands at 24%.

Companies are considered to be SMEs based on turnover and headcount (See tax incentives above).

For future years these percentages are going to be converge and the tax-free threshold will increase according to the following schedule:

Employees’ contributions (withheld from salaries)

The withholding rate to be applied by the employer on employees’ remuneration is 17%, allocated as follows:

• 11% to Pension Fund.
• 3% to the Health System.
• 3% to Social Services.

Insurance payable by the employer
Employers are required by law to pay two types of binding insurance: a) mandatory life insurance: It is a fixed amount per employee, current value at ARS 14.90. This insurance is collected by the employee’s beneficiaries/assignees, and b) workers’ comp insurance: It covers all salaries and employers’ contributions payable to an employee who has suffered an accident while performing its tasks. The payment is a percentage determined by the Superintendency of Occupational Risks (Superintendencia de Riesgos del Trabajo) according to the company’s business activity.

6.Tax System

6.1 National Taxes

Income Tax

The Argentine Income Tax is levied on worldwide income as it taxes Argentine-source and foreign-source income derived by residents in the country. In the case of foreign-source income and notwithstanding the application of International Conventions in force (item 9), the Argentine resident

may offset income tax on foreign-source income against the tax effectively paid abroad.

Corporate Income Tax

In the case of corporate income, any net worth betterment is treated as taxable income, regardless of their regularity, eventuality or reason.

Following the latest tax reform in Argentina (Act No. 27430 from December 2017), the corporate income tax has been reduced to 25%. However, this reduction has been implemented in two phases: for fiscal years commenced on January 1, 2018, a 30% rate is applicable (before it was 35%) while for fiscal years commencing on January 1, 2020, the applicable rate is 25%. To offset the effects of this reduction, a withholding is established on dividend payouts at a rate of 7% in the case of profits earned for fiscal years beginning on or after January 1, 2018, and 13% on profits earned in fiscal years beginning on or after January 1, 2020. However, dividends paid out by an Argentine company to another company in the country are not liable to such withholding tax, irrespective of the fiscal year when such earnings have been generated.

In the case of residents in the country, there is no differential treatment for foreign or national capital.  In general, companies organized in Argentina are deemed to be resident, regardless of where the capital is sourced. Furthermore, permanent establishments or branches that carry out their activities in the country and belong to foreign companies or persons are considered to be resident in the country.

In general, the companies may deduct all expenses necessary to obtain, maintain and preserve taxable income. However, some limitations are established for the deduction of the following expenses:

a) Representation expenses: up to 1.5% of salaries paid in the fiscal year.
b) Fees paid to members of the Board and statutory auditors: up to 25% of income for the year or ARS 12,500 per beneficiary, whichever is higher.
c) Fees and salaries of managers acting abroad: up to 12.5% of income (it is reduced to 2.5% if no dividends are paid out).

d) Fees payable for technical advice rendered abroad: up to 3% of sales or 5% of the investment, as applicable.
e) Depreciation of vehicles: up to an acquisition value of ARS 20,000.
f) Vehicle maintenance expenses: up to an annual amount ARS 7,200 per vehicle.
g) Financial interest and exchange differences with related companies (in the country or abroad): Up to 30% of the income for the year (before deducting the abovementioned financial charges, and the income tax and considering depreciation/amortizations at tax values), or the amount of ARS 1,000,000, whichever is higher. In the event of excess financial income that may not be deducted in a given fiscal year, the balance may be carried forward for future deduction over the following five fiscal years. This limitation does not apply to financial entities who are engaged in leasing activities and to companies within the same economic group when it is proved that the relation between interest and income is lower than the ratio of the whole economic group. Neither shall the limitation apply when the recipient of interest shows that they have paid the tax or have been subject to a withholding.

Inflation effects are to be accounted only where the three-year cumulative inflation rate (including the then current fiscal year) equals to or is higher than 100%. As a transition rule, it was established that the adjustment for inflation shall apply to fiscal years beginning on or after January 1, 2018 when inflation in any given year exceeds 55%, for the following fiscal year when inflation exceeds 30% (cumulative rate of 85%) and for the third fiscal year where inflation exceeds 15% (cumulative three-year inflation exceeds 100%).

Transfer Pricing

The Income Tax Law provides transfer pricing controls over transactions carried out with natural or legal persons, estates or related entities created, domiciled, sited or located abroad or with persons who are resident in zero or low tax jurisdictions or included in the list of “non-cooperating countries”, even when there is no economic relation with them.

Transfer pricing standards are consistent with the OECD Transfer Pricing Guidelines, which serve as an interpretation guide but have no formal enforceability.

Information to be filed with the AFIP on annual basis includes a local file, a master file and a country-by-country report. Subsidiaries of multinational groups are required to file information annually on the situation of the ultimate controlling company as regards the obligation to file the CBC Report and, if necessary, file such report directly.
There are special regulations on imports and exports made through intermediate companies related to the Argentine taxpayer or to the foreign exporter or importer, as well as the obligation to register with a Special Registry all contracts with commodity exporters who use triangulation schemes through related intermediaries or intermediaries domiciled in a low or zero tax jurisdiction or non-cooperating jurisdiction. Failure to file such contract with the Special Registry, the market price on the shipment date (end of loading) should be taken into consideration.

Existen regulaciones especiales para las importaciones y exportaciones efectuadas a través de empresas intermediarias vinculadas con el contribuyente argentino o con el exportador o importador del exterior y también obligación de registración, en un Registro Especial, de los contratos para los exportadores de commodities que triangulen las operaciones a través de intermediarios vinculados o domiciliados en una JBNT o JNC. En caso de falta de inscripción del contrato en el Registro, se deberá considerar el precio de cotización del bien a la fecha de embarque (fin de carga).

La solicitud para tramitar un APA debe interponerse ante la AFIP con anterioridad al inicio del ejercicio fiscal en el que se realizarán las transacciones. No se prevé una vigencia temporal de la DCPOI, sino que queda condicionada a que las transacciones se efectúen conforme a los términos expuestos en el acuerdo.

Natural Persons

In the case of natural persons, the tax is levied on income expressly mentioned in the Act, all other income that is habitual and involve the continuity of the source of income. In order to assess the tax on natural persons, it is generally applied on taxable income as per a progressive tax rate scale that ranges from 5% through 35%.

The following types of income are also liable to a schedular tax:

a) Interest on bank deposits.
b) Sale of:

    • Shares, securities and certificates of deposits.
    • Equity interests.
    • Shares in investment mutual funds and trusts.
    • Digital currencies.
    • Government bonds, corporate bonds and other debt securities.
    • Real property and interests on real property.

To assess the schedular tax on such income, a general rate of 15% applies. However, in the case of income earned on bank deposits, securities, corporate notes, shares in mutual funds, trusts, bonds and other securities, issued in Pesos and without adjustment clause, a 5% tax rate shall apply.

For purposes of assessing taxable income, natural persons may deduct the following concepts:

a) Expenses necessary to obtain, maintain and preserve taxable income
b) Interest on debt, restatements and related expenses, related to property that produce taxable income.
c) Interest on loans taken for the acquisition or construction of dwelling house: up to ARS 20,000 per year.

d) Insurance in case of death up to an annual amount of ARS 12,000 (2019), ARS 18,000 (2020) and ARS 24,000 (2021).
e) Donations made to certain exempt entities up to the limit of 5% of the net income.
f) Contributions to pension funds and union health plans.
g) Expenses for medical insurance plans capped at 5% of net income
h) Medical expenses capped at 40%, or 5% of net income, whichever is lower.

In addition, they may compute the following personal allowances (annual amounts) up to the limit of the taxable income for the year (values correspond to fiscal year 2019):

i) Nontaxable threshold:  AR$ 85,848.99.
j) Allowance for dependent spouse: AR$ 80,033.97.
k) Allowance for each dependent while younger than 18 years old or disabled: AR$ 40,361.43.
l) Special deduction: depending on the type of income it ranges between ARS 171.697,98 and ARS 412.075,15.

Financial income exempt for foreign recipients

Certain financial income derived by foreign recipient is exempt from income tax insofar as such beneficiaries do not reside in non-cooperating jurisdictions or the funds invested are not sourced from non-cooperating jurisdictions. A jurisdiction is considered non-cooperating when there is no Double Tax Convention or Tax Information Exchange Agreement, or when they are not applied despite existing.

For such foreign recipients the following types of income are exempt:

a) Income from purchase and sale transactions, FX transactions, swaps or sale of shares, share receipts and certificates of deposit of shares, provided such transactions have been conducted in authorized markets within our country.

b) Interest and gains/losses resulting from the purchase and sale, exchange, swap or sale of:

a) Government securities —bonds, notes and bills and other debt instruments issued by national, provincial governments or the government of the City of Buenos Aires (CABA).
b) Corporate notes (section 36 of Act 23.576).
c) Debt certificates issued by financial trusts created in Argentina and sold through public offering.
d) Participating units in open mutual funds created in the country (section 1 of Act 24083) placed through public offering.
e) Share certificates or receipts issued abroad, where the shares they represent were issued by entities domiciled, established or located in Argentina and have been admitted to public offering by the Argentine Securities Commission

Final Withholding on Foreign Recipients

The income tax on Argentine source income derived by foreign recipients, which is not expressly exempt, is subject to a final withholding at source. To calculate the tax to be withheld, the corresponding tax should be applied on a percentage of presumed net income as established by law for each type of income derived by the foreign recipient.

Below is a list (for the most common transactions) of the withholding rates applicable to each type of income, notwithstanding the ones that would be applicable due to the existence of a given double tax convention. To such effect, treatment varies depending on whether the beneficiary is located in a non-cooperating jurisdiction or not, for withholding tax rates may differ.

a) Dividend payouts.

Distribution of dividends and remittance of profits made by branches derived from income generated in the first two fiscal years commenced on January 1, 2018 are subject to a 7% withholding tax. This rate is increased to 13% on income earned in subsequent fiscal years

b) Gain/loss from the sale of shares.

The gain made on the sale of shares, certificates/receipts representing shares and other securities, pass-through certificates in financial trusts and any other right on trusts and similar agreements and shares in closed end mutual funds:

c) Interest on government bonds

Interest or yield on the following securities not placed through public offering:

  • Bonds.
  • Negotiable securities.
  • Shares in closed end mutual funds
  • Debt certificates from financial trusts
  • BCRA Bills (LEBACs).

d) Gain on the sale of certain securities

Gain on the sale of the following instruments:

  • Debt certificates from financial trusts not placed through public offering.
  • Bonds and shares in closed end mutual funds not placed through public offering.
  • Bonds and corporate notes not placed through public offering.

e) Other types of income

Notwithstanding the potential application of a Double Tax Convention, in order to assess the tax (by way of withholding) the withholding rates indicated below shall be applied on the taxable amount, which rates vary depending on the type of income earned.


This tax is regulated and collected by AFIP and is levied on the sale of goods and services. The standard rate is 21%. Certain goods and services may be subject to a reduced rate of 10.5% (some cattle, and services related to agricultural industry) while others are taxed at 27%. The increased rate applies on electricity, gas, water and other utilities by provider companies and used for purposes other than dwelling or recreational houses and to VAT registered persons or persons subject to the simplified system for small taxpayers.

Imports on goods and services are also subject to the 21% rate while exports of goods and services are zero rated.

The VAT input paid on the sale of goods and services used in producing sales or goods that are exported may be offset against the output VAT charged for the sale of services or goods in the domestic market and, in the event of any excess input VAT, such balance may be cross-creditable against any other tax liability or else reclaimed for a refund. In order to apply either of these two last options, the taxpayer should comply with the procedure established by AFIP.

VAT paid on the purchase of cars may be recovered as Input VAT. The same treatment applies to VAT on the provision of services like parking lots, hotels and restaurants, unless they are affected to conferences, etc.

Personal Asset Tax

Argentine companies are required to pay this tax on the value of shares or participating interests held by resident or non-resident natural persons and by foreign companies. Branches of foreign companies are no required to pay this tax, which criterion has been confirmed by a Supreme Court Ruling rendered on December 16, 2014 in the case The Bank of Tokyo. Argentine trusts are required to pay this tax.

The applicable rate is 0.25% on the value of shares or participating interests as it results from the financial statements as of December 31 each year.

This tax should be reimbursed by the holders of shares or participating units in the company.

This tax is also levied on natural persons and undivided estates residing in the country. It is levied on property located in the country and abroad, with certain exemptions mainly for assets located in the country: deposits with financial entities, term deposits and government securities, etc. The tax rate applicable for fiscal year 2019 and subsequent years varies, depending on the total amount of taxable goods. For such fiscal year the non-taxable threshold is ARS 2,000,000 and the applicable rates are 0.25%, 0.5% or 0.75%, depending on whether the amount taxed exceeds the referred minimum. Natural persons residing abroad only pay the tax on the taxable assets located in the country (at 0.25%).

Tax on Bank Debits and Credits

Bank debits and credits are taxed at a rate of 0.6%. This rate is reduced for some business activities.

Bank deposits and those transactions conducted as an organized system of payments, to avoid the use of bank accounts, are also taxed although at an increased rate of 1.2%.

This tax is creditable against income tax liability or else against the special contribution for cooperatives. The percentage currently considered creditable against other taxes is listed below.

Section 7 of Act 27432 authorized the Executive Power to reduce the percentage that is not creditable against income tax to a 20% per year as from January 1, 2018; providing furthermore that by fiscal year 2022 the full amount will be creditable against income tax.

As a result, the 34% computation of the tax on credits was transformed into 33% of the 0.6%, not only on credits but also on debits. Where taxable events are subject to a lower than the standard rate, the computation for purposes of cross-crediting the tax will be 20%.

Companies eligible for Promotion Regimes applicable to micro-small and medium sized companies may compute a higher percentage for cross-crediting purposes: 100% for micro and small companies and 60% for medium sized industrial companies (tier 1).

Excise Taxes

Several products and some services are subject to this tax at different rates. Taxable products and services include cigarettes, tobacco, alcoholic beverages such as whisky, brandy, non-alcoholic

beverages, champagne, motor cycles and ships in excess of a given amount, aircraft, electronic products and insurance.

Tax Incentives

There is a wide range of tax incentives intended to promote certain activities, including benefits under certain national taxes. Some provinces have certain

incentives in place to promote regional activities. Below is a list of the main national regimes in force.

Benefits for SMEs

The benefits depend on the type of company, whether it is a micro, small or medium sized business, as defined by the Ministry of Production, depending on the activity reported by the company, total annua

turnover (average of last three fiscal years) or headcount. Ruling 220/2019.

To qualify for such benefits, the Company should get registered as a SME with the AFIP.

Tax benefits in force in 2019 include: (i) extension of VAT payment due date for a term of 90 days (regularly payment is due on the month following the taxable event), (ii) full recovery of the tax on bank debits and credits by way of cross-crediting against income tax liability, and (iii)exemption of export duties on services (rebates in the acquisition of computers, training), credit lines with investment and foreign trade bank), etc.

The regime also establishes other benefits such as securing guarantees through the reciprocal guarantees scheme, benefits for digital innovation.

  • Knowledge Economy

It promotes economic activities that apply the use of knowledge and digitalization of information based on advances in science and technologies, including software and digital services, audiovisual production, biotechnology, airspace engineering, production automation solutions.

Benefits consist of tax stability, reduction of employer’s contributions to social security, tax credit bond, reduction of income tax and tax credit for similar taxes withheld abroad.

  • Investment in power generation through renewable energy sources

It promotes the generation of renewable energy sources for investments in projects coming onstream until December 31, 2017.  Benefits consist of accelerated depreciation of PP&E, early refund of VAT for investments, extension of the period to carr

forward tax losses to ten years, tax credit certificate to be applied to the payment of national taxes contingent upon integration of the national component as a percentage of electromechanical facilities.

  • Generation of distributable renewable energy

It is a promotion regime granted to persons who generate power from renewable energy for self-consumption and the injection of potential excess electric power into the power grid.

The promotional benefit consists of a tax credit certificate to be applied to the discharge of nationa

taxes; it is a nominative and non-transferable certificate to be applied to national taxes for which beneficiaries are liable.  The benefit also includes an accelerated depreciation of PP&E in the computation of income tax and the early refund of VAT on investments made.

  • Manufacturing of capital goods, information and telecommunication assets

This benefit applies to the sale of new assets used for national production (as identified by the ruling) to be used in economic activities in the Argentine territory; the benefit consists of a tax credit bond received to be applied to discharge national tax liabilities. The bond is nominative and can be transferred only once.

For sales made in 2019, the bond is equivalent to 50% of the value resulting from adding two components: 6% of the net sale price of imported inputs subject to import duties of 0%, and 8% of the net price of imported inputs with import duties higher than 0%.

In the case of micro, small and medium sized companies, the benefit is increased to 60% of the sum resulting from adding the components cited above.

The benefit may be increased insofar as the beneficiaries show the investments made to improve productivity, quality and the innovation of processes and products.

  • Construction of social housing

Construction works for social housing, including complementary infrastructure works for surrounding neighborhoods are exempted from VAT. This covers dwelling houses intended for medium and low income segments.

The benefit includes VAT exemption on the sale of dwelling houses and on construction works, providing

furthermore the computation of input VAT paid on the sale of import of goods as well as the provision of services applied to construction of dwelling houses; in addition, in the event of excess input VAT, the taxpayer may reclaim it, request a refund or offsetting option, so as to ensure the tax may be fully recovered.

  • Promotion scheme applicable to Tierra del Fuego Island, Antarctica and South Atlantic Islands

It establishes tax and customs benefits for economic activities developed in the southern province of the country and for persons residing there. A Special Customs Area and a Tax-Free Zone are created t

define the scope of exemptions and the procedures for the application of benefits in relation to goods produced in the Special Customs Area destined to the continental territory.

  • Mining Activity. Forestry Activity

The “tax stability” benefit is granted for both industries. Under this benefit, companies shall not see an increase in their total tax burden per jurisdiction and by undertaking over a term of 30 years (that may be extended to 50 years in the case of forestry). It covers direct taxes, rates, tax contributions, as well as import and export duties.

The AFIP (Argentine Revenue Administration) has yet to regulate the form, terms and conditions for refunds.

  • VAT Excess Input VAT on investments in PP&E, except vehicles

Act No. 27.430 (OB December 29, 20187) introduced a permanent mechanism for VAT refunds on the purchase, construction, manufacturing, production and importation of PP&E to promote investments made as from January 1, 2018.

The refund shall be admissible provided the VAT on such investments has formed part of the excess input VAT in the VAT tax return of the taxpayer after six consecutive tax periods (6 months) as from the initial computation of such VAT. That is, after 6 months have elapsed from the incorporation of the asset without being able to offset the input VAT paid on its purchase after computing all output VAT and other tax credits corresponding to the same period.

The proceeds from the refund shall be final and cannot be reverted insofar as, once 60 tax periods have elapsed, such amounts match the sums actually paid as a result of offsetting input VAT against output VAT on taxable transactions in the domestic market. In general, exports of goods and services are not taxable with VAT.

6.2. Provincial Taxes

Turnover tax

It is a jurisdictional tax. Each of the 23 Argentine provinces and Tierra del Fuego established their own local regulations to levy this tax on the sales an

services performed in their territories. In general, exports of goods and services are not taxable with turnover tax.

Stamp tax

It is a jurisdictional tax such as the tax referred to above.  This tax is levied on legal acts for valuable consideration executed with formal instruments and

monetary transactions registered with financial entities representing delivery or receipt of money and accrue interest.

6.3. Municipal taxes

Municipal rates

Municipalities finance a large part of their municipal budget through taxes, duties and contributions. Rates vary across municipalities. The most common include licensing tax; safety and hygiene; lightening, sweeping and cleaning; driver licenses; maintenance of public roads and streets; installation and verification of antennas; publicity and advertising taxes, etc.  Over the past years rates have been gradually phased out, in many cases, due to inefficient or absence of services, and due to the

sizable and irrational amounts being applied. As a result, such rates have become actual taxes that are inconsistent with the prohibition to apply taxes as set forth by the federal and provincial tax sharing agreement.

7. International Conventions

Argentina has signed Tax Conventions to Avoid Double Taxation with the following countries: Germany, Australia, Belgium, Bolivia, Brazil, Canada, Chile, China, Denmark, United Arab Emirates, Spain, Finland, France, Italy, Japan, Mexico, Norway, Netherlands, Qatar, United Kingdom, Turkey, Russia, Sweden and Switzerland.

It has customs agreements and international social security agreements in place with several countries.

To have access to information per transaction or situations in other jurisdictions, the Federal Revenue Administration (AFIP) shall be based on three regulatory frameworks:

-Bilateral Information Exchange Agreements entered into with zero and low tax jurisdictions (such as San Marino, Bermuda, Bahamas, etc.).

-The OECD Convention on Mutual Administrative Assistance in Tax Matters that allows for the exchange of information between the signatory countries.

-Tax Conventions to Avoid Double Taxation.

In all cases, information may be delivered “upon request” or “voluntarily”.

Specialist professionals

Gabriela Clerc
Andrés Saladino
Felix Rolando