Investing In... 2024 Comparisons

Political System

Argentina is organised as a federal republic with a democratic political system. Although each of the 24 jurisdictions (23 provinces and the City of Buenos Aires) enjoys a strong degree of autonomy (each has its own constitution, holds elections for its governor and legislators, and appoints judges to its provincial courts), federal laws pre-empt provincial legislation in several matters.

The National Constitution divides the federal government into three branches: the executive, the legislative and the judiciary. The first one, headed by the President, is the dominant branch at the federal level. The President is elected by direct vote and may serve a maximum of two consecutive four-year terms. The legislative branch (Argentine Congress) consists of two houses: the Senate and the House of Representatives.

Judicial System

A federal and a provincial judicial system co-exist in Argentina. Each province has its own lower and appellate courts together with a Provincial Supreme Court. There is at least one federal court of lower jurisdiction in each province, several Federal Courts of Appeals and the Argentine Supreme Court.

The Argentine Supreme Court has the power to review all decisions involving the interpretation of the National Constitution and has original jurisdiction over some cases of federal legislation, such as those in which a state is a party as well as all cases concerning ambassadors, ministers or foreign consuls.

In connection with decisions issued by governmental agencies, Argentine law allows resorting to the judicial system once all steps pertaining to administrative proceedings have been exhausted.

Legal System

Argentina has a civil law legal system, with a uniform substantive law (despite the above-mentioned federal system), with the following common to all provinces:

• the Civil and Commercial Code;
• the Criminal Code;
• the Aeronautic Code;
• the Labour Code;
• the Social Security Code; and
• the Mining Code.

Civil Procedure Codes approved by each Provincial Congress materially resemble the provisions contained in the Federal Code of Civil and Commercial Procedure.

Argentine Agency of Investment and International Trade

Argentina does not have a public office specifically dedicated to the supervision of foreign investments. However, the Argentine Agency of Investment and International Trade (Agencia Argentina de Inversiones y Comercio Internacional) is in charge of:

• engaging investors with government entities to facilitate and fast-track processes;
• assisting investors in alternate conflict resolution proceedings throughout the investment life cycle;
• providing updated statistics on investment-related issues and specific information in every sector; and
• developing ad hoc analysis and information packages for potential investors.

Foreign Investment Act

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. Generally, there are no limitations on the participating percentage by foreigners in a local entity, regardless of the type of vehicle chosen.

Argentina has executed a number of Bilateral Investment Treaties with third countries and is a member of the Multilateral Investment Guarantee Agency, the Overseas Private Investment Corporation and the International Centre for the Settlement of Investment Disputes.

Certain Limitations on Foreign Investment

Despite the general rule of equality set forth by the Foreign Investment Act, there are certain specific regulations that establish restrictions to investment by foreign individuals or entities in Argentina. The most relevant of these restrictions are the following.

• Security Zones Regulations provide that foreign individuals or entities must obtain an exceptional governmental authorisation to acquire ownership or other rights (including leases) over lands located near international borders or certain security areas. This is also further described in 7.1 Applicable Regulator and Process Overview.
• The Cultural Heritage Act provides that foreign entities or individuals can own up to 30% of the stock or voting rights of any national broadcasting company.

Until recently, there were two other relevant restrictions affecting foreign investments: the Rural Lands Act limited the acquisition of rural lands by foreign individuals or entities, and the Aeronautic Code provided that most stock or voting rights of national aviation companies dedicated to the internal transportation of passengers, cargo or mail had to be owned or controlled by Argentine companies or individuals domiciled in Argentina. However, Decree of Necessity and Urgency (DNU) No 70/2023, in force since 30 December 2023, repealed the Rural Lands Act and modified the relevant sections of the Aeronautic Code, thereby eliminating such restrictions.

A New Government to Fix Long-Lasting Problems

On 10 December 2023, Javier Milei took office as president after obtaining 55.65% of valid votes and prevailing by a considerable margin over Sergio Massa, the Minister of Economy and candidate of the government in office at the time. Milei defines himself as a liberal libertarian, and as such, his campaign focused on proposing profound changes to the country’s political, economic, monetary, and fiscal policies.

By the time the new government took office, Argentina’s macroeconomic situation was extremely delicate, as shown by some concerning indicators listed below:

• In 2023, the inflation rate was close to 200%, and Argentina recorded a deficit of around 3% of its GDP, which contracted by 1.8% during the year.
• The Central Bank’s negative net foreign exchange (FX) reserves amounted to approximately USD10.4 billion, which explains why – especially during the last few months of 2023 – the former government did not grant, or significantly delayed, import authorisations of goods and services required under the SIRA and SIRASE systems mentioned in 8.1 Other Regimes. Consequently, by the end of 2023, the foreign commercial debt of Argentine private companies was estimated to exceed USD56 billion.
• By 10 December 2023, the Argentine peso had devalued roughly 227% interannually with respect to the US dollar at the official FX rate, and 300% at the MEP FX rate, and by 31 December 2023, by 441% and 303%, respectively. The steep acceleration of the devaluation of the Argentine peso in December 2023 – by more than 200% at the official FX rate – was decided by Milei immediately upon taking office, to reduce the spread between the official FX rate and the MEP FX rate, and to encourage exports as a measure to recover Central Bank reserves. The MEP FX rate, a legal mechanism to obtain US dollars by operating with certain bonds in the local stock market, is considered a more realistic indicator of the devaluation of the Argentine peso because – due to FX restrictions further described in 8.1 Other Regimes – the official FX rate is not generally available for the acquisition of US dollars.

What to Expect

President Milei has acknowledged the severe challenges ahead and has indicated that there is no room for gradualism, instead promising to implement several significant measures swiftly. Below, are some relevant announcements Milei made after being elected (and some related projections), as well as the first measures his government adopted after taking office:

• The government expects to eliminate Argentina’s primary deficit in 2024, by significantly cutting spending on various fronts – including discretionary transfers to provinces and subsidies – and by privatising loss-making state-owned companies. Analysts expect GDP to contract by 1.2% and inflation to ramp up to more than 300% in 2024, the latter being driven mainly by repressed inflation and expected further significant official FX rate adjustments by the new government. As anticipated by Milei, such combination will probably generate stagflation in 2024 and 2025, after which, Milei expects to be able to control inflation and start seeing GDP growth.
• FX control will continue, at least throughout 2024.
• The government has indicated that it will strictly honour Argentina’s commitments. It is expected that the new government will be able to successfully negotiate an Extended Fund Facility with the IMF and obtain additional funding elsewhere. This will be key for Argentina in order to meet short-term maturities, given the Central Bank’s lack of FX reserves.
• The president issued DNU No 70/2023, effective as of 30 December 2023, which, in addition to other matters, repealed and modified a great number of laws and regulations to significantly deregulate the economy.
• On 27 December 2023, the government sent an omnibus bill to the Argentine Congress (the “Omnibus Bill”). Among other things, the bill:
1. declares a public emergency in economic, financial, fiscal, social security, security, defence, tariff, energy, sanitary, administrative and social matters until 31 December 2025, extendable for two additional years, and includes a broad delegation of legislative powers to the executive branch during such emergency;
2. includes a reform of the public administration, public employment and the Administrative Procedures Act, and of the electoral, education, judicial, public health and transportation systems;
3. authorises the privatisation of state-owned companies;
4. restricts protests and increases penalties for affecting public transportation;
5. contains a new antitrust law, certain tax reductions, a tax moratorium and the possibility to regularise employment relations;
6. includes several deregulation measures, such as the repeal and amendment of many existing laws applicable to several industries, including meat, energy, oil and gas, and tourism; and
7. creates a special incentive regime for large investments with certain tax, exchange and customs-related benefits and regulatory stability for 30 years.

It is expected that the government will continue issuing decrees and sending bills to the Argentine Congress in 2024 to make further reforms. Meanwhile, Milei’s campaign promises to dollarise the economy have apparently been paused, at least for the first period of his presidency, during which measures will be focused on reducing inflation, rebuilding the Central Bank’s virtually non-existent reserves and deregulating various sectors of the economy. In that respect, it is yet to be seen whether Milei will have congressional support to implement his proposals, and if so, whether the outcome of such proposals will be successful. It is at least a positive sign that Milei appears to be willing to take unpopular but – according to many specialists – crucial measures to try to rebuild the country’s economy.

Most Common Structures for Acquiring a Business

The two most common structures for acquiring a business in Argentina are stock deals and asset deals. Of these, stock deals are considerably more popular, mainly for the reasons detailed below.

• Tax efficiency – from a seller’s perspective, selling shares is generally more tax-efficient than selling assets, because:
1. shareholders transferring shares of a local entity are taxed at a rate of 15% over the net gain (note that foreign shareholders can elect to be subject to an alternative rate of 13.5% over the purchase price); and
2. local companies selling assets are taxed on a sliding scale rate ranging from 25% to 35% over the income made by such sales, in addition to other taxes that may apply over the transaction –
1. value added tax at a rate of up to 21%;
2. turnover tax at a rate (variable depending on the local jurisdiction) of around 3% or 4%; and
3. stamp tax at a rate (variable depending on several factors) between 0.5% and 4%, approximately.
• Simplicity – from the perspective of permits, it is generally much simpler to acquire a target company that owns and operates a business, and will continue to do so following closing, than to transfer the relevant assets and permits (or obtain new permits, in some cases) to the acquiring entity.

Liability Regime in Asset Deals

As a rule, a buyer will not assume the liabilities and contingencies of the seller by acquiring its assets. An exception to this general rule applies if the assets involved in the transfer fall within the definition of a total or partial “transfer in bulk” or of a “going concern” provided under the Bulk Transfer Law. In this case, if the buyer does not rigorously follow the procedure of the Bulk Transfer Law, the buyer may be held jointly liable with the seller vis-à-vis the seller’s creditors. Also, in order to avoid the assumption of the business’s prior tax and social security liabilities, there are special proceedings – complex and lengthy – both at a federal and provincial level.

Given that the procedures set forth in the Bulk Transfer Law and federal and provincial tax regulations are burdensome, parties to a transaction only rarely decide to follow those.

Acquisition of Public Companies

In order to acquire all or a substantial portion of the assets of a public company, such sale must be approved at a shareholders’ meeting of the public company.

Alternatively, after acquiring a controlling participation in a public company (ie, more than 50% of the voting rights) or in order to acquire all outstanding shares of a public company, a mandatory public acquisition offer must be made to the other shareholders. In such cases, the offering party will have to comply with specific requirements and procedures set forth by law.

Certain M&A transactions may be subject to government approval or to mandatory filing requirements (whether to provide notice or to obtain registration of the deal), depending mainly on the industry involved or the type of transaction.

Below is a list of some examples of transactions that may be subject to government approval or mandatory filing:

• acquisitions or mergers of financial institutions require the prior approval of the Central Bank;
• mergers must be registered with the Office of Companies and, if structured as tax-free economic group reorganisations, with the Federal Tax Authority;
• initial public offerings as well as voluntary and mandatory offers to acquire publicly listed shares are subject to the prior approval of the National Securities Commission;
• the acquisition by a foreign investor of any interest (ownership, lease or similar right) in real estate near an international border or in certain security areas is subject to a prior exceptional approval – this is described in further detail in 7.1 Applicable Regulator and Process Overview;
• the acquisition of shares of insurance and reinsurance companies and the mergers and spin-offs of such entities require the prior approval of the Insurance Regulator (Superintendencia de Seguros de la Nación);
• the acquisition of companies owning products registered with, or otherwise operating under the scope of, the Federal Foods and Drugs Administration (Administración Nacional de Medicamentos, Alimentos y Tecnología Médica, or ANMAT) generally do not require government authorisation, whereas the transfer of the products themselves may be subject to ANMAT’s approval;
• the transfer of licences or shares of a company holding a licence from the National Communications Authority (Ente Nacional de Comunicaciones, or ENACOM), which regulates the internet, fixed and mobile telephony, radio, mail and television, must be done ad referendum of ENACOM’s approval; and
• in general, the assignment of contracts with the federal state and change-of-control transactions affecting companies with certain types of contracts with the state require prior government approval.

Corporate Governance Rules

Corporate governance rules in Argentina are mainly set forth in the Companies Act and, in the case of publicly listed companies, in the Capital Markets Act.

Directors of Argentine companies are subject to the duties of care, loyalty and good faith. Generally, directors are not personally liable before the company or third parties for the performance of their duties unless they breach such duties.

Shareholders that, on a given transaction, have an interest contrary to that of the company cannot vote on the resolutions or agreements related to such transaction. Also, shareholders that have not voted in favour of resolutions adopted in violation of the law of the by-laws of the company are entitled to legally challenge such resolutions. Directors and members of the surveillance committee of the company may also challenge such resolutions.

Gender diversity rules by the IGJ

In August 2020, the Office of Companies of the City of Buenos Aires (Inspección General de Justicia, or IGJ) enacted General Resolution 34/2020, as amended, to promote gender diversity. Pursuant to it, certain entities incorporated with the IGJ must have the following composition in their administrative bodies and, if applicable, in their surveillance committees: (i) in the case of an even-numbered body, the same number of women as men; (ii) in the case of an odd-numbered body, at least one third must be women.

However, in August 2021, a decision by the Division C of the National Commercial Court of Appeals stated the inapplicability of General Resolution 34/2020 in a case in which an entity affected by such resolution had challenged its validity. The IGJ challenged the competence of the National Commercial Court of Appeals, which ratified its competence, for which the IGJ has filed a direct motion before the Argentine Supreme Court, which has yet to decide whether to hear the case or not.

Corporate Forms Typically Used

Foreign companies may operate in Argentina either through a branch or through a wholly or partially owned subsidiary. Any such subsidiary may operate under any of the several types of corporate entity available. The most common are (i) the stock corporation (Sociedad Anónima, or SA); and (ii) the general partnership (Sociedad de Responsabilidad Limitada, or SRL). As from 2015, single-shareholder stock corporations (Sociedad Anónima Unipersonal) are allowed as a subtype of a stock corporation. Since then, the use of such type of entity has slowly become more frequent. Also, one of the proposals of the Omnibus Bill is to allow, as a subtype of SRLs, single-partner general partnerships (Sociedad de Responsabilidad Limitada Unipersonal).

Foreign entities wishing to hold an interest in an Argentine entity must register with the Office of Companies as foreign shareholders. Also, foreign shareholders – whether entities or individuals – must register with the Federal Tax Authority and obtain a tax ID (Clave de Identificación).

Foreign shareholders registered with the IGJ

In May 2021, the IGJ enacted General Resolution 8/2021, which states the following main rules.

• Foreign entities filing for registration as “vehicle companies” with the IGJ must state such condition at the time of filing for registration. If not originally registered as “vehicles”, foreign shareholders will not be allowed to subsequently become vehicle companies. Vehicle companies are defined by the IGJ as entities whose place of incorporation or registration prohibits or restricts the development of all their activities or their main activity or activities, or that cannot provide evidence of having an economically significant activity outside Argentina (ie, non-current assets or shareholdings abroad).
• The IGJ will not allow the registration of more than one vehicle company per economic group.
• The IGJ will not allow the registration of a vehicle company if its direct or indirect controlling company is already registered in Argentina, either as a branch, permanent representation or foreign shareholder.
• The IGJ will not allow the registration of a vehicle company resulting from a chain of control between successive single-shareholder entities.
• The IGJ will not allow the registration of Argentine single-shareholder entities whose sole shareholder is also a foreign single-shareholder entity, whether it is a vehicle or not.
• Foreign companies with shareholdings “mainly” in companies domiciled and with headquarters in the City of Buenos Aires, must be registered with the IGJ, irrespective of whether such foreign companies are already registered in other provincial jurisdictions. The IGJ rules provide certain criteria to determine if a foreign company has shareholdings “mainly” in companies within the jurisdiction of the City of Buenos Aires.
• Companies filing for registration as foreign shareholders with the IGJ must include a statement detailing their investment plan (mainly, their activity abroad, the local entities they want to incorporate or in which they wish to participate and their activity, the identity of other shareholders and the number of shares they intend to acquire or subscribe).

These rules are under revision by the new IGJ authorities, and changes are expected during the first quarter of 2024.

Certain Considerations When Selecting the Type of Company to Incorporate

Liability regime

As a rule, the parent company of a branch is liable with all of its assets for the obligations of its branch, whereas shareholders of a local company are only liable up to the amount of capital contributed to the company by such shareholders. However, in certain very exceptional cases, local courts may apply the doctrine of “piercing the corporate veil” so that shareholders may be held jointly and severally liable together with the legal entity for acts or omissions performed by the subsidiary.

Tax treatment

Although SAs and SRLs are subject to the same tax treatment in Argentina, SRLs are eligible entities that may be treated as partnerships or disregarded entities for taxation purposes in other jurisdictions (eg, SRLs qualify to make a check-the-box election for US Federal Income Tax purposes). Branches are also generally treated in the same way as subsidiaries, since they are considered Argentine tax residents, except for the treatment of personal assets tax corresponding to shares and participations: while companies are taxed 0.5% over the shareholdings held by natural persons and legal entities located abroad, branches are not subject to this tax.

Public companies

Only SAs can publicly list their shares. However, other types of companies, such as SRLs and branches of foreign corporations, are allowed – together with SAs – to publicly issue notes (obligaciones negociables). Nonetheless, most issuers are still SAs.

The Companies Act

When a corporation has different classes of shares, the by-laws can provide that each class elects one or more directors. If that is not the case, then shareholders have the right to elect up to one third of the vacancies to be filled on the board of directors by the cumulative voting system. Also, the board of directors may not be renewed in a partial or staggered manner if by doing so the exercise of the cumulative vote is prevented.

In the case of corporations in which the state owns at least 51% of the shares of the company, private shareholders owning at least 20% of the company’s shares are entitled to proportional representation on the board of directors and to elect at least one member of the surveillance committee.

Capital Markets Rules

The Capital Markets Act contains certain specific defence provisions for minority shareholders of public companies. The main protection relates to several disclosure obligations imposed on public companies, both periodically and to inform about relevant events.

Also, where an entity or individual acquires a controlling share of a public company (whether a voluntary or mandatory offer triggered under certain circumstances set forth by law), or where the public company itself makes an offer to acquire its own publicly traded shares so as to go private, there are certain rules aimed at protecting minority shareholders. In such instances, in addition to disclosure obligations to which both the acquiring entity/individual and the target company are subject, the law sets forth a specific mechanism – applicable to mandatory public offerings as well as certain voluntary public offerings – to determine the fair price per share.

Annual Reporting Regime With the IGJ

In 2020, the IGJ – where most foreign entities are registered as foreign shareholders – reinstated the Annual Reporting Regime (Régimen de Información Anual, or RIA).

The purpose of the report is to show that the foreign entity’s main activity is performed outside Argentina. The RIA requires foreign companies – within 120 calendar days after the end of their subsidiaries’ or branches’ fiscal year – to file the following with the IGJ:

• evidence that they own equity interests in other foreign companies or assets outside Argentina, which under Generally Accepted Accounting Principles (GAAP) would be considered non-current assets; and
• the disclosure of their shareholders and beneficial owners.

Stock Exchanges

The main stock exchange in Argentina is Bolsas y Mercados Argentinos (BYMA). Shares are purchased and sold on the BYMA through authorised brokers, some of whom are related to national or international banks or international broker dealers. Negotiable instruments are also traded on the BYMA. The system is controlled by the National Securities Commission (Comisión Nacional de Valores, or CNV), which has functions similar to those of the Securities and Exchange Commission (SEC) in the USA. Listed companies must file their financial statements and board of directors’ reports quarterly with the exchange, and file annual audited financial statements.

The over-the-counter market is also regulated by the CNV. The daily volume of shares traded is similar to that of the BYMA, and the volume of government securities traded is considerably higher. The shares traded in this market are those of the companies listed on the BYMA.

To list shares on the stock exchange, a company must be registered for public offering with the CNV and must submit an application including several items of documentation and information.

Primary Sources of Funding for Businesses

Despite efforts from current and recent policymakers, financing through capital markets in Argentina is only reserved to seasoned issuers and a limited range of local products.

The main goals of Argentine securities regulations are:

• to protect investors;
• to reduce systemic risks; and
• to guarantee transparency and efficiency in markets.

Recent amendments in these regulations were intended to strengthen transparency rules, provide a more expeditious registration procedure for public offering, and to generalise mandatory tender-offer rules. Some of these provisions are explained in 4.2 Relationship Between Companies and Minority Investors under “Capital Markets Rules”.

Foreign investment funds are not subject to FDI regulatory reviews in Argentina. Where foreign investment funds conduct regular activity in Argentina (as opposed to isolated acts), they will be required to incorporate a permanent establishment in the country – ie, either a branch or local subsidiary, as explained in 4.1 Corporate Governance Framework under “Corporate Forms Typically Used”.

Merger Control Regulations

Argentine Merger Control Regulations (the “Regulations”) require certain economic concentration transactions (“economic concentrations”) to be notified to and approved by the Argentine Antitrust Authority (ie, the Trade Secretariat of the Ministry of Economy, which is the adjudicating authority, and the National Commission for the Defence of Competition, which issues non-binding reports – together, the “Antitrust Authority”).

Economic concentrations affected by the Regulations are those resulting in the control or attainment of substantial influence, directly or indirectly, of one or more companies or assets. Economic concentrations subject to notification include mergers, transfers of ongoing concerns, stock acquisitions, asset acquisitions, shareholders’ agreements, joint venture agreements and any other agreement granting de jure or de facto control or substantial influence over management decisions of a business (provided that they meet the quantitative thresholds explained below in “Transactions Covered”, and that none of the legal exemptions explained further below in “Exempt Transactions” applies).

Note that one of the proposals of the Omnibus Bill is to repeal the Antitrust Act currently in place and replace it with a new Antitrust Law with some significant changes to the regulations that are explained in more detail in this section, 6. Antitrust/Competition. Some of the proposed changes are to significantly increase the notification thresholds, allow voluntary notification of mergers that fail to meet the thresholds, enable ex-officio reviews of mergers that do not meet the notification thresholds, and to create a new Antitrust Authority.

Transactions Covered

An economic concentration must be notified to the Antitrust Authority if the following two thresholds are met:

• the combined Argentine annual net sales of the acquiring group (including its controlling and controlled entities) and the acquired group (including its controlled entities), including exports by foreign subsidiaries to Argentine clients as well as exports from Argentine subsidiaries to clients abroad, during the last fiscal year exceed ARS16,255 million; and
• either the amount of the Argentine portion of the transaction or the value of the assets to be transferred in Argentina exceeds ARS3,251 million.

The quantitative threshold amounts must be updated by the Antitrust Authority before 31 January of each year (those mentioned above correspond to 2023). Therefore, new quantitative thresholds are expected to be issued by the Antitrust Authority on (or around) 31 January 2024. Also, an economic concentration may require notification despite not meeting the second threshold listed above if the acquiring group was involved in prior transactions – that meet certain parameters – in the same relevant market in Argentina.

Exempt Transactions

The following economic concentrations are exempt from the notification requirement:

• acquisitions of companies in which the buyer already owns more than 50% of the shares and of the voting rights, as long as it does not entail a change in the nature of control of the company (ie, from sole to joint control or from joint to sole control);
• acquisitions of bonds, debentures, notes and non-voting shares;
• acquisitions of a single Argentine company by a foreign company that owns no assets in Argentina (excluding those held for residential purposes) nor shares in other Argentine companies, and has had no significant, regular and periodic exports to Argentina during the preceding 36 months; and
• acquisitions of companies in liquidation that did not transact business in Argentina in the preceding year, except if the main activity of the target company is the same as that of the acquirer.

According to well-established case law of the Antitrust Authority, the above legal exemptions are to be narrowly interpreted.

Notifying Entity

Economic concentrations must be notified by the direct acquirer (or its immediate controlling entity or the parent entity of the economic group). In the case of mergers, notification must be made by the “merging” and the “merged” entity. In all cases, notification by the seller is voluntary; however, the Antitrust Authority may expressly require the notification also to be performed by the seller, depending on the circumstances of the economic concentration under review.

Filing Deadline

Current ex-post merger control regime

Pursuant to a transitory clause embedded in the Regulations, until one year after the creation of the new Antitrust Authority, the notification of a reportable economic concentration may take place any time (as from the moment the parties execute some sort of binding legal document) up to one week after the closing or the acquisition of control, whichever happens first. Therefore, at present, there is no stand-still obligation, and the notifying companies may consummate an economic concentration without first having antitrust approval, and notify up to one week thereafter.

Even if closing without antitrust clearance is allowed, the Antitrust Authority always retains the power to – partially or totally – undo economic concentrations that are considered to be anti-competitive and harmful to the general economic interest. Recently, in a handful of reportable economic concentrations triggering competition concerns in Argentina, the Antitrust Authority issued injunctions requesting the merging parties to suspend or halt the implementation of their merger in Argentina, several months after the parties had closed and consummated their transaction.

Envisaged ex-ante merger control regime

Once one year elapses from the creation of the new Antitrust Authority (although its creation is uncertain at the present time) and thus the above-mentioned transitory clause in the Regulations expires, the ex-ante merger control regime will become operative. At that time, the consummation of economic concentrations or the acquisition of control without prior authorisation from the Antitrust Authority will be prohibited and sanctioned accordingly.

The Regulations do not stipulate a specific deadline for the notification once the ex-ante regime becomes effective. However, it would be in the parties’ interest to file as early as possible after signing, to obtain a clearance decision from the Antitrust Authority and thus be legally allowed to close the economic concentration.

The Regulations provide that economic concentrations that have the object or effect of restricting or distorting competition in a manner that may affect the general economic interest are prohibited. The general economic interest has been interpreted as comparable to the concept of economic efficiency, although more inclined to consumer surplus than to total surplus.

According to the Antitrust Authority’s guidelines, the following economic concentrations would be deemed unlikely to trigger competition concerns:

• horizontal economic concentrations (ie, those taking place between competitors) resulting in a post-transaction combined market share not exceeding 20% of the relevant market; and
• vertical economic concentrations (ie, those taking place between companies active in different stages of the production chain of the same good or service) where the market shares of the merging parties in both the upstream and downstream relevant market do not exceed 30% (ie, in the supply and demand of the product concerned, respectively).

The Antitrust Authority may request structural and/or behavioural remedies or commitments from the merging parties in order to approve a reportable economic concentration if it may be deemed potentially harmful to the general economic interest.

Process – Timing

Under the Regulations, the Antitrust Authority has a maximum of 45 business days (as from the filing of a complete and accurate notification) to issue a decision that must either:

• approve the economic concentration;
• conditionally approve the economic concentration subject to the fulfilment of certain conditions; or
• prohibit the economic concentration.

However, if the Antitrust Authority considers that the reported economic concentration has the capability to distort competition, it will issue a statement of objections to the parties (which is made public), extend the deadline mentioned above for up to an additional 120 business days and summon the parties to a special hearing to explore potential remedies to address the Antitrust Authority’s competition concerns.

In practice, the above deadlines are regularly suspended by the Antitrust Authority by means of issuing information requests to the notifying companies, to which they have 30 business days to respond. Generally, once the information request is fully answered, the Antitrust Authority’s clock restarts.

The Antitrust Authority is highly unpredictable in terms of the time taken to issue clearance decisions. At present, the Antitrust Authority is taking, on average, between ten and 18 months to clear non-problematic economic concentrations. In the case of economic concentrations posing competition concerns and where a remedy might be requested, the Antitrust Authority can take between two and four years to issue clearance.

Appeals

The Antitrust Authority’s decision to partially or totally block a reportable economic concentration may be appealed to the Federal Court of Appeals in Civil and Commercial matters, and the appeal must be filed within 15 business days. The Regulations provide for the creation of a specialised division – that has not yet been created – within such court of appeals, which will hear appeals to decisions adopted by the Antitrust Authority.

Although there is no specific foreign investment/national security review regime applicable to FDI, certain laws and regulations may affect the possibility of investments by foreigners, as mentioned in 1.2 Regulatory Framework for FDI.

In particular, there are certain legal limitations affecting the possibility for foreigners – whether individuals or entities (including local subsidiaries) – to hold ownership or other types of rights (including leases) over lands located near certain international borders or certain security areas.

Security Zones Regulations

Restrictions

“Security zones” are certain areas – specifically determined by the Ministry of Defence – near international borders or surrounding certain specific real estate property located within Argentina.

The Security Zones Regulations (Decree Law 15,385/44, Law 23,554, Law 26,338, Law 22,352, Law 26,737 and Resolution 166/2009 of the Ministry of Domestic Affairs) set forth that any transaction involving real estate located within security zones must be previously approved by the National Commission of Security Zones (NCSZ). The purpose is to allow the federal government to keep control over those strategic security zones, for national defence purposes.

Pre-closing approval

The transfer of ownership, the granting of a lease or any form of personal or real right, by which the possession or tenancy of a real estate property located within a Security Zone is transferred to a foreign individual or entity (defined broadly so as to include local subsidiaries of foreigners), is subject to the prior approval of the NCSZ under an exception standard. This means that the approval will be subject to stricter requirements than those applied to approval requests made by Argentine individuals or entities.

The filing before the NCSZ requires the parties to provide a copy of the transaction agreement (together with various other documentation and information, including an investment plan to be made in the real estate concerned). Therefore, in principle, the filing cannot be made before signing the relevant agreement.

Although the NCSZ has discretion as to whether to authorise or reject a proposed transaction, in general, transactions are cleared provided that the parties fully comply with the requirements of the filing.

See 7.1 Applicable Regulator and Process Overview.

See 7.1 Applicable Regulator and Process Overview.

See 7.1 Applicable Regulator and Process Overview.

Foreign Exchange Control Regime

Argentina has strict FX control affecting the FX market, the ability for local and foreign residents (either companies or individuals) to perform cross-border transfers – including payments of principal and the interest on loans and other indebtedness, services provided by foreign residents and imports – and the ready availability of foreign currency for exporters of goods and services.

That being said, in December 2023, the new government implemented several changes to the existing FX control regime aimed at simplifying the process for importing goods and services and making it more transparent.

Below is a brief overview of certain FX regulations that may be particularly relevant to FDI.

Legal entry of export proceeds of goods and services

Argentine exporters of goods and services are required to transfer their export proceeds into Argentina and exchange them for Argentine pesos (legal entry of export proceeds of goods and services). Of these proceeds, 80% must be exchanged in the official FX market, and the remaining 20% must be exchanged through blue chip swap transactions consisting of buying and selling certain bonds (which implies a higher exchange rate than the one obtained in the official FX market). In the case of exports of goods, the timeframe for the legal entry and conversion of export proceeds depends on the applicable tariff position of the product, while in the case of exports of services, the deadline for compliance with the legal entry of the proceeds is five business days upon collection.

Profits and dividends

Except under certain circumstances, local legal entities require prior written authorisation from the Central Bank to access the FX market for distribution of profits and dividends abroad. Such authorisation is rarely obtained in a timely manner.

The most relevant exception to the rule is local companies that have received direct investment (equity/capital) contributions through the official FX market since 17 January 2020, to the extent all the following conditions are met:

• the aggregate amount of the transfers abroad on account of profits and dividends made through the FX market since 17 January 2020, including the payment being requested, does not exceed 30% of the amount of the new contributions of FDI received as from 17 January 2020 (computed in Argentine pesos);
• the transfer abroad is intended to be made within a term not less than 30 calendar days as from the settlement in the FX market of the last contribution that is computed for the purposes of the requirement set forth in the first condition mentioned above; and
• the local company must provide written evidence of the definitive capitalisation of the capital contributions, or proof of the initiation of the registration procedure before the relevant Office of Companies of the capitalisation of the contributions, and undertake to submit the documentation of the definitive capitalisation of the contribution within 365 calendar days from the initiation of the procedure.

Repatriations by foreign residents

Repatriation by foreign residents of either foreign direct investments or portfolio investments requires prior written authorisation from the Central Bank, which is rarely obtained in a timely manner.

Prohibitions against selling foreign currency denominated securities before and after requesting access to the FX market

Local entities and individuals cannot sell foreign currency denominated securities, or transfer such securities to a depositary institution located abroad (i) during the previous 90 or 180 calendar days from the date on which access to the FX market is being requested; and (ii) for the subsequent 90 or 180 calendar days (the timing varies depending on the applicable law of the security used for the transaction).

Thus, although blue chip swap transactions are not specifically forbidden, in practice, these new regulations imply an effective restriction on performing these types of transactions for companies or individuals that usually operate through the FX market.

Imports of goods

As from 13 December 2023, the government eliminated the web-based system, SIRA, through which importers had to request authorisation to import goods and pay for them through the official FX market. Instead, importers may now access (through their local banks) the official FX market – without prior approval from the Central Bank – to make deferred payments for new imports following their customs entry into the country, as per the schedule outlined below.

• Petroleum oils, gases, electric power: from the entry date.
• Pharmaceutical products and/or inputs for local production, and certain fertilisers and/or phyto-sanitary products for local production: as from 30 days from the entry date.
• Certain finished automobiles and the customs tariff positions listed in Section 12.2 of the External Trade and Exchange rules: as from 180 days from the entry date.
• For other imports of goods, the following schedule applies, counted from their entry date:
1. 25% of the price of the imported goods, as from 30 days;
2. an additional 25% of the price of the imported goods, as from 60 days;
3. another additional 25% of the price of the imported goods, as from 90 days; and
4. the remaining 25% of the price of the imported goods, as from 120 days.

In addition, importers may also access the official FX market to pay imports prior to their customs entry into the country and/or prior to the schedule indicated above, in certain scenarios.

Imports of services

As from 13 December 2023, the government also eliminated the web-based system, SIRASE, through which importers had to request authorisation to import services and pay for them through the official FX market. Instead, importers may now access (through their local banks) the official FX market – without prior approval from the Central Bank – to pay for imported services, as per the schedule outlined below.

• Passenger transportation, travel and other card payments, audio-visual and related services, government services, travel assistance and other health services, cash withdrawals and card expenses, expenses paid to foreign financial institutions in regular operations: at any time.
• Freight services related to the import of goods: on the same dates on which access to the official FX market may be obtained for the payment of the imported goods.
• Other personal, cultural and recreational services: 90 days as from the date of provision.
• Services not previously covered, provided by an unrelated party to the importer: after 30 days from the date of provision.
• Services not previously covered, provided by a related party: after 180 days from the date of provision.

In addition, importers may also access the official FX market to pay imports prior to the schedule indicated above, in certain scenarios.

Payments of principal in excess of USD2 million

Resident individual and legal entity borrowers of financial indebtedness and debt securities with principal maturities in excess of USD2 million falling due between 15 October 2020 and 31 December 2023 intending to access the FX market for payment of such maturities must submit a refinancing plan to the Central Bank based on the following parameters (the “Mandatory Refinancing Plan”):

• the net amount to be paid through access to the FX market within the original term must not exceed 40% of the principal amount due; and
• the outstanding principal must be refinanced through new foreign debt with an average life of at least two years.

Certain types of indebtedness do not require a Mandatory Refinancing Plan, such as indebtedness with international organisations or their associated agencies or with official credit agencies, or guaranteed by any of them, and certain refinancings that imply a net inflow of funds to the country or that have met the parameters mentioned above for the Mandatory Refinancing Plan.

Finally, payment of principal or interest of intercompany financial debt (as opposed to trade-related debt) is subject to prior Central Bank authorisation until 31 December 2024. Such authorisation is rarely obtained.

FX criminal regime

The Argentine FX Criminal Regime provides different types of penalties for actions/omissions that violate the FX rules set forth by the Central Bank. These include: monetary fines; the suspension or cancellation of the person or entity involved in the infraction, of its authorisation to operate or intermediate in the FX market or to act as an importer, exporter or FX broker; and/or imprisonment.

Additionally, if the infringement of the FX rules was executed by the directors, legal representatives, agents, managers, trustees or members of the supervisory board of a legal entity on its behalf, the monetary fine may be effective not only on the assets of the legal entity, but also on the private assets of the above-mentioned individuals who have intervened in the commission of the infringement.

Argentine Companies

The following taxes apply to an Argentine company carrying out a business in Argentina.

• Income tax – a federal tax calculated on the legal entity’s worldwide income (ie, Argentine and foreign-sourced income) on a sliding scale ranging from 25% to 35%, and a 7% withholding tax at the time of distribution of dividends.
• Value added tax (VAT) – a federal tax applicable to the sale of goods, provision of services and the import of goods into Argentina. VAT is levied on the difference between the tax debit and tax credit at a 21% general rate.
• Tax on debits and credits – a federal tax which is also applicable on debits and credits from and to Argentine bank accounts and similar transactions, at an applicable rate of 0.6%. This tax is also levied on the transfer and delivery of funds when these transactions are made through organised payment systems as a replacement of bank accounts, without considering the person or entity responsible for making or receiving such payments.
• Personal assets tax – shareholders of Argentine companies are liable for personal assets tax of 0.5% on the company’s net worth.
• Turnover tax – a local tax levied on revenue resulting from business and activities carried out within an Argentine province and/or the City of Buenos Aires. Each province has different tax rates and exemptions under their tax codes. The average tax rate is 3%.
• Stamp tax – a local tax applicable on onerous acts and agreements executed in Argentina or executed abroad with effects within the country. The applicable tax rate is approximately 1% but this may vary according to the jurisdictions involved and the type of instrument. Parties executing an agreement are jointly responsible for payment. Tax codes usually include a large variety of exemptions to stamp tax which, along with certain tax-efficient ways to implement contracts, should be analysed on a case-by-case basis.

Foreign Beneficiaries

Federal tax regulations applicable to foreign beneficiaries are different to those described above for local entities. A foreign beneficiary may be subject to the following taxes applicable to activities carried out or services rendered to Argentina.

• Income tax – foreign beneficiaries are only subject to tax with respect to their Argentine-sourced income through a withholding mechanism. The applicable withholding tax rate depends on the type of income and whether a double tax treaty (DTT) is applicable or not.
• VAT – this applies to the import of certain goods and services to Argentina at a 21% rate. VAT must be paid by the end consumer either by a withholding controlled by the bank issuing the credit or debit card used to pay, or self-assessed by the end consumer. This means that no payment obligation will arise for the foreign beneficiary.
• Personal assets tax – shareholders of Argentine companies are liable for personal assets tax of 0.5% on the company’s net worth. The Argentine company is responsible for making this payment on behalf of the shareholders.
• PAIS tax – this is levied on Argentine individuals and legal entities on their access to the FX market in Argentina for the payment of services rendered from abroad. The general applicable tax rate is 30%, but this is capped to 8% for services already falling under the scope of VAT (certain services may have different applicable rates). However, PAIS tax is to be paid by end consumers of the digital services rendered from abroad by means of a withholding made by intermediaries for payment (eg, banks), meaning that no payment obligation arises for the foreign beneficiary.
• Turnover tax – this is applicable when a foreign entity has a “relevant digital presence” in certain jurisdictions, which occurs whenever certain thresholds are surpassed. Each jurisdiction’s tax code should be analysed to determine the point at which a relevant digital presence will trigger the taxable event in the turnover tax.

Income tax withholdings are applicable for certain payments in favour of individuals or entities domiciled abroad (ie, foreign beneficiaries). The applicable tax rate will be determined by the type of income and whether a DTT is applicable or not. As an example, payments stemming from interest are subject to a general effective withholding tax rate of 35% (unless a DTT applies or the lender is a foreign financial institution). Royalty payments are generally subject to a 21% or 28% effective withholding tax rate, depending on the technology involved.

As stated above, the applicable withholding tax rates might be reduced if a DTT is applicable. In general, these tax treaties are based on the OECD Model and usually entail certain ownership requirements in order to benefit from the reduced tax rates set forth therein.

Under Argentine Law, asset deals provide the most beneficial treatment to the buyer as they allow a step-up on the tax basis of the acquired assets. However, one usual concern relates to the ability to step up the basis of the underlying assets of the target company in the case of a stock deal, which is not possible under Argentine tax law: the target tax basis in its assets remains unaffected, disregarding the price paid for the stock. A step-up in basis would only take place upon a taxable realisation of the assets.

It is possible to structure certain debt pushdown strategies or similar arrangements.

Capital Gains

Income stemming from the sale, exchange or disposition by a foreign beneficiary of shares and any type of corporate participation in Argentine companies is subject to income tax at (i) a 15% rate on the net gain; or (ii) a 13.5% rate on the gross amount of the transaction, at the option of the seller. The foreign beneficiary may benefit from a reduced tax rate if a DTT is applicable.

Direct Sale of Assets

The sale of assets located in Argentina by a foreign beneficiary is subject to income tax at an effective 17.5% withholding rate.

Indirect Sale of Assets

Where a foreign beneficiary sells its shares or corporate participations in an entity incorporated abroad, the resulting income is deemed to be Argentine-sourced income, as long as certain requirements and conditions are duly met. In that case, the foreign beneficiary may choose to pay 15% on the net gain, or 13.5% on the gross amount of the operation, only in the proportion of the participation of the Argentine assets in the total value of the shares being transferred. Again, the foreign beneficiary may benefit from a reduced tax rate if a DTT is applicable.

Reporting Regimes

The Argentine Tax Authority has several reporting regimes currently in force. Reporting subjects are obliged to disclose documents and supporting evidence of certain transactions, operations and businesses. Failure to comply with reporting regimes currently in force will trigger the application of the fines and sanctions set forth in the Tax Procedure Law.

Transfer Pricing Provisions

Transfer pricing provisions are triggered in Argentina when a local entity conducts international business transactions with a related foreign company or with a company located or domiciled in a non-cooperative or low-tax jurisdiction. Consequently, the local entity will be obliged to file annual tax returns and supporting evidence, disclosing relevant information regarding pricing methods and practices agreed. The Argentine Tax Authority may also request further information as to the global activities of the related foreign company, including an in-depth analysis of the group’s activities and a country-by-country report.

Argentine labour laws consist of very comprehensive pro-employee rules addressing almost every aspect of an employment relationship. Labour laws are designed to protect the rights of employees by setting forth, among other matters:

• working conditions and working hours;
• mandatory payment of a 13th monthly salary per year and of sick leave;
• surcharges on salary for overtime;
• annual vacations;
• mandatory life and labour risk insurance; and
• payment of severance compensation in the event of dismissal without justified cause (provided that collective bargaining agreements – CBAs – can set forth a severance fund to replace severance compensation).

Labour laws are public policy and, therefore, mandatory. Employers can grant employees benefits on top of what is provided by the law and CBAs. However, agreements to the detriment of, or waivers of, employee rights provided by such laws and applicable CBAs are null and void. Also, employers can only change the terms and conditions of labour employment provided that those changes are not unreasonable and do not (i) modify the essential terms of the employment contract; or (ii) cause material or moral damages to the employee, unless the employer and employee agree to changes through a written agreement approved by the Ministry of Labour.

CBAs are negotiated between unions and the chambers that represent the employers of each industry. The provisions of CBAs are mandatory and regulated by law. There are specific CBAs applicable to employees working in sectors such as the industrial, commerce, health and others. In general, employees working as managers, supervisors or in other hierarchical positions are excluded from CBAs. CBAs usually provide benefits to employees on top of what is provided by the Employment Labour Law.

As a rule, labour laws provide that employees must be paid salary in cash, or into a local bank account, in Argentine pesos (ARS). Employers can pay up to 20% of the total salary in fringe benefits. Also, employees are entitled by law to mandatory vacations, medical coverage and pension plans funded through mandatory contributions made by both employers and employees.

Companies usually grant performance bonuses, as well as fringe benefits such as mobile phones and company cars to top executives. In the case of very highly ranked employees, some international companies grant them stock options or restricted shares as retention bonuses. If, under these plans, executive compensation is impacted by an acquisition or change-of-control transaction, a conservative approach is to fully comply with such provisions or amend those for the benefit of employees.

In stock deals, employees are not affected and remain as employees of the target, subject to their existing employment conditions. However, in asset deals, the key issue to analyse is whether the transaction implies the transfer of an independent business unit – ie, an independent technical and productive unit that may continue with its usual business after closing.

If an acquisition or merger involves the transfer of an independent business unit, employees are transferred as a matter of law and, therefore, neither the consent of the employee nor prior notice will be required. However, if the transfer does not entail an independent business unit, employees are not transferred as a matter of law and their consent is required.

In all cases, the new employer must maintain the employee’s employment category, benefits, rights, salary and seniority existent with the seller (previous employer) and can only change the terms of employment for the benefit of the employee. If any changes are detrimental to the employee’s rights, they are entitled to terminate the employment relationship upon constructive terms and claim the mandatory severance package, or judicially request the restoration of former working conditions by means of an injunction.

There is no legal obligation to inform or consult with trade union/employee representatives or local labour or regulatory authorities.

There is no government screening of FDI in Argentina.

Argentina provides an intermediate level of intellectual property protection granted by federal legislation such as the Trademark Law, the Patent Law, the Model and Design Executive Decree, the Copyright Law and the Commercial Secrets’ Law.

Obtaining patent protection usually takes several years (anything from three to eight years), depending on the industry. Patent applications for pharmaceutical products generally take longer to register and are more likely to be rejected by the Patent Office.

Although counterfeited goods are found in the jurisdiction, federal civil and commercial courts are swift to enforce intellectual property when requested by the lawful owner of the infringed intellectual property right.

Obtaining trade mark protection usually takes around 18 to 24 months, depending on whether there is opposition and/or the time taken by the Trade Mark Office (TMO) to review the submission. In June 2023, the TMO established a procedure by which interested parties can file a request for partial cancellation of trade mark rights due to lack of use in a specific class.

The collection and processing of personal data in Argentina is regulated by the Personal Data Protection Law 25,326 (the “DPA”) and its Regulatory Decree 1558/200, as well as its complementary regulations. The DPA – as opposed to the General Data Protection Regulation of the European Union – does not have extraterritorial scope. That is, the DPA only applies to the collection and processing of personal data within Argentine territory.

In June 2023, the Executive Branch submitted to the House of Representatives, for its analysis, a draft bill to amend the current DPA. The provisions set forth therein resemble the main European Union General Data Protection Regulation dispositions.

Also, in November 2023, the Argentine Agency of Access to Public Information (the “AAIP”) published the new standard model clauses for international data transfers. Such clauses are those issued by the Iberoamerican Data Privacy Network, which have also been adopted by Peru and Uruguay.

Audits and Sanctions Under the DPA

Under the current data protection rules in Argentina, the AAIP may impose administrative sanctions consisting of warnings, suspensions and fines ranging from ARS1,000 to ARS18 million, and closure or cancellation of the database. The amount of sanctions is determined according to the nature of the rights affected, the volume of data processing, the benefits obtained, the degree of intentionality, the recidivism, the damages caused to the data subjects and to third parties, as well as any other relevant circumstances.

Over the last few years, the AAIP has conducted several audits of local companies in order to certify whether the collection and processing of personal data is carried out in accordance with the provisions of the DPA. In this regard, the AAIP has been imposing sanctions for several years, although the amount of the infractions has generally been quite low.