Doing Business In... 2021

Last Updated July 13, 2021

Argentina

Law and Practice

Authors



Salaberren & López-Sansón is mainly focused on the provision of legal services in Argentina in connection with inbound investment, M&A and corporate restructurings, general corporate advice, tax planning and complex tax litigation, corporate finance, technology companies and regulated business. Argentina's leading legal and tax boutique firm in business law, it has a solid and prestigious international client base (including several worldwide leaders in IT, industry, food, agribusiness, infrastructure and energy) and provides full legal service advice. The cross-border approach of the firm, the partners' broad experience in working with international clients and a very personal, dynamic and modern approach are some of the firm's main values. Clients include The Coca-Cola Company, Mercado Libre, Tyson Foods, Pampa Energía, Kaszek Ventures, Auth0, Monashees, Accel, Brightstar Corp, Tiger Global, Kerry Ingredients, Pedidos Ya, Interenergy, Boston Consulting Group, Grupo Financiero Inbursa, HSBC and Scotiabank.

Argentina is a federal republic organised into 23 provinces and its capital, the Autonomous City of Buenos Aires. The federal government is organised into three branches: executive, legislative and judicial. Each province has its own constitution and government branches, as does the City of Buenos Aires.

Argentina’s legal system follows the civil law system. Federal, civil, commercial, criminal and labour legislation is enacted by the federal legislative branch, while each local government is entitled to enact procedural law. 

The head of the federal judicial branch is the Supreme Court of Justice, which controls constitutionality. The federal judicial branch also includes lower and appeal courts. Each of the local judiciaries has its own lower appeal and supreme courts. Local courts have jurisdiction over civil, commercial, criminal, labour and local legislation cases; federal courts have jurisdiction over federal cases.

The Argentine constitution and laws grant equal rights to local and foreign investors, and foreign investment is not generally subject to prior approval by the authorities. Argentina has entered into bilateral investment treaties with several countries, providing further protection of foreign investments.

The Companies Act

The Companies Act (Act 19,550 as amended) (CA) establishes that any foreign company wishing to acquire an equity holding in a local company (regardless of whether this represents a controlling stake) or wishing to conduct business in Argentina on a regular basis, must first register with the Public Registry of Commerce, have a fixed address for service and appoint a legal representative in Argentina.

The Frontier Securities Zone Act

The Frontier Securities Zone Act (Decree 15,385/44 as amended) (FSZA) regulates the acquisition by foreign individuals or foreign companies (including in this definition, local companies controlled by foreign companies or with a 25% equity participation by a foreign company) of rural real estate assets and certain urban real estate assets located in frontier zones. It also regulates the acquisition of shares in companies which own said real estate assets, as well as any corporate restructuring operations carried out by said companies. 

The Cultural Assets Act

The Cultural Assets Act (Act 25,750) (CAA) prevents foreign nationals, foreign companies or local companies directly or indirectly controlled by foreign nationals from holding more than 30% of the corporate capital and votes of broadcasting companies (ie, newspapers, magazines, radios, internet service providers, television, digital and audio-visual content producers), while the remaining 70% must be owned by Argentine entities (ie, Argentine nationals or foreign or local companies controlled by Argentine nationals). This limit does not apply to countries where the respective bilateral investment treaty has exclusions for this type of asset (eg, the bilateral investment treaty with the United States of America).

The Audiovisual Communication Services Act

Likewise, the Audiovisual Communication Services Act (Act 26,522) (ACSA) prevents companies which have audio-visual broadcasting licences from having corporate relationships with foreign broadcasting companies, and from being subsidiaries or affiliates of foreign companies. In this case, the definition of subsidiary or affiliate is not provided by the Act. The ACSA reproduces the limitation set forth in the CAA regarding the ownership of shares in local broadcasting companies.

The Protection of Rural Lands Ownership Act

The Protection of Rural Lands Ownership Act (Act 26,737) (PRLO) limits the ownership or possession of rural land by foreign individuals (with certain exceptions) or companies (including companies in which foreigners have controlling equity holdings), with "rural land" being defined as any real estate asset located outside the limits of cities. The Act provides that not more than 15% of the total amount of rural land in Argentina may be owned or possessed by foreign owners. Likewise, foreign owners cannot own or possess more than 15% of the total rural land in any individual province or administrative department. Additionally, foreign owners of the same nationality cannot own or possess more than 30% of the total rural land owned by foreign owners. Moreover, a single foreign owner cannot own more than 1,000 hectares in the core area, or an equivalent amount in other locations to be determined by the governmental authority. The interpretation of these limits will also depend on the applicable real estate right over the property. Finally, foreign owners cannot hold an interest in rural land adjacent to bodies of water of certain importance. Prior to the acquisition of a tract of rural land by a foreigner, authorisation must be procured from the National Registry of Rural Land. Moreover, any change in the composition of the corporate capital of local companies which qualifies them as foreign owners of rural land (or which, as a result of said change, will qualify or cease to qualify them as foreign owners) should be made known to the authorities, to verify compliance with the PRLO. The limitations of the PRLO do not apply to tracts of land destined for the generation of renewable energy.

Registration under the CA

Registration under the CA requires the production of the organisational documents of the foreign entity and corporate resolutions approving the registration, giving an address for service in Argentina and appointing a legal representative. These documents must be filed with the Public Registry of Commerce, which can make observations and require the production of further documents. In the City of Buenos Aires, the registration process takes between two and four weeks. Foreign companies holding shares may not validly vote or exercise their rights as shareholders if they fail to register. There is no specific sanction under the CA for lack of registration by companies conducting their business on a regular basis in Argentina, although this can result in the breach of other laws, such as labour, tax and social security laws.

Obtaining Authorisation under the FSZA

Under the FSZA, foreign companies must make a filing with the Internal Affairs Ministry, including certain forms provided by the Ministry, certain corporate information (eg, corporate by-laws, appointment of board members, latest financial statements, identification of shareholders), certificates of criminal record of the board members and an investment project (as analysed in 2.3 Commitments Required from Foreign Investors) to be conducted at the real estate property to be acquired. The filing should be made by the investor. Acquisitions of assets located in certain cities have been exempted from obtaining this authorisation, and in other cities not expressly listed, the acquisition of real estate assets with a surface of less than 5,000 square metres and not for business purposes is also exempted from the requirement for prior authorisation. Under the FSZA, the authorisation must be obtained in order to grant the deed transferring the ownership of the relevant real estate asset, and thus ownership cannot be acquired over the property.

Compliance with the PRLO

Pursuant to the PRLO, prior to the acquisition of rural land an online filing must be made with the National Registry of Rural Land, providing information relating to the purchase, the real estate, and compliance with the limits set forth in the PRLO, and indicating whether or not the property falls within the provisions of the FSZA. If all the requirements are met, the Registry will issue a certificate allowing the execution of the transfer deed, which must take place during the following 120 days. This process usually takes about a month.

Any change in the equity of a local company which qualifies as a foreign owner of rural land (or which, as a result of said change, will become or cease to be a foreign owner) should be informed to the National Registry of Rural Land within 30 days of the transfer, in order to verify compliance with the limitations set forth in the act. This verification usually takes about a month.

The PRLO voids any act that violates its provisions and holds the intervening parties jointly and severally liable for any damage caused by said violations. It is expressly indicated that in the case of acquisition of shares, said acquisition will need to be notified within 30 days following closing.

In the case of the FSZA, the underlying guideline is that it is of national interest that all assets located near to the country's borders be owned by Argentine citizens. Authorisation is therefore granted by way of exception, and also depends on providing evidence that the investor (or its shareholders and officers) has not been convicted of crimes affecting national security and proposing an investment project for the development of the acquired real estate asset. The investment project is analysed in light of criteria, including whether it:

  • is declared to be of national, provincial or municipal interest by the competent authority;
  • is key to the social and economic development of the region where it is located; 
  • will be implemented in underdeveloped zones; and
  • mainly employs Argentine workers.

A negative decision by the competent authorities can be challenged by way of requesting a review by the superiors of the relevant authority. Should the decision be upheld by the government authorities, the parties will be entitled to appeal before the Courts of Justice. In Argentina, judicial proceedings are very lengthy.

The two most common types of legal entities adopted in Argentina are the limited liability company (Sociedad de Responsabilidad Limitada or SRL) and the corporation (Sociedad Anónima or SA). In 2017, Argentina incorporated a new type of legal entity, the simplified company (Sociedad por Acciones Simplificada or SAS), which has substantially simplified the incorporation procedures and corporate governance, and has reduced costs for start-ups.

All three legal entities provide limited liability to their shareholders. Only in certain exceptional cases of bankruptcy or fraud (eg, in the fields of labour and tax law) may equity holders be held liable for the legal entity’s obligations.

Division of Corporate Capital

The corporate capital of the SA and SAS is divided into shares, while in the SRL it is divided into quotas (hence the owners of the equity are named quotaholders).

The SRL requires the existence of at least two quotaholders. The SA and the SAS can have one or more shareholders, although sole-shareholder SAs are subject to more strict governance and control requirements. If the SA and the SAS have only one shareholder, then the corporate capital must be paid in full at all times; if there is more than one shareholder, then the initial corporate capital and further capital increases in cash can be paid 25% upfront, with the balance paid during the subsequent two years. Additionally, single-shareholder companies cannot be shareholders of other single-shareholder companies.

The minimum registered capital to create an SA is ARS100,000 (approximately USD1,000) and to create an SAS, it is an amount equivalent to two times the minimum wage in force at the time of incorporation (this currently amounts to ARS51,840 or approximately USD500).

Corporate Bodies

Legal entities have three corporate bodies: a management body (comprised of directors or managers), a governing body (meetings of equity holders) and an audit body (a syndic, which is mandatory or optional, depending on the legal entity).

The SA is managed by a board comprising one or more directors. The majority of the directors must be domiciled in Argentina. Directors may hold office for a tenure of up to three fiscal years. However, at the end of the tenure, the tenure can be renewed. The board must meet at least once every three months. The SA is represented by the chairman of the board of directors.

The management of the SRL is performed by one or more managers, who can act individually, jointly or organised as a board, depending on the provisions of the by-laws. The majority of the managers must be domiciled in Argentina. Managers may hold office indefinitely.

The management of the SAS is conducted by managers, who can act individually, jointly or organised as a board, depending on the provisions of the by-laws. At least one of the managers must be domiciled in Argentina, which relaxes the requirement of SAs and SRLs. Managers may hold office indefinitely. One of the managers must be appointed as the legal representative of the SAS.

In all cases, the members of the management of the legal entity must be individuals and not legal entities. The members of the management are not required to be equity holders.

Meetings

At least annually, the equity holders of a legal entity will hold a meeting to approve financial statements and make a decision regarding the result of the fiscal year (profit or loss), consider the performance of the members of management and, if applicable, appoint members of management. The meetings of equity holders are also competent to amend the organisational documents, increase or reduce the corporate capital, approve mergers and spin-offs, and appoint or remove members of management. Decisions of the equity holders of an SAS and SRL may be obtained through written consents or voting via mail.

Syndics

Syndics act as internal auditors of an SA, verifying that it complies with the applicable law. All syndics must be lawyers or accountants. The appointment of one or more syndics is optional, unless the SA:

  • has corporate capital in excess of ARS50 million (approximately USD500,000);
  • has only one shareholder;
  • is a public company;
  • is owned by the government (51% or more of the shares);
  • is engaged in financial or savings activities;
  • is a public utilities company; or 
  • controls or is controlled by a company of which any of the above are true.

In the SAS the appointment of a syndic is optional, while in SRLs with corporate capital in excess of ARS50 million (approximately USD500,000) it is mandatory.

Suitability of legal entities

SASs and SRLs are best suited for start-ups. The SA is best suited for more consolidated business and is the only type of legal entity that can become a public company.

Other structures are also available to conduct business in Argentina, such as branches of foreign companies (discussed in 2.1 Approval of Foreign Investments), partnerships, limited partnerships, trusts and joint ventures.

SA

The incorporation of an SA requires the execution of a public deed and the publication of a notice in the Official Gazette. The payment of the corporate capital (at least 25%) must be attested in the deed or made by way of a deposit in the Banco Nación Argentina. The documents are then filed and registered with the Public Registry of Commerce. In the City of Buenos Aires, if payment is made for an express registration, the whole process takes about one week. Ordinary registration takes about three weeks.

SRL

The incorporation of an SRL can be performed by executing a public deed or a notarised private document. A notice must be published in the Official Gazette and the payment of the corporate capital (at least 25%) must be attested in the deed or made by way of a deposit in the Banco Nación Argentina. The documents are then filed and registered with the Public Registry of Commerce. In the City of Buenos Aires, if payment is made for an express registration, the whole process takes about one week. Ordinary registration takes about three weeks.

SAS

The incorporation of an SAS can be performed by executing a public deed or a notarised private document. The incorporation document is filed online and the minimum payment of the corporate capital (25%) is completed by paying the registration forms. Upon registration, a notice will be published in the Official Gazette. The whole process can be completed in 24 hours.

All appointments of members of the management, amendments to the organisational documents and modifications of the corporate capital of a local company must be filed and registered with the Public Registry of Commerce.

On an annual basis, any ultimate economic beneficiary of a legal entity (defined as any individual directly or indirectly holding 20% or more of the equity of a legal entity) must be identified with the Public Registry of Commerce.

SAs must file their financial statements annually with the Public Registry of Commerce, as well as pay a (fairly insignificant) service fee to the Public Registry of Commerce. SASs must also file their financial statements annually.

Only SRLs with a corporate capital in excess of ARS50 million need to file their financial statements with the Public Registry of Commerce.

The management of legal entities in Argentina is usually organised as a one-tier structure (ie, a board of directors or managers).

As noted in 3.1 Most Common Forms of Legal Entities, SAs are managed by a single-tier board. Additionally, although not very frequently, a two-tier management structure may be put in place, adding a supervisory committee which is entirely comprised of shareholders. The board may also delegate some aspects of the management to an executive committee or other committees (this is more common in public companies).

Directors of an SA are jointly and severally liable vis-à-vis the company, shareholders and third parties for the poor performance of their duties, as well as for non-compliance with the law, by-laws or regulations, and for any damages caused by fraud, abuse of their faculties or serious fault. They must fulfil their obligations in a loyal way and act as a "good businessperson". There are some exceptions to the rules described here, however.

The managers of an SAS are individually or jointly liable, depending on the organisation of the management of the SAS and the regulation of its operation established in the contract. If more than one manager participated in the same events generating responsibility, the court may determine their liability pursuant to their personal involvement in the events. Provisions relating to the responsibility of directors of an SA are applicable when management is organised as a board.

The managers of an SRL are individually or jointly liable, depending on the organisation of the management of the SRL and the regulation of its operation established in the contract. If more than one director participated in the same events generating responsibility, the court may determine their liability pursuant to their personal involvement in the events. Provisions relating to the responsibility of directors of an SA are applicable when the management of the SRL is organised as a board.

Equity holders of an SA, SAS or SRL are granted limited liability. Only in certain cases of bankruptcy or fraud (in particular, in the fields of labour and tax law) may the equity holders be held liable for the legal entity’s obligations.

Labour law has its main statutory source in Section 14bis of the National Constitution and in the Argentine Labour Contract Law 20,744 (LCL).

Employees also have the right to organise and join unions which represent employees within a certain activity and may negotiate better contractual conditions than those set forth in the LCL through collective bargaining agreements.

Accidents and illnesses suffered at work are also contemplated and governed by the Labour Risks Law 24,557, which requires employers to contract insurance coverage for said risks. 

Both employers and employees must make social security payments, and employees also have mandatory life insurance coverage.

The LCL establishes that there is a labour contract when an individual with legal capacity agrees to perform certain acts, work or services in favour of another person for a determined or undetermined period of time, in consideration for remuneration. The labour contract can be either verbal or in writing. The main rights and obligations of employers and employees are set forth in the LCL.

Unless otherwise agreed, labour contracts are deemed to be established for an undetermined period of time. If otherwise agreed, labour contracts may be established for a fixed period, for a season or for a specific task.

The ordinary working day is eight hours daily, from Monday to Friday and until noon on Saturday, with a maximum of 48 hours per week in the case of employment during the daytime. In the event of employment during the evening/night (ie, from 9pm to 6am) the maximum individual block is seven hours, with a maximum of 42 hours per week. In the case of unhealthy work (which is work that due to the place, the conditions or its nature may be hazardous to the health of employees, as determined by the labour authorities), the maximum working time is six hours per day and 36 hours per week.

If employees work overtime, they are entitled to an additional payment. Overtime cannot exceed 30 hours per week or 200 hours per year. Any overtime worked from Monday to Saturday is paid at 150% of the regular salary; overtime worked after noon on Saturday, on Sundays or public holidays is paid at 200% of the regular salary.

The LCL also allows part-time labour contracts, which cannot exceed two thirds of the ordinary full-time working hours. Employees with part-time labour contracts cannot work overtime.

Labour contracts can be terminated by the unilateral decision of the employee (resignation or abandonment), the decision of the employer (termination with or without cause), or by mutual agreement of the parties.

In the event of termination by the employee, the employer should pay all accrued and unpaid amounts (salary until the termination date, accrued vacations, accrued 13th mandatory monthly payment).

In cases of termination by the employer without cause, the employee is entitled to a severance payment equal to one month's gross salary per year of seniority (meaning, length of employment) or fraction thereof exceeding three months, plus, in cases of more than 10 years of seniority, one or two months' salary as pre-notice, plus all accrued and unpaid amounts (as described above). Collective bargaining agreements establish different caps for the severance payment, although a Supreme Court precedent has considered said caps as unconstitutional, determining that caps cannot be below 67% of the statutory amount.

In the exceptional case of termination by the employer with cause (highly restrictive criteria), no severance payment applies and only accrued and unpaid concepts shall be paid (as referred to above). 

Employers are free to agree on terms and conditions more favourable to the employee. Conditions less favourable to the employee than those resulting from the LCL are invalid.

In the case of companies with more than ten employees working within the same activity, employees can be represented by a union through a number of delegates (depending on the number of employees), internal commissions or similar bodies. 

Delegates are entitled to verify fulfilment of the law and collective bargaining agreements by the company, to meet with the employer and file claims to the employer on behalf of the employees, subject to authorisation from the relevant union.

Employees are subject to personal income tax at a progressive rate ranging from 5% to 35% over the employee’s net salary (ie, gross salary minus certain deductions, including personal deductions, employee’s social security taxes and special deductions, eg, interest paid on real estate loans and rent payments, among others), which is withheld by the employer from the employee’s salary on a monthly basis. 

Employees are subject to social security taxes at a total rate of 17% (this includes the contribution to social health and a pension fund) of the employee’s gross salary. This amount must be withheld by the employer. Currently, the taxable base has a cap of ARS225,000 (approximately USD 2,250). 

Employers must pay social security taxes on a monthly basis. The applicable tax rate depends on whether or not they qualify as an SME (small or medium-sized company). Currently, SMEs pay social security taxes at a total tax rate of 24% on the gross salary of the employee, while non-SMEs pay at a rate of 26.4% if the main activity of the company (gross income) is related to services or commerce. 

Employers must, on a monthly basis, deposit the amounts withheld from the employees' wages (personal income tax and social security taxes) and their own social security taxes to the National Social Security System. If the employer fails to deposit employees’ contributions, severe penalties and criminal charges may apply.

Corporate Income Tax

The income tax law has recently been amended in relation to corporate income tax (CIT). The current law changes the fixed tax rate (30%) applicable until fiscal year 2020 for a progressive one, according to the following criteria:

  • if the net income of the company does not exceed ARS5 million (approximately USD50,000) in the fiscal year, a 25% tax rate applies;
  • if the net income range exceeds ARS5 million but is less than ARS50 million (approximately USD500,000), a tax rate of 30% applies to the income exceeding ARS5 million; and
  • if the net income exceeds ARS50 million, a tax rate of 35% applies to the income exceeding ARS50 million.

Resident companies are subject to CIT on a worldwide income basis, ie, they are taxed in Argentina on their local-source profits and on their foreign-source profits. However, companies can compute as tax credit similar income tax payments made abroad on foreign-source income, subject to certain limits. Non-resident companies are only taxed on their Argentine-source income.   

When a business suffers a net operating loss, this loss can be applied to reduce income tax for the following five fiscal years. There are certain specific losses that can only be offset against profits generated from similar sources, such as capital loss from the sale of stock, bonds or other securities issued by Argentine companies.

Dividends

Dividends distributed to non-resident shareholders (companies or individuals) are taxed at a rate of 7%. The same tax on dividends applies to profit remittances made by branches to their parent companies. Dividends distributed to Argentine individuals are also taxed at 7%, whereas those distributed by an Argentine company to another Argentine company are tax exempt.

Withholding Tax

When an Argentine company pays interest to foreign beneficiaries, a withholding tax (WTX) is applied at a tax rate ranging from 15.05% to 35%, depending on the nature of the creditor. The tax rate could even be reduced if a DTT applies to the transaction. This interest, within certain limits (see the thin capitalisation rules discussed in 5.5 Thin Capitalisation Rules and Other Limitations) is considered a deductible expense of the Argentine company.

Royalties for services related to technical assistance paid to foreign beneficiaries are subject to WTX at a tax rate of 31.5%, 28% or 21% depending on whether such services are available in Argentina and whether the contract providing for the services has been registered with the National Institute of Industrial Property. Royalties paid for trade marks/patents are subject to 28% WTX. Other royalties for services are subject to 31.5% WTX. The applicable tax rate could be reduced if a DTT applies. The royalties paid are considered deductible expenses for the Argentine company, with certain limitations.

Value Added Tax

Value added tax (VAT) is applied on the sale of goods, provision of services and imports (including imports of services) by individuals and legal entities carrying out economic activity within Argentine territory. Exports of goods and services are taxed at a zero rate and the exporter can request a tax refund in order to recover the VAT paid by the exporter to third parties.

The general VAT tax rate is 21%. There is a reduced tax rate of 10.5% that applies for very specific sales of goods and provisions of services, such as interest and commission charged in connection with loans granted by banking entities which adhere to the standards of the Basel Committee of Banks.

Debits and Credits Tax

Pursuant to the debits and credits tax, debits and credits in bank accounts are taxed at a rate of 0.6% for the debits and 0.6% for the credits, which means that the consolidated impact of this tax is 1.2%. Certain exceptions apply depending on the use of the bank account. Companies are able to compute 33% of their debits and credits tax payments as a tax credit against CIT. Small and micro enterprises which are beneficiaries of the SMEs regime are allowed to compute 100% of their payments against CIT.

Export Duty

During fiscal years 2019, 2020 and 2021 exports of services will be considered as merchandise under the Customs Code, and subject to a special export duty. This export duty has been established at a rate of 5% on the amount invoiced for the export of services. For SMEs, there is a non-taxable minimum amount of ARS60 million (approximately USD600,000) per year.

Wealth Tax

Finally, equity holdings owned by Argentine individuals or foreign beneficiaries in local companies are subject to wealth tax at a rate of 0.5% on the book value of the holdings as at 31 December of each year. This tax is paid directly by the local company; however, the company can recover the wealth tax paid from each shareholder.

At a federal level, Argentina provides various special incentive regimes, including, among others, the SME law (Ley PyME), the Renewable Energy Regime, Forestry Promotion Regime, Tierra del Fuego’s Special Customs Zone and, more recently, the Knowledge Economy Regime.

Knowledge Economy Regime

The regime includes tax benefits for those legal entities that develop the following activities:

  • software and digital services in general;
  • audio-visual production and postproduction;
  • bioindustries;
  • geological prospecting services; electronic and communications;
  • professional services (export only);
  • nanotechnology and nanoscience;
  • aerospace and satellite industry;
  • engineering for nuclear industry; and
  • 4.0 technology.

The tax benefits included in the regime are the following:

  • benefits stability;
  • non-transferable tax credit bonus equivalent to 70% of the employer contributions effectively paid with respect to employees assigned to work in promoted activities;
  • income tax (related to promoted activities) could be reduced by up to 60%/40%/20% depending on the kind of legal entity applying for the benefit (micro, small, medium and macro legal entities);
  • VAT collection regimen will not apply to those beneficiaries who carry out exports related to promoted activities; and
  • deductible expenses.

Income tax paid or withheld abroad will be treated as deductible expenses for the income tax assessment of the local entity.

SME Regime

In 2016 Act No 27,264 was enacted, creating a special tax regime for small and medium-sized enterprises (SMEs). This regime provides several tax benefits for these types of companies: 

  • deferral on VAT payment (90 days, instead of the general rule of monthly payments);
  • small and micro enterprises may compute 100% of the amounts paid pursuant to the debits and credits tax against their CIT; and
  • a non-taxable minimum of ARS60 million (approximately USD600,000) for service export duties.

Renewable Energy Regime

Acts No 26,190 and 27,191 established a special regime with the purpose of promoting the generation of electricity from renewable sources. The main tax benefits under this regime are:

  • accelerated depreciation of fixed assets for the purposes of CIT; 
  • anticipated refund of VAT corresponding to goods or infrastructure works included in the investment project for new renewable energy plants; and 
  • import duty exemptions for certain assets related to renewable energy projects.

Tierra del Fuego Tax Regime

Act No 19,640 established a special tax regime in Tierra del Fuego (an Argentine province). Under this regime, companies domiciled in this province enjoy a general tax exemption (including on CIT and VAT) and also have significant benefits in connection with customs duties.

Forestry Promotion Regime

Act No 25,080 establishes a special regime for the purpose of promoting forestry activity. The main tax benefits under this regime are:

  • accelerated depreciation of fixed assets for the purposes of CIT; 
  • anticipated refund of VAT corresponding to goods or infrastructure works included in the investment forestry project; 
  • tax stability; and
  • valuation of reserves at market value.

Argentina uses a separate entity approach, pursuant to which each company may only compute its own losses against its own future income tax. The only application of consolidated tax grouping relates to the thin capitalisation rules, discussed in 5.5 Thin Capitalisation Rules and Other Limitations, which includes an exception to the interest deduction limit, applying a 30% limit to the debt of the whole economic group.

The law establishes that interest on financial debts owed to related parties will be tax deductible, subject to certain quantitative limitations, except for those debts generated by acquisitions of goods, leases, and services related to the company’s business. This interest will be deductible at the higher of the two following limits:

  • an annual cap established by the federal executive power (currently ARS1 million, or approximately USD10,000); or
  • 30% of the net profit before deducting the interests referred to above and amortisations allowed by law. 

Non-deductible interests can be carried forward for five years. 

Among other exclusions, the deductibility limitation does not apply to: 

  • financial entities; 
  • certain financial trusts;
  • companies whose main business is the execution of lease-purchase agreements, and whose secondary business consists exclusively of financial activities; or
  • when evidence can be produced that the beneficiary of the interest has actually paid tax in Argentina on the income concerned (either income tax for Argentine residents or WTX for foreign residents), in such case the deductibility limitations will only apply to losses derived from foreign exchange losses.

OECD Model

Transfer pricing rules in Argentina follow the OECD model, based on the principle that transactions between an Argentine company and related companies based outside Argentina (or with companies located in non-co-operative, low-tax or no-tax jurisdictions) must be made at arm's length. This analysis is made taking into account the functions, assets and risks assumed by each party in the relevant transaction.

Argentina’s rules include the five methods from the OECD model: the comparable uncontrolled price method, the net margin method, the resale price method, cost plus method and profit split method.

The "Sixth Method"

In addition to the five OECD methods, Argentina has an additional rule, called the "sixth method", which applies to the import and export of commodities made through an international related intermediary or an intermediary located in a non-co-operative jurisdiction or low-tax jurisdiction. The sixth method works as follows: for tax purposes, the national tax administration will compare the price set in the contract with the market value of the item at the moment of shipping. Under certain conditions, the tax authorities will only consider the higher of both amounts as the transaction’s real price.

In the field of transfer pricing, the most litigated matters are the selection of comparable transactions, comparability adjustments and profit level indicators. The agribusiness, pharmaceutical and car industries are usually in the spotlight.

Argentina has a substance-over-form rule called Realidad Económica, under which the Federal Tax Administration may disregard a certain legal structure and deem the business to be a different entity for tax purposes. This principle applies when the taxpayers use manifestly inadequate forms and legal structures that do not reflect their actual economic intention. There are currently certain cases under analysis to determine if this domestic anti-evasion rule can be applied to transactions involving DTT.

Argentina is also a signatory to the Multilateral Instrument (MLI), a multilateral convention promoted by the OECD (BEPS project) in order to better address multinational tax evasion. The MLI allows its signatory countries to modify their bilateral tax treaties incorporating anti-evasion clauses such as the "Principal Purpose Test" (PPT) and the "Limitation of Benefits" (LOB).

The PPT could be interpreted as having a similar application as the domestic Realidad Económica principle.

The LOB clause was drafted with the intention to avoid treaty shopping, ie, when a resident of a third country seeks to obtain the benefits of a DTT between two other countries interposing a company or an entity. On this line, the LOB clause establishes certain tests to determine the applicability of the DTT to a company or an entity.

Argentina has incorporated the PPT and the LOB clauses into some recent DTTs that are already in force, such as the DTT with Chile, Mexico and Brazil. Also, Argentina is currently negotiating the amendment of several DTTs pursuant to the MLI (eg, with Italy, France, the UK and the Netherlands, among others). 

Finally, Argentine CFC rules, include, among others:

  • if an Argentine resident controls a foreign trust, the profits of that trust will be attributed to the Argentine resident; 
  • if an Argentine resident owns equity holdings in a foreign transparent (disregarded) entity, the profits will be attributed to the Argentine resident; and 
  • if an Argentine resident owns equity holdings in a foreign non-transparent entity which has passive revenues representing 50% or more of its income, profits will be attributed to the Argentine resident if certain conditions are met.

Argentina amended its Antitrust Law (AL) in 2018. Pursuant to the AL, prior authorisation must be sought from the National Antitrust Authority (Autoridad Nacional de la Competencia or ANC) for any transaction of economic concentration where two or more previously independent businesses become dependent on a unified decision and direction centre, or enter into agreements leaning towards the total or partial integration or combination of their businesses or assets through any of the following: 

  • merger; 
  • transfer of ongoing concern; 
  • acquisition of ownership or other rights over shares or an equity holding which allows significant influence over the decisions of a business; or 
  • any other agreement or transaction that legally or de facto transfers the assets of a company or grants significant influence over the ordinary or extraordinary management decisions of a business.

The prior authorisation requirement does not apply to the following cases: 

  • if the aggregate sales volume in Argentina of the purchaser’s group and of the target company does not exceed 100 million Mobile Units (this currently equals ARS5.52 billion, approximately USD55.2 million); 
  • if the purchaser group already owned more than 50% of the equity of the target, provided this does not change the manner in which control was exerted over the target; 
  • the acquisition of a single business by a foreign business which did not previously own assets or equity holdings in Argentina and whose exports to Argentina during the prior 36 months were neither significant nor frequent; and
  • if neither the price of the transaction nor the value of the assets in Argentina involved in the transaction exceeds 20 million Mobile Units (this currently equals ARS1.1 billion, approximately USD11 million), and provided that no transactions took place in the relevant market: 
    1. during the prior 12 months, exceeding that amount; and 
    2. during the prior 36 months, exceeding 60 million Mobile Units (ARS3.3 billion, approximately USD33 million).

The ANC has not yet been appointed; until its appointment is completed, requests for authorisation can be filed with the Comisión Nacional de Defensa de la Competencia (CNDC), the authority currently in charge of the application of the AL, up to a week following the closing of the transaction.

When one year has elapsed from the appointment of the ANC, the authorisation of the ANC must be obtained prior to the closing of a transaction, ie, this will be a prerequisite for the consummation of the relevant transaction.

The request for notification must be made by the purchaser, the merged companies or their immediate or final controlling parties, and by the company acquiring significant influence. It is optional for the selling party to participate in the authorisation proceedings.

There are three stages for the notification, depending on the complexity and effects of the transaction; these stages are reflected in the three forms F1, F2 and F3, which require information regarding the parties, the underlying business, the market for the products, the geographic extent of the relevant market, the concentration of the market, etc. The ANC may require additional information concerning the transaction, the market and the parties.

The ANC has a term of 45 business days to issue a resolution. If the ANC fails to comply with this term, the transaction is deemed to be tacitly authorised. 

A fast-track procedure is available for transactions which have a minor probability of restricting or affecting free competence and which would not affect the general economic interest. Although this fast-track procedure has not yet been formally regulated, the ANC has been applying it. 

The authorisation procedure requires the payment of a fee which has not yet been regulated, but which will range between 5,000 and 20,000 Mobile Units (ARS276,000 and ARS1.1 million respectively, approximately USD2,700 and USD11,000).

The AL forbids all types of agreements between competitors as well as any act or conduct which limits, restricts, falsifies or distorts competition or access to the market, to the extent that this may affect the general economic interest. 

The AL sets out a list of completely restrictive practices (which are presumed to affect the general economic interest and are therefore illegal) resulting from agreements between competitors which: 

  • fix retail prices; 
  • set forth obligations of manufacturing, processing, distributing, buying or commercialising limited or restricted amounts of goods, and/or of providing restricted or limited volume or frequency of services; 
  • allocate zones, markets, clients or providers among competitors; and/or
  • establish or co-ordinate biddings or abstentions in biddings or auctions.

The AL has identified other practices that may be prosecuted, depending on whether they constitute an abuse of dominant position or limit, restrict, falsify or distort competition or access to the market, to the extent they may affect the general economic interest. These practices include, among others: 

  • fixing retail prices; 
  • fixing, imposing or agreeing conditions for manufacturing, processing, distributing, buying or commercialising limited or restricted amounts of goods, and/or of providing restricted or limited volume or frequency of services; 
  • limiting or controlling technical development or investments relating to production or commercialisation of goods and services;
  • imposing entry barriers on competitors;
  • exclusivity obligations; 
  • conditioning the sale of goods to the purchase of other goods; 
  • discriminatory conditions for the acquisition or purchase and sale of assets or services, other than pursuant to usual market practices; 
  • refusal to sell goods or services and narrowing of margins; 
  • predatory prices; and 
  • the holding by the same individual of executive positions or board seats in competing companies.

The AL deals with the abuse of dominant position, including unilateral conduct and the economic dependency of a market or person with a dominant business.

Pursuant to the AL, a business has a dominant position when it is the only supplier or buyer in a market, or when, even though it is not the only player, it is not subject to relevant competition.

For the purposes of determining the existence of dominant position, the authorities will also consider whether a certain good can be substituted by other goods, if there are legal restrictions on the access of other products or competitors to the relevant market, and if competitors have means to limit the market power of the dominant business, including the unilateral formation of prices or restrictions to the supply or demand.

The authorities may also consider a business to be in a dominant position if it has sufficient economic power to allow it to act independently with regard to its competitors, suppliers or clients. 

To determine if a business has abused its dominant position, the authorities must analyse the effect of the alleged dominant position on the relevant market or on the party which has suffered from the alleged abuse.

The authorities have recently issued guidance relating to practices of abuse of dominant position that tends to exclude competitors from a market.

Argentina’s Patent Law (Act 24,481) grants protection over inventions which are new, the result of an inventive process and have industrial application. Special criteria apply for pharmaceutical, biotechnological and software patents. The protection extends for 20 years from the date of filing. Argentina is also a party to the Paris Convention and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement).

In order to be granted a patent, an application must be filed with the National Institute of Industrial Property (INPI). The INPI undertakes a preliminary review of the application and publishes this within 18 months of the filing. During the 60 days following publication, third parties can make observations on the application. If all observations (made either by the INPI or third parties) have been duly answered by the applicant, the patent will be granted.

Once the patent has been granted, the owner can prevent third parties from unauthorised manufacturing, using, selling or importing of the patented products. The owner can obtain an injunction as well as claim for damages against an infringer.

Argentina’s Trademark Law (Act 22,362) protects trade marks and trade names. The protection extends for ten years, renewable indefinitely for subsequent periods of ten years (counted as from the end of the previous registration), provided evidence of usage of the trade mark is produced.

A trade mark application must be filed with the INPI. The INPI undertakes a preliminary review, and then publishes the trade mark in the Trademark Gazette. Following publication, third parties have the right to oppose the registration of the trade mark. The applicant has a three-month period in which to settle any existing third-party opposition; if no settlement is reached, the INPI shall provide a ruling. Formal observations by the INPI must be answered within ten business days, while substantive observations by the INPI must be answered within 30 calendar days. Once all opposition has been resolved, the INPI will further review the application and finally register the trade mark.

Pursuant to an amendment which came into force on 3 June 2019, between the fifth and sixth year of registration of the trade mark, the filing of an affidavit regarding the use of the trade mark is required in connection with trade marks registered after 12 January 2013. 

The owner of the trade mark can obtain an injunction as well as claim for damages against an infringer.

Argentine law protects industrial designs or models regarding the appearance or aesthetic features of a product. The protection is granted for five years, renewable for two further five-year terms.

The request for registration is filed online or personally. After a formal review, the model is registered by the INPI. 

The owner of the design can obtain an injunction as well as claim for damages against an infringer. Additionally, criminal fines apply to the infringer.

The Argentine Intellectual Property Law (Act 11,723) protects copyright, including written works, musical works, cinematographic works, drawings, paintings, sculptures, architectural works, artistic works, scientific works, maps, plans, photographs, software and databases, translations, compilations and derivative works. The protection is granted for 70 years from the year following the death of the author.

For purposes of protecting copyright, an application must be filed with the National Direction of Copyright (Dirección Nacional e Derechos de Autor) including a copy of the work to be protected. The National Direction of Copyright co-operates with different non-profit organisations representing authors from different industries (writers, music producers, software designers, etc).

The owner can obtain an injunction as well as claim for damages against an infringer. Additionally, criminal charges may apply to the infringer.

Web Domains

Web domains are registered with an official government body, the National Direction of Web Domains (known as Nic.Argentina), which grants exclusivity to the owner. The registration of web domains is procured online and protects the domain for one year, renewable for further one-year terms. A dispute resolution procedure is in place to claim domains registered by third parties.

Software and Databases

Software and databases are protected pursuant to the copyright laws discussed in 7.4 Copyright.

Trade Secrets

Trade secrets are protected pursuant to the Confidentiality Act No 24,766. This protection does not grant exclusivity to the owner of the trade secret, but allows the owner to obtain an injunction to prevent the disclosure of secrets and to obtain indemnification. Additionally, the disclosure of secrets may qualify as a criminal offence.

Utility Models

Utility models are new arrangements or shapes of tools, working instruments, utensils, devices or known objects with a practical application, which improve their usage. A certificate of utility model is granted for a non-renewable term of ten years. The registration process and remedies are the same as those relating to patents.

Sources and Designations of Origin

Geographical indications, controlled indications of sources and designations of origin relating to agricultural and food products as well as wines and spirits are protected under Argentine law.

Data protection in Argentina is governed by the National Constitution and the Data Protection Law (DPL, Act 25,326). The DPL’s provisions are mandatory and protect personal data registered in files, registries and databases which are used to provide reports. The DPL gives the owners of this information the right to control its use and to access it.

The DPL requires that all databases are registered with the Agency of Access to Information and also requires that the consent of the owners of personal data be procured for the purposes of gathering, assigning and transferring personal data.

The owner of private data has the right to free access to the data, provided their requests to access the relevant database are made no more frequently than every six months. Any request must be answered within ten days of being made.

Additionally, the owner of the private data has the right to request that the data is rectified, updated, erased and/or kept confidential by the database. Requests of this nature must be complied with within five business days of being made.

Failure to comply with the above requests entitles the owner of private data to make judicial claims of enforcement.

The DPL applies exclusively to the territory of Argentina. Any company wishing to collect personal data from Argentine residents must comply with the provisions of the DPL, unless the owner of the personal data has provided consent to the transfer of the data abroad, or the data can be publicly accessed. Transfer of personal data without the consent of its owner is illegal.

The Agency of Access to Public Information (Agencia de Acceso a la Información Pública) is the agency in charge of enforcing the DPL. The DPL controls and audits the integral protection of personal data, with the purpose of protecting the reputation and privacy of individuals and legal entities, as well as their right to access their personal data.

The Agency also provides advice to individuals and legal entities in connection with the interpretation of the DPL and all remedies available for the protection of personal data.

The Agency manages the National Registry of Public and Private Databases and issues regulations relating to the collection, integrity, security and treatment of personal data.

Finally, the Agency can conduct audits and impose civil penalties in connection with breaches of the DPL, as well as be a claimant in criminal litigation relating to breaches of the DPL.

There are several legislative reforms currently being analysed in the Congress.

Updating the DPL

There is a project to update the current DPL and to align it with international standards, especially with the GDPR. The project includes, among other things, an expansion of the rights of the data owner and the principle of accountability for data processors.

Modification of the AL

With regard to antitrust provisions, there is a project to modify the AL with the aim of changing the procedure for appointing the ANC and accelerating the application of the pre-closing merger control procedure.

Modification of SAS Companies

Finally, there is one additional project which has already been approved by the Senate, which would modify the regulation of SAS companies, suspending the incorporation of new SAS companies for six months, restricting their use to entrepreneurs registered in the Registry of Venture Capital Entities. As per the project, if existing SAS companies do not meet the requirements for being registered, they will need to convert into SAs or SRLs.

Salaberren & López-Sansón

Arroyo 880
2nd floor, suite “3”
City of Buenos Aires
C1007AAB
Argentina

+54 11 5278 5280

+54 11 5276 8702

info@syls.com.ar www.syls.com.ar
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Law and Practice

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Salaberren & López-Sansón is mainly focused on the provision of legal services in Argentina in connection with inbound investment, M&A and corporate restructurings, general corporate advice, tax planning and complex tax litigation, corporate finance, technology companies and regulated business. Argentina's leading legal and tax boutique firm in business law, it has a solid and prestigious international client base (including several worldwide leaders in IT, industry, food, agribusiness, infrastructure and energy) and provides full legal service advice. The cross-border approach of the firm, the partners' broad experience in working with international clients and a very personal, dynamic and modern approach are some of the firm's main values. Clients include The Coca-Cola Company, Mercado Libre, Tyson Foods, Pampa Energía, Kaszek Ventures, Auth0, Monashees, Accel, Brightstar Corp, Tiger Global, Kerry Ingredients, Pedidos Ya, Interenergy, Boston Consulting Group, Grupo Financiero Inbursa, HSBC and Scotiabank.

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