The Argentine tax regime functions at the three levels of government: federal, provincial and municipal. The most relevant taxes at federal level levied on individuals are income tax and personal assets tax, although there are other taxes that, though normally irrelevant, may have an impact on wealth structuring.
Personal Income Tax
Individuals residing in Argentina are subject to personal income tax (PIT) on worldwide income. Briefly, the following are regarded as Argentine residents:
In the case of individuals, the Income Tax Law (ITL) establishes a progressive scale consisting of two concepts: a fixed tax value and a variable rate (from 5% to 35%). However, in the case of profits derived from the sale of bonds, stocks, other securities and real estate, and income derived from dividends distributed by Argentine entities, the ITL applies a differential treatment at a rate of 5%, 7% or 15%.
Regarding transfers of real estate, personal income tax applies to the extent that the real estate was acquired on or after 1 January 2018. Where the real estate being sold was acquired prior to 1 January 2018, a 1.5% withholding tax (real property transfer tax or ITI) will apply.
PIT is an annual tax and the tax return must be filed in mid-June of the year following the tax period settled. A tax credit will also be permitted with respect to a similar tax paid abroad.
PIT – Amendments to Legislation
Law 27.430 incorporated significant changes and had a great impact on high net worth individuals and families due to the taxability of financial investments and the inclusion of fiscal transparency through the Controlled Foreign Company Rules.
However, Law 27.541 (published in the Official Gazette on 23 December 2019) repealed several changes incorporated by Law 27.430, re-establishing some exemptions for certain Argentine-sourced income. The main changes include the following:
Likewise, Law 27.541 established two relevant modifications that, although they are not within the scope of income tax, influence the financial operation of individuals. The first refers to the monthly limit of USD200 established by the central bank of the Argentine Republic for the purchase of foreign currency. The second relates to the creation of the Impuesto PAIS, which implies a 30% charge on the purchase of foreign currency and products or services abroad.
Section 130 of the ITL establishes that if certain foreign structures (companies or other entities or contracts such as trusts) meet certain requirements, they will be considered "transparent" for tax purposes. To that end, the ITL establishes three categories of entities:
Trusts and Private Interest Foundations
Regarding trusts, private interest foundations and similar structures, the ITL establishes that fiscal transparency will apply if an Argentine tax resident exercises control over the structure – ie, when there is evidence that the assets remain in its possession and/or are administered either directly or indirectly by the tax resident, comprising among others the following cases:
On the contrary, if a trust/private interest foundation does not meet these characteristics, it will not be considered transparent for tax purposes.
Personal Asset Tax – Amendments to Legislation
Section 30 of Law 27.541 (published in the Official Gazette on 23 December 2019) changed the criteria by which an individual falls within the scope of personal asset tax (PAT), from domicile to residency under the terms and conditions foreseen in the ITL; increased the tax rate on the net equity value of stock owned by Argentine resident individuals and non-residents or entities (from 0.25% to 0.5%); modified tax rates, which now range within a progressive scale (between 0.5% and 1.25%); and delegated the power to establish differential rates for assets held outside Argentina to the executive branch (until 31 December 2020).
Therefore, an Argentine-resident individual will be subject to PAT on the assets held in and outside Argentina as of 31 December each year. Assets with a value of ARS2 million or less remain exempt from tax. For assets above that threshold, the progressive tax rates increase as follows:
Real property in which the taxpayer lives (Casa Habitación) or in which the deceased used to live in the case of undivided estates will not be taxable when its value is equal to or less than ARS18 million. The taxable base is the market value of such assets and, apart from a few exceptions, debts are not deductible.
For assets held abroad, the executive branch established the differential tax rates through Decree No 99/2019, as follows:
The differential rate will not apply to foreign financial assets if at least 5% of the total foreign assets is repatriated, provided the repatriation occurs by 31 March of each year and that the repatriated funds remain deposited in an Argentine bank account until 31 December of the year of repatriation, or are applied to certain specific purposes.
PAT is also applicable to non-resident individuals exclusively on assets held in Argentina. To ensure that the tax is collected, the law provides a method of substitution that imposes the obligation to file the tax return and pay the tax on the local resident that administers the asset on behalf of the foreigner ("substitute taxpayer regime"). Those individuals must designate a local substitute taxpayer to pay the tax assessed on property located in Argentina, applying a fixed tax rate, which has been increased by Law 27.541 from 0.25% to 0.5%.
Expatriates residing in Argentina on work assignments for a period not exceeding five years are considered non-residents (Section 123 (c) of the ITL). Therefore, they are taxed exclusively on their Argentine situs assets. The employment reasons that require Argentine residence must be duly proven.
In Argentina there is neither federal gift tax nor inheritance/estate tax. A gift tax/estate tax (Impuesto a la Transmisión Gratuita de Bienes or ITGB) is only applicable for Buenos Aires Province (PBA). Even though there are no similar taxes in the rest of the provinces (Entre Ríos Province abrogated this tax on 22 December 2018), it cannot be ruled out that the federal government may introduce similar taxes in the future.
ITGB is assessed on any increase in an individual’s wealth due to the receipt of a gratuitous transfer of assets from acts including inheritances, legacies and gifts. According to the law, the following are regarded as liable:
The tax-free allowance when the beneficiary is the spouse, child or parent of the transferor is ARS1.344 million. If the amount received exceeds this sum, the tax will be applied to the difference. In any other cases, the tax-free allowance is ARS322,800.
The applicable tax rates vary between 1.6% and 8.78%, depending upon the value of the property transferred and the relationship between the transferor and the transferee of the property, and are based on the assessment value or the market value, whichever is higher.
The Buenos Aires Province Tax Code (Section 320 of Provincial Law 10.397) provides that certain heirs (surviving spouse, ascendants and/or descendants) will be exempt from ITGB when they receive any of the following assets mortis causa:
Real Estate Owned by Non-residents
Non-residents are subject to PAT on all property located in Argentina as of 31 December each year. To collect this tax, the law provides a method of substitution that is imposed on the local resident that administers the asset owned by the foreign national. Such person must submit and pay the tax return (Substitute Taxpayer Regime). The tax is composed of a fixed amount (from ARS15,000 to ARS156,250) and the tax rate to be applied on the surplus of the established minimum of the scale, which goes from 0.50% to 1.25%.
In addition, provincial real estate tax must be paid annually, in one or several instalments that expire in the months of February, April, June, August and October. The tax is composed of a fixed amount (from ARS207 to ARS276.121) and the tax rate to be applied on the surplus of the established minimum of the scale, which goes from 0.028% to 2.363% and varies according to the type of property and the fiscal valuation carried out by the Land Registry and Territorial Information Service (with the minimum and maximum being ARS179,851 and ARS15 million, respectively).
If the property is rented out, the tenant should withhold at an effective tax rate of 21% (ITL presumes that 90% of the rent is the net income and applies a 35% tax rate). If the property is to be rented for commercial purposes (ie, it is not to be the tenant's homestead), VAT would apply (21% applicable tax rate of the rental value).
Regarding transfers of real estate, PIT applies to the extent that the real estate was acquired by the non-resident on or after 1 January 2018. Where the real estate being sold was acquired by the non-resident prior to 1 January 2018, a 1.5% withholding tax (real property transfer tax or ITI) will apply. In addition, the deed of sale of the real estate is subject to stamp tax. The applicable tax rate will depend on where the real estate is located, as each province sets a specific rate within its own provincial tax code. For example, in the Autonomous City of Buenos Aires, the tax rate for the transfer of ownership of real estate is 3.60% on the economic value of the contract. Where a non-resident receives income on the sale or transfer of shares or other interests in foreign entities, and the value of this derives from at least 30% of assets located in Argentina (eg, real estate), this income will be taxed in the same way as for capital gains.
Stability is not a quality that is readily associated with Argentina, and the country's tax legislation is no exception to this. This can clearly be seen by the changes made to PAT in the last four years, which can be summarised as follows.
Law 27.605 was finally enacted on 4 December 2020, creating a one-off extraordinary contribution levied on the assets held by individuals and undivided estates (both residents and non-residents), known as Aporte Solidario or Impuesto a la Riqueza (the ASE). The tax will be applied to the total assets existing as of 18 December 2020, provided the value of those assets exceeds ARS200 million.
While resident individuals and undivided estates are subject to tax on worldwide assets, non-resident individuals and undivided estates shall be subject to tax exclusively on Argentine situs assets. Progressive rates are established depending on the total value of the assets and on their location (Argentine or abroad). The rates range from 2.00% to 3.50% for Argentine situs assets, and from 3.00% to 5.25% for assets held abroad.
Although the ASE was thought to give response to the economic impact of COVID-19, only 20% of the funds collected was finally applied to purchase and/or develop medical equipment, drugs and supplies for healthcare. The deadline to file and pay the ASE tax return was 16 April 2021 (non-residents by the Substitute Regime). Tax due could be paid outright or under different plans (down payment and instalments with interests).
However, many individuals have decided not to file and pay the ASE because they consider that this new tax duplicates the existing PAT and that – because of the excessively high rates – it absorbs entirely the income generated by the taxable assets as well as part of the capital, violating different constitutional principles. Those individuals filed an action before court claiming that applying the law in their particular case results in the unconstitutionality of Law 27.605 (known as Acción Declarativa de Certeza). At the time of writing, the Federal Public Revenue Administration of the Argentine Republic (AFIP) has initiated tax inspections of each of these individuals, which will end with a Tax Assessment Resolution. The review of this official assessment may be requested, at the taxpayer's option, by filing the following within 15 days of receiving written notice:
The lack of stability in the tax laws, the extremely high overall tax burden (mainly after the introduction of differential higher rates for assets held abroad and the ASE) and future uncertainty, mainly in relation to the future raising of the PAT rate, have aroused concern among high net worth individuals. Therefore, consultations on tax and estate planning have increased considerably, and many high net worth families are considering moving abroad.
Following the international standards suggested by the Organisation for Economic Co-operation and Development (OECD), fiscal transparency through controlled foreign company rules was introduced for the first time in Argentina by Law 27.430 (27 December 2017).
Fiscal Transparency for Individuals
Fiscal transparency rules apply primarily to individuals who hold shares or have an interest ownership in foreign companies located in non-co-operative or low or nil tax (LONT) jurisdictions, modifying the moment of recognition of foreign-source income by resident taxpayers. In this way, the income will be recognised as having been earned by an Argentine resident as if the foreign entity does not exist, to the extent that certain conditions are met (control through ownership, lack of "substance", passive income representing more than 50% of gross income, etc).
Fiscal transparency also applies to individuals with interests in foreign trusts/private foundations, provided certain conditions are met (revocable trusts, trusts in which the settlor is also a beneficiary, and trusts in which the settlor keeps direct or indirect control over the structure).
These structures are therefore no longer useful for personal income tax deferral.
For the past few years, Argentina has been an active participant in the exchange of international tax information. In this sense, Argentina has subscribed to:
In order to fulfil the commitments assumed, the AFIP enacted General Resolution No 3826/2015 on 30 December 2015, which established an information regime on financial accounts, so that financial institutions provide the required information.
Through different communications, the AFIP requested that the different entities involved (such as the Argentine Central Bank, the National Securities Commission and the Superintendence of Insurance) take the necessary measures to identify holders of the accounts reached in the field of information exchange.
According to the commitment assumed in previous years, the AFIP regulated the automatic exchange of bank account information through General Resolution No 4056-6 on 22 May 2017. The resolution established the subjects, forms, periodicity and deadlines within which the information must be submitted.
Throughout the previous government (2015–2019), Argentina encouraged negotiations with the USA and came near to subscribing to a Foreign Account Tax Compliance Act (FATCA) intergovernmental agreement (reciprocal Information Exchange Agreement) to attain an automatic exchange of information. At present, negotiations are on hold. However, the Information Exchange Agreement subscribed to by both countries on 23 December 2016 is still in force.
As family wealth and investments become increasingly global, foreign structures such as revocable and irrevocable trusts become more relevant and useful. Although the older generation is generally reluctant to turn over wealth and control, the new tax burden to which they are exposed (PAT differential higher rates for assets held abroad and, eventually, the Impuesto a las Grandes Fortunas) will no doubt encourage them to consider succession planning as a way to ease this burden.
Regardless of the fiscal efficiency associated with these structures, once assets have been contributed them they will not be included in the judicial succession process that will be carried out upon the death of the decedent, thus avoiding several costs regarding the court process.
See 2.1 Cultural Considerations in Succession Planning.
Argentina has a forced heirship (public order) regime. The forced heirship portion refers to the part of the estate that is reserved for certain heirs by law (ie, forced heirs). This allows for descendants, ascendants and the surviving spouse to have a reserved portion (la legítima) in the deceased estate, of which they cannot be deprived either by will (testamento) or by any free inter vivos act (gifts) (Section 2444 of the CCC).
The reserved portions are as follows:
These portions are calculated by taking into account the sum of the liquid value of the estate at the time of the decedent's death and the gifts provided for each of the forced heirs at the time the gift was made.
The CCC introduces the concept of improvement. This allows the decedent to reduce the reserved portion to exclusively improve it for disabled heirs, whether they are descendants or ascendants (first part of Section 2448). Section 48 of the CCC establishes that a disabled person is someone who suffers from a mental or physical disorder, either permanent or prolonged, which, in relation to their age and social environment, entails considerable disadvantages for their family, social, educational or professional integration.
Since the forced heirship regime is a public order regime, any provisions or structures used by the parties that conflict with the portions under the regime may be challenged under a legal action (collation bonorum). There have been precedents in Argentine courts in which forced heirship claims have been admitted against trust assets when the legitimate portion of one of them was infringed.
A forced heir cannot be deprived of their legitimate portion by the decedent. However, upon the decedent's death, any of the heirs can file a legal action to exclude another heir, invoking one of the statutory causes for indignity established in Section 2281 of the CCC (eg, an heir can claim that the decedent was the victim of violence by the heir against whom the action is filed). The onus probandi of the invoked indignity cause is in the hands of the heir filing the action (Acción de indignidad under Section 2283 of the CCC).
Any general agreement entered into by and between future heirs during the deceased's life is null and void. However, Section 1010 of the CCC allows agreement over future inheritances if the agreement meets all the following conditions:
Under the CCC, future spouses have the possibility of opting – by entering marriage conventions – between a shared/marital property regime or a separate property regime. Section 463 of the CCC establishes that if no convention is entered into, or if the convention does not set forth any provision regarding the property regime, the traditional shared/marital property regime will be applied. Under this regime, each spouse is entitled to the full management and disposal of their personal assets (bienes propios). The management and disposal of shared property (bienes gananciales) falls to the spouse who acquired it. However, the other spouse's consent must be obtained in order to transfer recordable assets, shares of stock or businesses (Section 470 of the CCC).
Conventions may be created (Section 446 of the CCC) for the purpose of:
Section 448 of the CCC provides that a convention must be executed by public deed (escritura pública) in order to be valid. For a convention to be effective towards third parties, the marriage certificate must include a note in the margin specifying the chosen regime. If the spouses decide to change the regime (which they can only do after being married for at least one year), the amendment must also be made by convention and by public deed. If creditors are affected by this change, they will have one year from the date they became aware of the change to object to it.
When a marriage is terminated (due to death or divorce), the assets that qualify as shared/marital property are grouped together and, after the applicable liabilities and claims of each spouse have been worked out, they are divided and distributed equally between the spouses (in the case of divorce) or between the heirs and the surviving spouse (in the case of death).
The cost basis of any property being transferred (whether gifted or at death) must be maintained at the same cost assigned by the transferor in their income tax return – ie, the value in Argentine pesos at which they acquired that property.
The only way to transfer assets to younger generations tax-free is through lifetime gifts, to the extent that the gifted assets do not qualify as PBA situs assets and that the donee is not domiciled within the PBA (in which case, the ITGB would apply). However, after the enactment of the CCC (Law 26.994), gifts involving real property – even in favour of forced heirs – are no longer an option due to the fact that the title would be deemed imperfect (Section 2458 of the CCC).
There are no specific provisions regarding how digital assets (such as email accounts and cryptocurrency) should be treated for succession purposes.
Traditionally, families used to make inheritance advances (gifts) to their successors to avoid court succession proceedings. With respect to tax matters, there were benefits in the use of certain double tax treaties (DTTs), such as those made with Austria and Chile, which permitted, through the use of simple structures, the exemption of the property that was subject to PAT as well as the exemption of income tax with respect to the income generated by it. When both DTTs were denounced, the tax impact of maintaining the assets in the individual estates led to a gradual change of trend, and high net worth individuals and families became more prone to planning through foreign fiduciary structures.
Under Argentine law, the applicable law is the law of the place where the trust has been settled, providing that Argentine public order is not infringed (mainly, the forced heirship rules).
Revocable and Irrevocable Trusts
Until the enactment of Law 27.430, Section 140 (b) of the ITL was the only reference to foreign trusts in local legislation. Law 27.430 establishes the cases in which a foreign trust should be considered transparent for tax purposes. In this sense, fiscal transparency applies to revocable trusts, so they are no longer useful for income tax planning purposes. However, as mentioned, it must be stressed that these structures will still be useful for estate planning.
Concerning irrevocable trusts, neither fiscal transparency nor anti-deferral rules will apply unless either of the following situations applies:
Therefore, if structured correctly, revenues derived from the assets held in trust will not be subject to tax in the jurisdiction of the trustee, and the trustee becoming the legal owner of the assets will ensure that neither PAT nor income tax will be levied on the settlor for such assets and their revenues.
However, it must be stressed that there has been an attempt to change this situation by taxing the “rights inherent to the capacity as beneficiary of a foreign trust” with the differential rate of PAT (Law 27.541, Section 25, third paragraph). Nevertheless, it seems that the way in which this provision has been included does not change the tax consequences for the beneficiary of an irrevocable discretionary trust for the following reasons:
However, this provision has not yet been regulated.
Therefore, the use of an irrevocable trust – ignoring the fact that the transfer in trust that must be made by the settlor to a third party (trustee) generally generates resistance in individuals in countries such as Argentina (due to various cultural factors) – may give rise to benefits concerning both taxes and successions.
Irrevocable Fiduciary Structures
It seems probable that there will be an increase in the implementation of irrevocable fiduciary structures for different reasons. Firstly, high net worth families have entered the Tax Amnesty (Law 27.260), under which they declared the possession of national or foreign currency and other property located in the country and abroad. Consequently, high net worth individuals have since been affected by the increasing tax burden (regarding PIT, PAT and, possibly, the Impuesto a las Grandes Fortunas) and will seek tax planning alternatives to ease this burden. Secondly, taking into account the current fiscal deficit deepened by the COVID-19 situation, further taxation cannot be ruled out (inheritance/estate tax at a federal level and/or an increase in the tax rates of PAT and PIT, etc).
Lastly, in line with the above, high net worth individuals and families will be uncomfortable when showing all their assets (recently disclosed under the tax amnesty) periodically in their relevant tax returns. The events of recent Argentine political history will surely speed up this planning decision. In other words, high net worth individuals and families will seek tax and estate planning but mainly asset protection.
All the factors will encourage high net worth families to analyse estate planning alternatives. The efficiency of any structure will depend upon the eventual terms of these upcoming amendments to tax laws.
Argentina has not signed the Convention on the Law Applicable to Trusts and on Their Recognition (1 July 1985). However, court precedents have recognised the existence and enforceability of foreign trusts, providing that Argentine public order is not infringed (mainly, the forced heirship rules). This was then included in Section 2651 (e) of the CCC. Argentina therefore recognises and respects foreign trusts.
The tax consequence of a fiduciary of a foreign trust being an Argentine resident is that the trust would be considered a taxable entity for Argentine tax purposes.
The tax consequences of a beneficiary of a foreign trust being an Argentine resident will appear exclusively upon receiving distributions from the trust (provided it is an irrevocable and discretionary trust). However, it must be stressed that there has been an attempt to change this situation by taxing the “rights inherent to the capacity as beneficiary of a foreign trust” with the differential rate of PAT (Law 27.541, Section 25, third paragraph). However, it appears that the way in which this provision has been included does not change the tax consequences for the beneficiary for the following reasons:
However, this provision has not yet been regulated.
The tax consequence of either the beneficiary or the settlor of a foreign trust serving as a fiduciary is that the transparency rules would apply (Section 130 of the ITL) and the assets in the trust would be included in the settlor's PAT return.
Exercising control over irrevocable planning vehicles (ie, if the settlor/founder retains extensive powers) would result in fiscal transparency (Section 130 of the ITL). Therefore, to attain the benefits derived from planning through these vehicles (concerning both taxes and successions), high net worth individuals would be well advised to overcome their usual resistance to giving up control.
The most popular mechanism to seek asset protection is through trusts.
When it comes to family-owned companies, it is common for the founder to gift their shares/interest to their heirs, reserving the economic rights for themselves and in some cases the political rights too, until their death (usufructo vitalicio). Related to this, and mainly when the family-owned company holds real property or rural land, tax-free reorganisation procedures are commonly used to split the shares/interest between the members (escisión libre de impuestos), to avoid any tax burden, provided the following requirements are met:
For family-owned companies where a reorganisation procedure is not an option due to the company's particular, further planning might be suggested to achieve not only an efficient succession on the property (shares of the family company) but also the subsistence of the family company throughout the generations. A family business constitution (Protocolo de Empresa Familiar) might be an effective way to future-proof a family business, especially if the amendments to Section 1010 of the CCC are finally approved by the congress.
When it comes to family-owned companies, it is common for the founder to gift their shares/interest to their heirs, reserving the economic rights for themselves and in some cases the political rights too, until their death (usufructo vitalicio). Unless the company is located within Buenos Aires Province, the transfer during the founder's lifetime is not subject to any transfer tax (the same applies to transfer at death). Therefore, there is no need for a transfer of partial interest. For income tax purposes, transferees must include the interest received at the same value as for the transferor (Section 4 of the ITL).
Argentine law provides legal remedies for a forced heir to make a claim if the forced share that should be allocated to them has been adversely affected. In this sense, the affected party could file a collatio bonorum claim regarding the trust fund.
Case Involving Collatio Bonorum
This interpretation was extended by the courts in a unique and unprecedented case in Argentina where the collatio bonorum was discussed in the case of a trust created under the laws of the United Kingdom. In this case, the two daughters from the first marriage of the decedent and the surviving divorced spouse filed a complaint against the other heirs – the children from a third marriage of the decedent – with respect to the collatio bonorum of the real estate located in London and received by them as beneficiaries of a trust created in the United Kingdom by their deceased father. The court resolved, regarding the collatio bonorum, that a trust created with a view to gratuitously benefiting a forced heir of the settlor might be deemed a gift to the heirs made before the death of the decedent, and so goes into the accounting of the estate, as its content and significance exceed that permitted under inheritance law.
Regarding matters of private international law, the court established that, even though the trust was governed by UK law, the succession was subject to Argentine law because that was the last address of the decedent. As a general principle in succession matters, the Argentine legal system provides that succession proceedings will be governed by the laws of the country in which the decedent’s address is located, as seen in the aforementioned case, where the law of the decedent’s address prevailed over the law governing the trust.
A Sham Trust
Furthermore, if the settlor received funds from the trust then any party with a legitimate interest could pursue a sham trust claim for the irrevocable trust to be declared void ab initio. Therefore, those assets would be treated as if they had never left the settlor's estate. A sham trust is the term used to refer to a trust that was set up with intentions other than those expressed in the deed, and where the trustees had no intention of acting on the terms of the trust.
As a general principle in succession matters, the Argentine legal system provides that succession proceedings will be governed by the laws of the country in which the decedent was domiciled at the time of their death.
If a settlor dies and their last domicile is in Argentina, the CCC's forced heirship rules would apply. Therefore, if the trust was created with a view to gratuitously benefiting some of the forced heirs of the settlor (to the detriment of the others), it would be considered a gift to those heirs (made before the death of the decedent) and, therefore, would go into the accounting of the estate, as its contents and significance exceed that permitted under inheritance law. As seen in 5.1 Trends Driving Disputes, the remaining forced heirs (aggrieved parties) should file a collatio bonorum claim against the trust fund to compensate the other forced heirs of the estate.
The use of corporate professional fiduciaries/trustees is prevalent when planning through foreign irrevocable discretionary trusts. When planning through local Fideicomisos, the fiduciary most commonly used is a company owned by the Fiduciante (not a corporate professional fiduciary), which usually gifts the bare ownership of the shares in the company to their descendants, keeping lifetime usufruct over those shares.
Fiduciaries' protection from liabilities is attained through exoneration/exculpatory clauses and by delegating power of investment to third-party professionals (investment advisers).
In Argentina, trusts were originally regulated by Title I of the Housing and Construction Financing Law No 24,441 (Trusts Law), which contemplated two types of trusts:
However, the CCC has since amended the Trusts Law. The regulation of trusts is now set out in Chapter 30 of the CCC (local trusts), which incorporates suggestions from legal scholars and case law with respect to certain issues of interpretation and the application of trust law.
There are no specific provisions related to fiduciary investments in Argentina.
Unlike in many other countries, obtaining citizenship in Argentina is relatively straightforward. The first step is to obtain a visa, which will allow a person to live in the country for one year on a temporary residence permit. When the year has expired, the visa can be extended for an additional year. At the end of the second year, the visa can be extended again for another year. At the end of the third year, the person can extend the visa again and receive permanent residency. At this point, they will be legally entitled to reside in Argentina permanently. Two years after receiving permanent residency, they may apply for citizenship.
The children of an Argentine father or mother (regardless of whether native or by choice) who were born abroad also have the right to acquire Argentine nationality, no matter their age, even when the Argentine father or mother has passed away.
Those who cannot apply for Argentine nationality are family members of Argentine citizens (such as the spouse, grandchildren or siblings), despite some of them having the right to reside in Argentina.
It is not a requirement to give up (renounce) another nationality to acquire Argentine nationality by choice. However, whether the person can retain their original nationality will be a matter for the foreign country in question.
Although COVID-19 has impacted global travel and immigration, it appears that Argentina will not incorporate measures restricting domicile, residency or citizenship once the situation has normalised.
This is not applicable in this jurisdiction.
Argentine Trust Law does not include any specific provisions regarding a special needs trust. However, if the beneficiary is a natural person without legal capacity, the maximum duration period for local trusts (30 years from the date on which it was created) would not apply. In that case, the trust will last until the beneficiary's death or until termination of their incapacity.
In general terms, minors are represented by the surviving parent. If there is no surviving parent, the court designates a legal representative to handle all the assets on the minor's behalf. Likewise, the disposition of assets usually requires court approval. A minor can inherit and own assets through their legal representative.
The Medical Anticipated Directives (Directivas Médicas Anticipadas) is a relatively new method (regulated in the CCC) by which a capable person can anticipate directives and grant power of attorney regarding their health and foreseeing their own potential incapacity. A person (or more than one) may be appointed to express the consent to medical acts and to act as curator. However, directives related to euthanasia are null and void, and can be freely revoked.
Since the enactment of Law 23.264, and pursuant to the American Convention on Human Rights (Convención Americana sobre Derechos Humanos), Argentine law has not made a distinction between legitimate and illegitimate children (those born out of wedlock). Therefore, they have the same rights to inherit or be included in a class of beneficiaries.
An adopted child is one who is taken into a family that is different from that of its natural parents, after a legal process is followed under the CCC. Sections 594 to 637 of the CCC distinguish between simple, full and integrative adoption.
The distinction has a direct impact on the intestate inheritance rights of the adopted children, as follows.
Argentine law recognises marriage between same-sex couples, so the same marital property regime applies in such cases. This has no special effect on the testator's will, since they have the same inheritance rights as any other spouses in a marriage. "Marriage" is defined as a union between one person and another of the same or opposite sex, in a consensual and contractual relationship recognised by law, the consent to which is usually expressed in the presence of a public officer. Argentine law also recognises a civil partnership, which is a legal union or contract like a marriage, between two people of the same sex.
Charities are recognised under Argentine legislation, but there is no single regulatory authority for all charities in Argentina. In addition, unlike in many other jurisdictions, Argentine law does not provide an exact definition of a "charity".
Main Types of Not-for-Profit Organisations
Despite the lack of a proper legal definition, a charity can generally be defined as an organisation whose purpose is to work for the public benefit without making a profit. The two main types of not-for-profit organisations are:
Incorporation of a Charity
To incorporate a charity, the founding members must file the following documents with the local Public Registry of Commerce:
Registration of a Charity
Local registration is mandatory, with the appropriate registry being determined by the domicile of the foundation or association. For example, in the City of Buenos Aires, foundations and civil associations are registered with and controlled by the Public Registry of Commerce (Inspección General de Justicia), the government agency with supervisory authority over companies registered in the City of Buenos Aires. In other provincial jurisdictions, the same body that controls commercial companies may also oversee the regulating of charities and registering them in the local Public Registry of Commerce.
Once the charity is registered with the Public Registry of Commerce, it must be registered with the AFIP, which will provide the charity with an identification number, identifying the organisation as a charity, with all applicable tax exemptions.
The benefits for individuals when setting up a charitable organisation are as follows:
See 10.1 Charitable Giving.
Family Agreements on Family-Owned Businesses and Family Governance
This article will address some ideas about a wealth planning instrument that has been incorporated into Argentine legislation since 2015: the Family Agreement on Family-Owned Businesses. It will discuss whether these agreements should – or can – be preceded by so-called family governance or whether it is necessary instead to incorporate family governance rules after a person has planned the generational continuity of a family-owned company.
The Family Agreement on Family-Owned Businesses has not been expressly defined under Argentine law, but the concept and its specific features are presented as the exception to the generic prohibition on entering into future inheritance agreements – ie, Argentine law maintains the ban on entering into agreements on things and rights in relation to the estate of a person who was alive at the time the contract was entered into. Therefore, "the future inheritance cannot be the object of the contracts", but what stands out as novel is the exception to said prohibition, as follows: "Agreements dealing with the productive exploitation or corporate holdings of any kind, with a view to preserving the unity of business management or conflict prevention or resolution, may include provisions referring to future hereditary rights and establish compensation in favour of other heirs. These agreements are valid, whether or not the future deceased and his/her spouse are a party, if they do not affect the legitimate inheritance, the rights of the spouse, or the rights of third parties.” This is where the definition of agreements for planning family-owned businesses comes from.
This means that, if the purpose is to avoid possible hereditary conflicts and promote the continuity of a family productive exploitation (under any legal form), the rights resulting from the inheritance of a person who is still alive can be agreed upon. And provision must be made so that those heirs who are not beneficiaries of said rights are compensated with other assets of the owner of said heritage (to preserve the principle of public order laid down under Argentine law whereby heirs cannot be deprived of their legitimate heirship).
Why Is the Subject of These Agreements Relevant?
The subject of the agreements is relevant because of the impact that family-owned businesses have on family assets and mainly on the world economy, according to the data and the statistics. More than 90% of the total number of companies operating in Argentina are family-owned businesses, which generate around 70% of private employment and create 68% of the internal GDP. The same holds true for the rest of the world, with it being estimated that 80% of companies are family-owned and account for approximately 50% of job creation. This shows the economic importance of the family-owned business, not only for its own sake but also because of its importance to the rest of society, in terms of jobs, consumption, competition, etc.
Now, as reported by official data, paradoxically, only 40% of those companies transcend the second generation, about 15% survive the third generation and less than 2% manage to last until the fourth.
As a result of these figures, the trend both in Argentina and in other jurisdictions is to encourage mechanisms to sustain the generational transmission of these family businesses (eg, in Spain, Italy and the European Union).
The relaxation of certain estate planning regulations that make it possible to incorporate this type of agreement is great progress, but it is suggested that tax benefits should also be added to accompany and financially sustain this path.
Additionally, when going down the road to organise, preserve and transfer a family business generationally, it is important to mention that family governance also plays an important role. The question to ask is whether these protocols serve as prior background to the agreement on the family business as described above, or whether entering into these agreements leads to moving forward with the design of a family protocol where the owners incorporate certain rules to define the ways in which family members relate and interact with each other, with the company and with third parties, in order to avoid future conflicts between them and, where appropriate, provide mechanisms for solving possible conflicts that may arise to endanger the development of their economic activity and their generational transfer.
It should be emphasised that the purposes in both instruments are the same, but do they have the same legal treatment? As has been discussed, Argentine law incorporates family business agreements into statute law, but does not do so with family protocols. In other words, in Argentina the protocols are merely moral agreements (known as “gentlemen's agreements”) that are signed by family members; a breach thereof will bear no legal consequences but lead only to ethical reproaches.
However, this does not render family agreements less relevant. More often than not, families resort to these agreements as they believe the best way to ensure the continuity of the company and keep it under family control over time is by defining a mission and a strategy for the company, a management and governance system, its culture and the way in which the family is going to interact on both a personal and a business level. That is why these protocols are important antecedents for the design of a family agreement that involves all members of the family (or those who will continue), from not only an economic perspective but also an emotional one.
Currently, there are some projects in Argentina that are intended to incorporate family protocols into legislation and thereby render them legally binding agreements with legal and binding force for family members, being opposable to the family business itself and to third parties. Likewise, these preliminary projects propose the voluntary publicity of the existence of the protocols by means of their registration in the commercial registers where the companies are registered as a way to publicise it, forcing everyone to comply with it.
So family governance is an instrument that provides mechanisms to establish the principles of an orderly generational transfer of a family business. By being aware of the interests of the family members within the company (in their capacities as shareholders or partners, as employees, or only as part of the family without interference in the administration), governance rules ensure the necessary balance for transcendence and incorporate the mechanisms for the resolution of any disputes that may arise.
The most relevant content to be incorporated into a family protocol includes the following:
Finally, family protocols (such as Agreements on Family Businesses) intend to ensure the transcendence of the family business, comprising both the economic and emotional involvement of all or part of the family members. In the end, it is a process that, after a series of meetings and negotiations, becomes a valuable instrument (which must be complied with by all) where the common objectives are set out to achieve the desired continuity.
The inclusion of covenants on future inheritance as a legal instrument for family wealth planning has been welcomed, although it must have special treatment in tax matters to promote its use. However, it is not the first thing that families should look for – they should focus instead on the family business transcending generationally. In other jurisdictions, these covenants have been extremely useful for estate planning projects. Under Argentine law, where the legitimate estate portion allotted to forced heirs functions as a limit, it is important to work on the ways in which the compensations will be implemented to preserve their effectiveness over time.
Decision-making through these legal agreements, with the underpinning of family protocols, is a choice that should ensure a positive outcome for the purpose sought by families, not only for the successful management of the company but also for the assessment of value upon transfer to subsequent generations.