Regulations for Foreign Investment

The Argentine constitution grants foreigners the same rights to work, conduct business, buy, own and sell property as it does for Argentine nationals. Property is inviolable and no inhabitant of the nation may be deprived of it except by virtue of a judicial decision.

The rules covering foreign investment are contained in the Foreign Investment Act Nº 21382 enacted in 1993 by Executive Order 1853/93, established the legal framework for foreign investment. The last amendment has repealed all provisions of the law requiring prior approval for the investment of foreign capital in Argentina.

National treatment for foreign investment

• Foreign investors have the same legal treatment as nationals under the Argentine Constitution.
• Foreign companies may invest without prior approval or registration requirements.
• Foreign investors have the same access to incentive programs as local investors.
• Foreign companies have unrestricted access to all economic sectors.
• Foreign companies can adopt any legal entity formation allowed by Argentine business law.
• Foreign companies have the same access to credit as local companies.

Bilateral Investment Treaties (BITs) with several countries

Argentina has signed Bilateral Investment Treaties (BITs) with several countries, such as: Austria, Armenia, Australia, Bolivia, Bulgaria, Canada, Croatia, Cuba, Chile, China, Denmark, Ecuador, Egypt, Finland, France, Germany, Hungary, Indonesia, Israel, Italy, Jamaica, Luxembourg, Malaysia, Netherlands, Peru, Poland, Portugal, Rumania, South Korea, Spain, Sweden, Switzerland, Tunisia, Turkey, Ukraine, United Kingdom, USA, Vietnam, Venezuela, Senegal and Morocco, in order to protect investments and avoid double taxation.

Member of ICSID, MIGA and OPIC

Argentina is a member, among others, of the Multilateral Investment Guarantee Agency (MIGA), the Overseas Private Investment Committee (OPIC), and the International Center for Settlement of Investment Disputes (ICSID).

Lesgal Structure of Companies

The form of business organization legislated in the Business Associations Law (Nº 19550) are as follows:

Corporations ("Sociedades Anónimas S.A.")

Along with the branches of foreign companies, corporations ("Publicly Held Corporation" - "Sociedad Anónima") are among the most common types of company formation by foreign investors in Argentina.

• Capital is represented by shares of stock


• Corporations should have at least two shareholders, and shares may be privately held or quoted publicly. This type of company formation is the only one allowed to go public.


• The liability of shareholders is limited to their paid-in capital.


• The Board of Directors is responsible for the administration of the company. Directors are selected by the shareholders annual meeting. They are personally responsible for their actions.


• Corporations are subject to supervision and control by government entities:

The basic characteristics of the corporation (objective, duration, administrations, etc.) are established in the articles of incorporation which must be approves by the "Inspección General de Justicia" (the governmental agency that regulates Corporations), published in the Official Gazette, registered with the Public Register of Commerce and notarized.

Sociedad de Responsabilidad Limitada” (Limited Partnership Society)

Generally, the formation and administration of a “Sociedad de Responsabilidad Limitada (S.R.L.)” is relatively uncomplicated. However, its effective continuity depends on the relations existing among its members, since majority and, in some cases, unanimous consent is required for all changes. Compared to a Publicly Held Corporation “(Sociedad Anónima)”, the time needed to form an S.R.L. is shorter, and if the capital is below $2,100,000, there is much less government supervision or regulation. Corporations may not be partners of an S.R.L. Capital is divided into quotas, and the liability of the partners (There must be between two and fifty) is limited to paying up the quotas they have subscribed.

Branches of Foreign Corporations

If a foreign company desires to engage regularly in its line of business by setting up a branch, office or any other form of permanent representation, it must:

• Prove the existence of the parent company abroad, register the parent's articles of incorporation or partnership contract with the Public Register of Commerce, appoint representatives and register them likewise.


• Established a domicile in Argentina


• Fulfill the same publication and registration requirements as Argentine companies. Like Corporations Branches are subject to permanent control by the society control entity (Inspección General de Justicia)


• Appoint a representative or manager


• If a branch is chosen as the form of establishment, it must have assigned capital (there are no maximum or minimum limitations in this connection)


• Keep accounts separately from those of headquarters and file their own accounting statements with the control entity (Inspección General de Justicia) within 60 business days of their fiscal year-end.

There are different types of joint ventures, among which the most common are temporary partnerships and temporary unions of companies ("Uniones Transistorias de Empresas – UTE"). In these cases the law expressly states that no new company or new legal entity is created. There is merely association for a purpose and this relationship is regulated by a contract made by the parties concerned. Contracts of this nature must be registered with the Public Register of Commerce and must include their objectives, term of duration, name and other particular information on their partner's responsibilities, financial contributions and other legal implications.

Temporary Partnerships

The objective of temporary partnerships is to mutually collaborate in the development of certain stages of business activity of the partners, or to improve and develop their mutual activities.

Temporary union of companies (U.T.E.)

U.T.E. is a joint venture created for a specific task of limited duration.

Both types of joint ventures must have the following characteristics:

• They are not separate legal entities in their own right. Thus, members face unlimited liability for the venture's obligation, and they must operate in their own names.


• Participants may be resident businessmen, locally constituted entities or nonresident companies that have established a separate branch or other type of presence in Argentina.

Business Records

The Commercial Judge or the Securities Commission may authorize the use of modern electronic data processing or mechanized records to supplement the rubricated books or to partially replace the journal. In this case, the latter is written up with monthly summary entries. A description of the system must be included in the inventory book.

Migration Regulation

Local regulations on immigration establish three types of residence: permanent, temporary and transitory. To start a business in Argentina it is required to have a permanent or temporary residence. There are no restrictions with respect to the nationalities of company directors but they need to have an address in Argentina.

Foreign investors who wish to obtain a permanent residence must prove that they have made an investment of $ 100,000 or a deposit for the same amount. Regarding the hiring of foreign workers, the job contract must conform to the existing labor legislation in Argentina.

Taxation

The taxation system can be divided into three categories: taxes, charges and contributions. Charges and contributions are normally lower in amount than taxes and are intended to compensate the State for some specific activity in the form of individualized service to the party called taxpayer. Most taxes are levied as indirect consumer taxes.

Corporate Income tax

The tax rate applicable to the taxable income of Argentina corporations is 35 percent. The same rate applies to the silent equity of stock issuing partnerships. The distribution of dividends is not taxed further.

• Any profits including capital gains are taxable.
• Resident corporations are taxed on worldwide income. They may credit foreign income taxes against their Argentine tax liability, up to the amount of the increase in such liability resulting from including foreign source income in the taxable base. The tax rate is 35 percent.
• Non-resident companies without a branch or other permanent establishment in Argentina must pay taxes only on their Argentine sources of income and capital gains. Tax is normally levied in the form of a final withholding tax at various effective rates depending on the particular type of income. These rates are calculated as the 35 percent on a prescribed percentage of the gross payment.
• Companies with financial debts up to US $500.00, can take for the first $100,000, 5 additional points to pay Income Tax and Minimum Presumptive Income Tax.

Individuals

• Resident individuals in Argentina are liable for income tax at progressive rates on their worldwide income. Rates range from 9 to 35 percent.
• Non-resident individuals are taxed only on Argentine-source income. Tax is levied as a final withholding tax at various effective rates depending on the particular type of income.

Value added tax (VAT)

VAT is applied to the delivered cost of the product or service at each change of hands, with a credit given for taxes paid at earlier stages of production. Imports are subject to taxation at the same rates that apply to similar domestic items. The general rate for VAT is 21 percent, but some services such as electricity, gas and water have a VAT rate of 27 percent. Cable television, long distance passenger transports (except for international journeys), videos, magazines, brochures and publications, private health insurance, and interest paid on foreign loans and domestic bank loans pay 10.5 percent. Newspaper sales and bus passenger transports are exempted. VAT is not levied on exports. Exporters may claim the reimbursement of VAT paid on their purchases.

Import duties

The tariffs range between 0 and 35 percent. Generally, goods that came from member countries of ALADI have certain preferences.

As a result of the Customs Union effective on January 1, 1995 most of the goods that form the tariff universe of the Mercosur were subject to the common external tariff. Trade import duties among the members of Mercosur were practically removed.

Moreover, imports are levied by a statistical tax which rate is 0.5 percent calculated on the CIF value and the payment of V.A.T (the rate range between 21 percent and 10,5 percent) and Income Taxes in which case a payment of a rate (usually 3 percent) shall be required to be made in advance. This payment will be considered on account of the tax amounts that have to be effectively paid.

Other taxes

- Tax on assets (tax on minimum presumptive income)
A tax is levied on worldwide assets of Argentine companies. The tax rate is 1 percent and the payment of this tax and of the income tax may be mutually compensated during a 10-year consecutive fiscal term.

Excise tax

This tax is charged on specific consumer goods and at different rates. The first consumer or importer pays this tax. The main products under this category are cigarettes, alcoholic beverages, oil and lubricants, wine, luxury articles, furs, etc.

Tax on personal assets

Individuals are subject to an annual tax of 0.5 percent on personal assets exceeding $ 102,300 up to $ 200,000. Beyond this amount the tax rate increases to 0.75 percent. Stocks traded on the Buenos Aires Stock Exchange are exempted from this tax if the securities are held for at least a year

Tax on transfer of real estate

Real estate transactions of properties located in Argentina, owned by individual residents or non-residents are subject to a tax of 1.5 percent only if this transaction is not subject to income tax.

Provincial and municipal taxes

Turnover tax

This tax is levied on each commercial transaction. No credit is given for tax paid at previous stages. Tax rates vary between 1.5 and 4 percent, depending on the type of activity and the law of each province.

Stamp tax

Stamp tax is levied on public or private instruments upon formal execution. The rate is usually 1 percent. Some jurisdictions have eliminated this tax for certain transactions.

Tax on real estate

Provinces and municipalities tax real estate located on their respective jurisdiction. This tax varies within each jurisdiction.