Doing Business In: Argentina

Salaberren & Lopez Sanson (SyLS)

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1. Introduction.

Argentina is the 8th largest country in the world and produces several services and goods relating to a wide variety of industries including, among others, agribusiness, real estate, tourism, oil and gas, mining, technology, telecommunications, media, etc.

Argentina also has sophisticated human resources dedicated to business, which due to the exchange rate of the peso vis a vis foreign currency is more cost friendly than other countries, and has created a cross border technology services industry focused in the development of software.

For the past several years, Argentina has been suffering high inflation rates, devaluation of its local currency and increasing unemployment. Additionally, the COVID-19 pandemic has significantly impacted its economy. Moreover, the reinstatement of foreign exchange controls in 2019, discussed below, has given rise to different exchange rates depending on the type of transaction and person involved.

Based on the above, proper corporate, financial and tax structuring are key for not foundering in the regulatory requirements and factual complexities.

2. Legal system.

Argentina is a federal republic organized into 23 provinces and an autonomous federal district, the Autonomous City of Buenos Aires. Pursuant to the national constitution, the federal government is organized into three branches: executive, legislative and judicial. Each province and the City of Buenos Aires has its own constitution and government branches.

The federal executive is headed by the President, and includes several ministries and decentralized bodies.

The legislative power is exercised by the National Congress, which comprises the Senate and the Chamber of Deputies. Federal, civil, commercial, criminal and labor legislation is enacted by the National Congress, while each local government is entitled to enact procedural law.

The federal judicial branch is headed by the Supreme Court of Justice, which is in charge of constitutionality control. The federal judicial branch also includes lower and appeals courts. Each of the local judicial branches has its own lower, appeal and supreme courts. Local courts have jurisdiction over civil, commercial, criminal, labor and local legislation cases; federal courts have jurisdiction over federal cases.

3. Business Structures in Argentina.

The conduct of business in Argentina by foreign companies requires the incorporation of subsidiaries or the setting up of a branch.

The main advantage of incorporating a subsidiary is that, depending on the corporate type, they grant limited liability to its shareholders, while in the case of the branch the parent company will be directly liable for the business conducted through the branch.

The main corporate types available under Argentine law for incorporating a subsidiary with limited liability are the corporation (sociedad anónima), the limited liability company (sociedad de responsabilidad limitada) and the simplified corporation (sociedad por acciones simplificada).

Shares in corporations and simplified corporations can be transferred by way of a registration in the shareholders registry, while the limited liability company requires a registration of the transfer with the Public Registry of Commerce. Corporations are the only type of companies which are allowed to become public.

Corporations and limited liability companies are subject to certain additional requirements. For example, corporations and limited liability companies require a minimum of two shareholders (sole shareholder corporations are authorized but require the appointment of an internal auditor) and the majority of the directors must reside in Argentina.

Introduced in 2017, the simplified corporation was the main alternative for new start-up companies as it offered many advantages, including reduced bureaucratic burden and less restrictions than the other corporate types (allowing sole shareholders and requiring only one resident director). However, during 2020 the government has restricted many of these advantages and an amendment to the law is being considered by the Legislative Branch which will further reduce the availability of this corporate type.

For purposes of holding equity in Argentine companies, foreign companies need to register with the Public Registry of Commerce. This registration takes about a month and requires the appointment of a representative in Argentina, fixing an address for notices in Argentina and the filing of several documents of the foreign company, including an identification of shareholders and final economic beneficiaries as well as evidence that the main activity of the foreign company is conducted abroad from Argentina. Once registered, the foreign company must comply with an annual information regime updating the shareholders, final economic beneficiary and activity information.

The creation of a branch requires that the foreign company be registered with the Public Registry of Commerce, appoint a representative in Argentina, fix an address in Argentina and file several corporate documents, including an identification of shareholders and final economic beneficiaries as well as evidence that the main activity of the foreign company is conducted abroad from Argentina. Branches must file their annual financial statements as well as comply with the annual information regime.

4. Restrictions on foreign investments.

Equal rights are granted to local and foreign investors by the National Constitution and laws. Argentina has entered into bilateral investment protection treaties with several countries further providing for the protection of foreign investments. As a general rule, foreign investment is not subject to prior approval by the government; however, there are several regimes that regulate or limit foreign ownership of certain assets, as further described below.

4.1. Corporate requirements: As noted above, prior to conducting a business in Argentina or holding equity in Argentine companies, foreign companies are required to registered with the Public Registry of Commerce.

4.2. Ownership of Real Estate Assets:

4.2.1. Frontier Securities Zone (“FSZ”)1: The acquisition by foreign individuals or foreign companies (which includes 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 is limited by the FSZ regulation. This regulation also limits the acquisition of shares in companies which own said real estate assets, as well as any corporate restructuring operations carried out by said companies. These acquisitions must be authorized by way of exception by the Ministry of Interior, and depend on providing evidence that the investor, its shareholders and officers have 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 analyzed in light of criteria including whether or not it: (i) is declared to be of national, provincial or municipal interest by the competent authority; (ii) is key to the social and economic development of the region where it is located; (iii) will be implemented in underdeveloped zones; and (iv) mainly employs Argentine workers.

4.2.2. Rural Lands Ownership Act (RLO)2: The ownership or possession of rural land by foreign individuals (with certain exceptions) or companies (including companies in which foreigners have controlling equity holdings) is limited pursuant to this Regulation. ‘Rural land’ is defined as any real estate asset located outside the limits of cities. Pursuant to the RLO, 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. The acquisition of rural land by a foreigner requires the prior authorization of the National Registry of Rural Land. Additionally, any change in the composition of the corporate capital of local companies which qualify as foreign owners of rural land (or which, as a result of said change, would qualify or cease to qualify as foreign owners) should be informed to the authorities to verify compliance with the RLO. The limitations of the RLO do not apply to tracts of land destined for the generation of renewable energy.

4.3. Ownership of Media:

4.3.1. Cultural Assets Act (CAA)3: This regulation 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 (i.e., newspapers, magazines, radios, internet service providers, television, digital and audiovisual content producers), while the remaining 70% must be owned by Argentine entities (i.e., 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 assets (e.g. the bilateral investment treaty between Argentina and the United States of America contains such an exclusion).

4.3.2. Audiovisual Communication Services Act (ACSA)4: This regulation prevents companies which own audiovisual broadcast licenses 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.

5. Foreign exchange controls.

Since 2019, extensive foreign exchange controls have been reinstated in Argentina. Exchange controls impact most inflows and outflows of funds in Argentina and are relevant for the conduct of business in Argentina.

As a general outline, some of the more relevant provisions include:

  1. Consideration for the export of goods must be collected and converted into pesos within certain maximum time frames depending on the type of good.
  2. Consideration for the provision of services to non-residents must be converted into pesos at the official exchange rate.
  3. Payment of dividends must be authorized by the Central Bank, unless the amount paid as a dividend does not exceed 30% of the capital contributions received by the local resident since January 2020 and which were disbursed through the official exchange market).
  4. Payment of intercompany services to foreign residents must be authorized by the Central Bank.
  5. Payment of debts is conditioned upon the loan having been disbursed through the official exchange market, and different other conditions.
    f. Payment of imports is subject to several limitations and restrictions.
  6. Transactions of creation of external assets of legal entities (this includes purchase of currency for treasury purposes and granting of loans to non-residents) is subject to the prior approval of the Central Bank, while individuals are subject to a monthly cap of USD 200.
  7. Payment of services to non-resident related parties, is subject to prior authorization of the Central Bank.

Breaches to the regulations can result in criminal procedures involving the company and its directors. As regulations are quite extensive, complex and dynamic counsel advice should be sought before transactions are conducted.

6. Labor Regulations.

Employment agreements are regulated extensively in Argentina, mainly by Section 14bis of the National Constitution and the Labor Contract Law5. Argentine labor regulations seek to protect the employee from abuses, and has a remarkable pro-employee slant.

The most common form of employment agreement is established for an undetermined period of time. If otherwise agreed, employment agreements may be established for a fixed period, for a season or for a specific task. The employment agreement can be either verbal or in writing, and the main rights and obligations of employers and employees are set forth in the Labor Contract Law.

Labor regulations fix a minimum salary, maximum working times, vacations, provide protection vis a vis labor related accidents and illnesses, and regulate union representation. Employers are free to agree on terms and conditions more favorable to the employee. Conditions less favorable to the employee than those resulting from the Labor Contract Law shall be invalid.

Upon termination without cause of the employment agreement by the employer, the employee is entitled to severance compensation equal to one month’s gross salary per year of seniority 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 of the date of termination.

Employees must be registered with the tax authorities, detailing the gross salary paid to each employee and the date of commencement of the employment. However, due to the high social security taxes further discussed below, the provision of services by individuals who could deemed as employees but are not registered with the tax authorities is a widespread practice that can give rise to significant liabilities, which depending on the timing of the claim made by the individual can amount to 25% of all the amounts paid or increase several times the severance payments.

Employees are subject to: (i) personal income tax at a progressive rate ranging from 9% to 35% over their gross salary, minus certain items that are not subject to tax (such as personal deductions, employee’s social security taxes and other deductions that could apply according to each case, such as interest paid on real estate loans or rentals for a particular house if the employee is not owner of any property); and (ii) social security taxes at a total rate of 17% (this includes contribution to social health and pension fund) of the employee’s gross salary. Both items are withheld by the employer.

Employers must pay social security taxes. 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 total tax rate of 24% on the gross salary of the employee, while non-SMEs pay at a rate of 26.4%. These rates will gradually converge each year until 2022, when the differences between SMEs and non-SMEs will disappear and a unified tax rate of 25.50% shall apply.

Due to the economic crisis in Argentina and the COVID-19 pandemic, termination without cause of employment relationships by the employers has been suspended by the government (the current expiration of the suspension is November 30, 2020, but this term could be extended), and the severance payments have been doubled until December 31, 2020.

7. Outline of Applicable Taxes.

7.1. Income Tax

7.1.1. Corporate Income Tax.

Companies are subject to corporate income tax (CIT), which is applied on the net taxable profits at a tax rate of 30% for 2018, 2019 and 2020, but this rate will be reduced to 25% for taxable years beginning on or after 1 January 20216. Local companies are subject to CIT on a worldwide income basis, i.e., taxes are paid for both their local-source and foreign-source profits. Subject to certain limits and if certain conditions are met, companies will be able to offset (as a tax credit) against foreign-source income, income taxes paid abroad from Argentina. Non-resident companies are taxed only with regards to their Argentine-source income and the withholding tax (“WTX”) rates depend on the type of income effectively paid.

Net operating losses can be applied to reduce CIT for the following five fiscal years. There are certain specific losses that can only be offset against profits generated from similar type of income and source, such as capital gain losses derived from the sale of stock, bonds or other securities issued by Argentine companies and also from certain derivative agreements.

7.1.2. Dividends.

Dividends paid to non-resident shareholders or Argentine individuals are taxed at a rate of 7% for income related to fiscal years 2018, 2019, 2020 (13% from 2021 and onwards7 or 10% if a Double Tax Treaty (DTT) applies). The same rates apply to remittances of profit made by branches to their parent companies. Dividends distributed by an Argentine company to another Argentine company are not subject to tax.

7.1.3. Interests.

Interests paid by Argentine companies to foreign beneficiaries are subject to WTX at a tax rate ranging from 15.05% to 35%, depending on the nature and location of the creditor. A reduced tax rate could apply subject to the application of DTT, depending on the type of financing involved. Subject to Thin cap rules, payments of interest are considered deductible expenses for Argentine companies.

7.1.4. Royalties.

WTX also applies to the payment of royalties to foreign beneficiaries for technical assistance services; the tax rate will be of 31.5%, 28% or 21% depending on whether or not such services are available in Argentina and if the contract governing the services has been registered with National Institute of Industrial Property. Royalties paid for trademarks/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. Subject to certain limitation, royalties paid by Argentine companies are considered deductible expenses.

7.1.5. Capital Gains.

As a general rule, the sale of shares of Argentine private companies is subject to capital gains tax levied on the seller, regardless of its status (resident / non-resident), and whether the sale occurs directly or indirectly (i.e. sale of shares in a foreign holding company). The applicable tax rate for a foreign seller is either 15% on the net value of the sale or 13.5% of the total sales price, at the seller’s option (a reduced tax rate may apply if a DTT is applicable). If the seller is based in a non-cooperative jurisdiction (or the funds come from such a jurisdiction) the rates to be applied will be 35% of the net value of the sale or 31.5% of the sales price.

Indirect sales of equity participations acquired after January 1, 2018 are subject to capital gains tax provided that, at the time of sale or during the 12 preceding months: (i) at least 30% of the market value of the shares derives from shares, assets or rights located in Argentina; and (ii) the shares being sold represent at least 10% of the equity of the foreign company. Indirect transfer of shares within economic groups are exempt from this tax if certain conditions are met.

Foreign residents (other than those from non-cooperating jurisdictions) are exempt from capital gains tax on the sale of shares listed on stock markets authorized by the Argentine Securities authority.

7.1.6. Transfer Pricing.

Transactions between related companies or between local companies and companies located in a non-cooperative or low or no tax jurisdictions, are subject to transfer pricing rules, which in general follow the OECD Model. This analysis is made taking into account the functions, assets and risks assumed by each party in the relevant transaction.

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-cooperative jurisdiction or low-tax jurisdiction.

7.1.7. Double Tax Treaties (DTT).

Argentina has signed several DTT. Additionally, Argentina is a signatory to the Multilateral Instrument (MLI), a multilateral convention promoted by the OECD in order to better address multinational tax avoidance. The MLI allows its signatory countries to modify their bilateral tax treaties incorporating anti-avoidance clauses such as the ‘Principal Purpose Test’ (PPT) and the ‘Limitation of Benefits’ (LOB).

7.1.8. Low tax Jurisdictions (L/NT) and Non-Cooperative Jurisdictions (NCJ).

It should be noted that negative tax consequences are regulated in the case of transactions involving foreign entities located in Jurisdictions considered to be of Low or No Taxation and in Non-Cooperative Jurisdictions. L/NT jurisdictions are those countries, domains, jurisdictions, territories, associated states or special tax regimes that establish a maximum taxation of corporate income below 15%. NCJs are those countries or jurisdictions that do not have a tax information exchange agreement or an agreement to avoid international double taxation with a broad information exchange clause in force with the Republic of Argentina, and are listed in Section 24 – income tax reglementary decree.

Among other consequences, (i) the receipt of funds originating in L/NT jurisdictions is presumed to be an unjustified wealth increase of the local recipient which would be considered in full as net income of the Argentine tax resident and subject to tax (although this can be proved otherwise); and (ii) the tax rate for the sale of shares when the shareholder is based in a NCJ is increased to 35%.

7.2. Value Added Tax (VAT).

VAT is applied on the sale of goods, provision of services and imports of goods and services by individuals and legal entities conducting businesses within the 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 in Argentina in connection with the goods and services exported.

The general VAT tax rate is 21%, although a reduced tax rate of 10.5% applies for very specific sales of goods and provisions of financial 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.

7.3. Debits and Credits Tax.

Debits and credits tax is levied on transactions made through bank accounts; 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 may apply depending on the use or specific destiny 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 beneficiary of the SMEs Regime (Special Regimen) are allowed to compute 100% of their payments against CIT.

7.4. Export Duties on Services.

During fiscal years 2019, 2020 and 20218 exports of services are subject to a special export duty. This export duty has been established at a rate of 5% on the effective amount invoiced for the export of services. For registered SMEs, there is a non-taxable minimum amount of USD 600,000 per year.

7.5. Personal Assets Tax.

The personal assets tax law applies to assets that belong to individuals tax residents and non-residents on the 31st December of each year. For the Argentine tax residents, the PAT applies to all of their assets (whether in the country or abroad) while for non-residents it only applies to the assets located in Argentina.

In relation to individuals tax residents, for assets located in Argentina, a progressive tax rate that goes from 0.50% to 1.25% will be applied, while for the years 2019 and 2020 assets located abroad will be taxed at a progressive rate that goes from 0.70% to 2.25%.

Equity holdings owned by Argentine individuals or non-residents in local companies are subject to a personal assets tax at a rate of 0.50% over the book value of the holdings as of 31 December of each year. This tax is paid directly by the local company (as a substitute responsible payer); which can later recover the wealth tax paid from each shareholder.

7.6. Local Taxes.

Each province and the City of Buenos Aires apply turnover tax which is levied over gross income. The tax rate depends on the level of income and on the activity developed by the tax payer but, in broad terms, it goes from 3% to 5%. Exemptions may apply.

Stamp tax applies over the economic value of written instruments (e.g. agreements, promissory notes, etc.). The tax rate depends on each province. This tax may not apply if the agreement is implemented by way of offer and acceptance letters.

8. Other relevant matters.

8.1. Regulated Industries: Several industries have specific regulatory regimes, such as mining, energy, oil and gas, telecommunications, banks and other financial companies, insurance companies.

8.2. Intellectual Property: Argentina recognizes and protects several forms of industrial and intellectual property, including without limitation patents, trademarks, industrial designs, copyright, utility models, geographical denominations, trade secrets and web domains. Argentina is a party to the Paris Convention, the Berne Convention and the Trade-Related Aspects of Intellectual Property Rights (TRIPS) provisions of the General Agreement on Trade and Tariffs (GATT)

8.3. Antitrust regulation: 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 tending to the total or partial integration or combination of their business or assets through a merger, transfer of ongoing concern, acquisition of ownership or other rights over shares or equity holdings, or which allow significant influence over the decisions of a business, or any other agreement or transaction with legally or de facto transfer of assets of a company or grants a significant influence over the ordinary or extraordinary management decisions of a business. There are some exceptions to the prior authorisation requirement, namely: if the aggregate sales volume in Argentina of the purchaser’s group and of the target company does not exceed of 100,000,000 Mobile Units (this currently equals ARS4.06 billion, approximately USD50.75 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 owned assets or equity holdings in Argentina and whose exports to Argentina during the prior 36 months were not significant nor frequent (first landing exception); when neither the price of the transaction nor the value of the assets in Argentina involved in the transaction exceeds of 20,000,000 Mobile Units (this currently equals ARS812 million, approximately USD10 million), and provided that no transactions took place in the relevant market: during the prior 12 months exceeding that amount, and during the prior 36 months exceeding 60,000,000 Mobile Units (ARS2.43 billion, approximately USD30 million).

8.4. Dispute Resolution and Applicable Law: Parties to international agreements are free to elect applicable law and jurisdiction, including arbitration. Argentine courts recognize foreign arbitration awards subject to compliance with certain formal and substantive requirements.


  1. Decree 15,385/44 as amended
  2. Act 26,737
  3. Act 25,750
  4. Act 26,522
  5. Act 20.744
  6. 2021 CIT tax rate could be modified by the end of this year. The Government is analyzing some changes to the income Tax Law.
  7. 2021 dividends tax rate could be modified by the end of this year, as per the changes being analyzed by the Government.
  8. This can be extended and applied during the following fiscal years. This change is under analysis by the Government.