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Doing Business

in Argentina

2009

Contents
1.

Introduction......................................................................................... 2

2.

Businessenvironment ........................................................................ 3

3.

Foreigninvestment........................................................................... 12

4.

SettingupaBusiness........................................................................ 13

5.

Labour ................................................................................................ 18

6.

Taxation.............................................................................................. 28

7.

Accounting&reporting................................................................... 35

8.

UHYfirmsinArgentina .................................................................. 37

9.

UHYofficesworldwide ................................................................... 37

Copyright2008UHYInternationalLtd

1.

Introduction

UHYisaninternationalorganisationprovidingaccountancy,business
managementandconsultancyservicesthroughfinancialbusinesscentres
inover70countriesthroughouttheworld.Businesspartnerswork
togetherthroughthenetworktoconducttransnationaloperationsfor
clientsaswellasofferingspecialistknowledgeandexperiencewithintheir
ownnationalborders.Globalspecialistsinvariousindustryandmarket
sectorsarealsoavailableforconsultation.

Thisdetailedreportprovidingkeyissuesandinformationforinvestors
consideringbusinessoperationsinArgentinahasbeenprovidedbythe
officeofUHYrepresentatives:

UHYMacho&Asociados
AuditoresyConsultores
Av.Cordoba12553er.Piso
BuenosAires
Argentina

Tel:
+541148158866
Website: www.uhymacho.com
Email:
rmacho@uhymacho.com

YouarewelcometocontactRobertoE.Machoforanyinquiriesyoumay
have.

Informationinthefollowingpageshasbeenupdatedsothattheyare
effectiveatthedateshown,butinevitablytheyarebothgeneraland
subjecttochangeandshouldbeusedforguidanceonly.Forspecific
matters,investorsarestronglyadvisedtoobtainfurtherinformationand
takeprofessionaladvicebeforemakinganydecisions.Thispublicationis
currentatNovember2009.

WelookforwardtohelpingyoudobusinessinArgentina.

UHYMacho&AsociadosisamemberofUHY,aninternationalassociationof
independentaccountingandconsultancyfirms,whoseorganisingbodyisUrbach
HackerYoungInternationalLimited,aUKcompany.EachmemberofUHYisa
separateandindependentfirm.ServicesdescribedhereinareprovidedbyUHY
Macho&AsociadosandnotbyUrbachHackerYoungInternationalLimitedor
anyothermemberofUHY.NeitherUrbachHackerYoungInternationalLimited
noranymemberofUHYhasanyliabilityforservicesprovidedbyothermembers.

Copyright2008UHYInternationalLtd

2.

Business environment

Geography
ArgentinaisinthesouthernpartofSouthAmerica.Excludingthe
AntarcticterritoriesandSouthAtlanticislands,itcovers2.8millionsqkm
(1.1millionsquaremiles).ArgentineAntarcticaandtheSouthAtlantic
islandsaccountforanother970,000sqkm.
ArgentinaborderswithChile,Bolivia,Paraguay,Brazil,andUruguayand
hasalongcoastlinealongtheSouthAtlanticOcean.
WeatherconditionsrangefromsubtropicaltosubAntarctic.Between
thesetwoextremesthereisawideclimatebeltperfectlysuitedfor
agriculturebecauseoftherichnessandfertilityofitssoilandtherainfall
regime.
Historyandgovernment
Until1810,ArgentinehadbeenpartoftheSpanishViceroyaltyofRiver
Plate.Inthatyear,ArgentinaraisedagainsttheSpanishrule.After
unsuccessfulattemptstoregaincontrol,theSpaniardswerefinally
defeatedandindependencewasproclaimedonJuly9th,1816.
Differentgovernmentalsystemswereapplieduntil1853whentheGeneral
AssemblyvotedintheConstitution.Amendmentshavebeenintroduced
butithasremainedessentiallythesamesincethen.
TheConstitutionorganisedthecountryasafederalrepublicwith23
provincesandafederalcapital(thecityofBuenosAires).Thefederal
governmentconsistsoftheExecutive,headedbythePresident;the
LegislativePower(Congress),consistingoftwochambers,theSenateand
theChamberofDeputies;andtheJudiciaryPower,representedbythe
CourtsofJustice,headedbytheSupremeCourtofJustice.
Population
Argentinahasapopulationof37millionpeople,mostlyofSpanishand
Italiandescent.Almost45%ofitspopulationliveinthefederalcapitaland
theprovinceofBuenosAires.Therearenocolour,racial,religiousorother
minoritygroupconflicts.
ThemainandlargestcitiesareBuenosAires,Crdoba,Rosario,SantaF,
TucumnandMendoza.

Copyright2008UHYInternationalLtd

Language
Spanishistheofficiallanguage.Theliteracyrateishigh(96.3%)andthe
labourforcecompareswithmostdevelopedcountriesintermsofskilland
capacity.Technicalandprofessionalstandardsachievedarealso
comparable.Thisissuebecomesespeciallyimportantwhentheavailability
ofhumanresourcesisconsideredforundertakingproductiveactivitiesin
thecountry.
Economy
Since1991,Argentinahasbeenundergoingremarkablechangesaffecting
itsstructureandgovernmentalpolicies.
Afteryearsofhighinflation,theincreaseinthewholesalepriceindexhas
beenbroughtintolinewithlevelsofinternationalinflation.Theconsumer
priceindexisalsoapproachingthatmark.In1999,itrankedamongthe
lowestintheworld.
Simultaneously,Argentinaseconomyhasregisteredahighrateofgrowth
anditsfreeeconomicstructurehasbecomeoneofthemostopeninthe
world.Thismeans,amongotherthings,that:
Thereiscompletefreedomtosetprices,todevelopdomesticand
internationalcommerce,totransferforeigncurrencyoverseas,tomake
investmentsandtocarryoutalltransactionsinfinancialandcapital
markets.
Alleconomicactivitieshavebeenderegulated:domestictrade,overseas
trade,professionalservices,transportofcargoandpassengers,ports,
insuranceandmanyothers.
Avastprocessofprivatisationhasallowedthetransfer,bothtolocaland
foreigninvestors,ofpublicutilitiesaswellasmostactivitiesformerlyrun
bytheState.
Significantreductionshavebeenintroducedintariffandnontariffbarriers
onimportssince1990.Importdutieshavebeenestablishedonascalethat
runsfromzeroto24%,althoughcertaingoodsaretaxedataratewhich
mayevenreach33%.Inaddition,a0.5%statisticaltaxmustbeadded.
SinceJanuary2002,aneweconomicenvironmenthascomeintobeing
affectingtheexchangerateandbankdeposits.Althoughtheessentialsof
themodeldescribedabovewerenotchanged,devaluationandpolitical
problemsbroughtthecountrytoaprofoundrecessionthatledtooneof
thebiggestfinancialcrisesinhistory.Afteroneyearandtheresolutionof
somestructuralproblems,theeconomyhasstartedtoshowpositivesigns
ofrecoveryandanalystsareidentifyingmanybusinessopportunitiesina
marketwhichhasconsiderablepotential.

Copyright2008UHYInternationalLtd

FromJanuary1st1995,ArgentinaenteredintoanagreementwithBrazil,
UruguayandParaguaytoconstituteacommonmarketcalledMercosur.
Sincethatdate,theliberalisationoftradeamongmembercountrieshas
beenappliedtomostproducts,anditwillbeextendedprogressivelytoall
productsinthenextfewyears.
Withsomeexceptions,theratesofcustomsdutiesforimportsfromnon
membercountrieswereunifiedfrom1995,andexceptionsarebeing
eliminatedgradually.
MercosurmembercountrieshavesubscribedtoanagreementwithChile
andBoliviaforeconomiccooperation.Thesetwocountriesareexpected
tobecomefullmembersofMercosursoon.
AlongwiththenewadministrationwhichtookofficeinDec2007,the
economicframegotbacktoamoreinterventionistroleoftheGovernment,
includingrenationalisationsofcertainactivities,formerlyprivate.
Currency
Thecurrencyunitisthepeso($),whichwasdevaluedbytheGovernment
onJanuary4th2002.Thissituationchangedthe10yearconvertibilitythat
wasineffectsustaininga$1=USD1exchangerate.
TherearecurrentlysomerestrictionsregulatedbytheCentralBank,on
inwardoroutwardinvestmentorontherepatriationofdividends,profits,
interest,oranyotheramountspayableinforeignexchange.
Weightsandmeasures
Argentinausesthemetricsystem.
Financialsystem
Monetaryandbankingauthorities
TheBCRA(throughitsdifferentagencies)isthefinancialagentofthe
federalGovernment,whichconductsitsmonetarypolicy;handlesthe
foreigncurrencyreservesofthecountry;controlsfinancialentities
(includingbanks),exportsandfinancings;andissuesrelatedregulations
andspecialrules.
Financialinstitutions
FinancialEntitiesLawNo.21,526,asamended(theFEL),definessix
categoriesofoperatorsinthefinancialmarket:

Commercialbanks
Investmentbanks

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Mortgagebanks
Financialcompanies
Savingsandloaninstitutions
Cooperative(savings)banks.

Commercialbanksmayengageinalmostanytypeoftransactionand
relatedservicestraditionallyperformedbycommercialbanksaroundthe
world.Somerelevantrestrictionsonfinancialentitiesare:

Theymaynotruncompaniesengagedincommercial,industrialor
farmingactivities,oranyotheractivities,withoutpriorBCRA
authorisation;
TheymaynotencumbertheirassetswithoutpriorBCRA
authorisation;
Theymaynotaccepttheirownsharesascollateralsecurityforany
kindoftransaction;
Theymaynotenterintoanykindoftransactionwiththeir
directors,officers,managers,oranyotherpersonsdirectlyrelated
totheinstitution,undermorefavourableconditionsthanthose
offeredtoindependentthirdparties.

Operatingrestrictions
Certainminimumcapitalrequirementsmustbemaintainedpermanently.
Loanstoanyclientoranyrelatedgroupofclientsmaynotexceed25%of
thefinancialentitysnetworth,andaresubjecttocertainrestrictions
dependingonthetypeofloan.
Authorisationofnewfinancialentities
Inreviewinganapplicationfortheauthorisationofanewfinancialentity,
BCRAgivesspecialconsiderationtothefinancialmarketcondition;the
appropriatenessofincreasingthenumberofauthorisedfinancialentities;
andthebackgroundoftheapplicant.Thebackgroundandtechnical
knowledgeofthefounders,directorsandofficersofthenewfinancial
entityareparticularlyimportant.
TransactionsmuststartnolaterthanoneyearafterBCRAsapproval.
Underpresentregulations,afinancialentitystartsitstransactionswhenit
beginsdoingbusinesswiththepublic.
Foreignfinancialinstitutions
ExecutiveOrderNo.146/94hadasignificantimpactonforeignfinancial
institutionssuchasbanks,financialcompaniesandsavingsandloan
institutionsinterestedinoperatinginthelocalmarket.

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Ithastworemarkablefeatures.Firstly,itabrogatedthereciprocity
principlesetoutinSection16oftheFELandenforcedbytheArgentine
bankinglegislationforalmost60years.Pursuanttothisprinciple,BCRA
consideredapplicationsofforeignfinancialinstitutionsonlyfrom
countriesthatgrantedthesametreatmenttoArgentinefinancial
institutions.However,thefullpowerofBCRAtorejectapplicationsonthe
basisofitsdiscretionarypowersstillremains.
Secondly,financialinstitutionsinwhichmorethan30%oftheircorporate
capitalisheldbyindividualsorentitiesdomiciledabroad,andbranchesof
foreignfinancialinstitutions,enjoythesametreatmentgrantedtodomestic
financialinstitutions.
So,foreignfinancialinstitutionsmayrequestauthorisationfromBCRAto
engageinanybankingbusinesscontemplatedintheFEL.Beforethis
ExecutiveOrder,foreignfinancialinstitutionscouldactonlyasinvestment
orcommercialbanks.
ExecutiveOrderNo.146/94wasclearlyintendedtoincreasecompetition
amongfinancialinstitutionsallowingtheaccessofnewonestothe
growinglocalbankingmarket.
Atpresent,allsectionsoftheFELrelatedtoforeignlimitationsorspecific
regulationshavebeenrepealedorotherwiseamendedinaccordancewith
newforeigninvestmentpoliciesimplementedbytheArgentineRepublic.
Inthisregard,foreigninvestorsshouldreceivethesametreatmentgivento
localinvestors.
Mergersandacquisitions
MergersandacquisitionsoffinancialentitiesaresubjecttoBCRAsprior
approval.
BCRAregulationsrequiredirectorsandstatutoryauditorsofafinancial
entitytoreportanyacquisitionofshares,theresultofwhichmay:

Changethequalificationofthefinancialentity
Alterthecontrolstructureamongtheshareholdersor
Adverselyaffectatleast5%oftheoutstandingcapitalorvotesof
theentity.

AllpurchasesofsharesinfinancialentitiesmustalsobereportedtoBCRA
foritsapprovalwithintendaysoftheexecutionoftheagreement,orletter
ofintent,orthereceiptofanypayment,whicheveroccursfirst,regardless
oftheamountinvolved.Intheabsenceofsuchapproval,thesalemaynot
beperformed,sharesmaynotbedelivered,andnopaymentinexcessof
20%ofthepurchasepricemaybemade.

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Inanalysingapplicationsforapproval,BCRAemphasisesthefollowing:

Theacquisitionagreementandthecontrolstructureresultingfrom
theacquisition
Thefinancialbackground,expertiseandsolvencyofthe
purchasers
Thefinancialstatements,financialconditionandbackgroundof
directorsandmanagers
Thesubmissionofappropriateevidenceoftheoriginoffundsto
bepaidforthetransaction
ThebackgroundandpersonaldataoftheBoardmembersand
statutoryauditorstobeappointedaftercompletionofthe
acquisition.

Newbranches
Requirementsforopeningnewbranchesofdomesticfinancialinstitutions
are:

Fullypaidinminimumcapital
Noreservedeficienciesduringtheprevioussixmonths
Compliancewithregulationsconcerningfinancialconditionand
financing
Absenceofeconomicorfinancialdifficulties
Absenceofexcessiverisks
Absenceoforganisationalproblemstheyshouldhavean
updated,electronicreportingregime
Theyshouldhaveaninvestmentrankingof1,2,or3accordingto
(i)theCAMELprocedure,and
(ii)dutiesrelatedtotheevaluationoftheinternalcontrol
system.

Capitalmarkets
Securitiesmarket
During2003,securitiesmarketsrecoveredinpartafterthefinancialand
economiccrisisofDecember2001.Owingmainlytoanincreaseinexports
andpartiallytootherfactors,theUSdollarexchangeratedecreasedand
savingsandinvestmentswerestronglydirectedtothesecuritiesmarket.
TheComisinNacionaldeValor,CNV(NationalSecuritiesCommission)
regulatesmarketsdealingwithpublicofferingofsecurities.TheCNVwas
establishedin1937.Individualsandentitiesdealinginpublicsecurities
markets,aswellasinthepublicofferingofallsecuritiesotherthan
primaryissuesofGovernmentsecurities,aresubjecttotheCNVscontrol.

Copyright2008UHYInternationalLtd

SinceMay1st1993,allsecuritiesareexclusivelytradedonthestock
exchange.Governmentanddebtnotescanbetradedeitheronthestock
exchangeorintheoverthecountermarket(theOTCmarket).
ThePublicOfferingLawNo.17,811,asamendedbyExecutiveOrderNo.
677/011andsubsequentregulations,governthepublictradingof
securities.
InaccordancewiththePublicOfferingLaw,thepublictradingofsecurities
inexchangesmustbemadewithintheMercadosdeValore(Securities
Markets),whichareinstitutionsorganisedasstockcorporationsthatmust
beaffiliatedwiththedifferentstockexchanges,orBolsasdeComercio.
EachMercadodeValoresisliableforalltransactionsperformedbyits
stockbrokersandmayimposesanctionsonthem.Transactionsentered
intobetweenstockbrokersareguaranteedbyeachMercadodeValores.
ThemainstockexchangesareinthecitiesofBuenosAires,Rosario,
Crdoba,LaPlataandMendoza.TheBuenosAiresStockExchange(the
BASE)istheoldestandlargest,foundedin1854,andwherenearly90%of
allsecuritiesaretraded.
TobeamemberoftheBASEandauthorisedtooperateasastockbroker,
individualsandcorporationsmustownashareintheMercadodeValores
deBuenosAiresS.A.(MVBA).
PursuanttoLawNo.20,643,debtandequitysecuritiestradedonthe
exchangesandtheOTCmarketaretobedepositedintheCajadeValores
S.A.(CDV),whichactsasacentraldepositaryandclearinghousefor
securitiestrading.TheCDVisacorporation,thesharesofwhichareheld
bytheBASEandtheMVBA.
Obligacionesnegociables(PromissoryNotes)
LawNo.23,576(LeydeObligacionesNegociables),asamendedbyLaw
No.23,962(theONLaw),helpeddevelopthecorporatebondmarket.
PursuanttoprovisionsofthisLaw,debtnotesmaybeissuedtobearer,
registeredorbookentryforms,andmaybedenominatedineitherlocalor
foreigncurrency.
Ratesondebtnotesmaybefixedorfloating,andmayvarysubstantiallyin
accordancewithmarketconditionsandtheissuerscreditworthiness.
PursuanttotheONLaw,Argentinecorporations,cooperatives,and
branchesofforeigncorporationsareempoweredtoissuedebtnotesupon
compliancewiththelegalrequirementsoftheONLaw.
Differentclassesofdebtnotesbelongingtothesameclasshavethesame
rights.Differentseriesofthesameclassofdebtnotesmaybeissuedbythe
sameissuer,butnewseriespertainingtothesameclassmaynotbeissued
untilallofthedebtnotescorrespondingtopreviousissuanceshavebeen

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sold.Itisnotnecessarythatbylawsexpresslycontemplatetheissuanceof
debtnotes.Suchadecisionmustbeadoptedbyanordinaryshareholders
meetingthatmaydelegatetotheBoardofdirectorsallnecessarypowersto
approvethetermsandconditionsofthedebtnotestobeissued.
Equities
Duringthe1990s,andfollowingtheenactmentoftheConvertibilityLaw
inApril1991,thestockmarkethadanoutstandingperformanceasa
financingsource.Manyprivatisedcompaniesbecamepubliclytraded
corporationsandhadaccesstoEuropeanandAmericanpublicandprivate
markets.However,accesstointernationalfinancialmarketsreducedafter
thecollapseoftheeconomyanddefaultinmostofthecountryspublic
andprivatedebt.
Newissuesmaybeunderwrittenbyinvestmentbanks,brokeragefirms
andsecuritiesdealers,andarerequiredtobepreviouslyregisteredwith
theCNV,whichreviewstheissuerscompliancewithregulatoryand
disclosureprocedures.TheCNVcurrentlyimposesnorequirementson
listingwithrespecttoanissuerssize,capital,numberofshares
outstandingorearnings.However,forlistingpurposes,theissuermust
alsobepreviouslyapprovedbytherelevantstockexchange,which
reviewstheissuersnetworthorshareholdersequity,financialstanding
andprospects.
Generally,theBASErequiresanissuertoshowprofitsduringtheprevious
twoyears,thoughaseparateprocedureisavailableforcompanieswithout
anoperatinghistory.
Sharesareissuedatpar,andtheirofferingpricemaybeofanyvalue
(exceptbelowpar)aslongasitisadequatelyjustifiedbythecompany,
takingintoaccountmarketquotationsandthenetworthandprofit
prospectsofthecompany,andthatitwouldnotresultinanyunjustified
dilutionoftheexistingshareholdersentitlementtopreemptiverightson
newissuancesofshares.
Argentinahasarelativelyactivemarketofsecuritiesandbondsanda
corporatebondmarket.TheCNVregulatesmarketsdealingwithpublic
offeringofsecurities.TheCNVwasestablishedin1937.Individualsand
entitiesdealinginsuchmarketsaswellasinthepublicofferingofall
securities,otherthanprimaryissuesofGovernmentsecurities,aresubject
toCNVscontrol.
SinceMay1st1993,allsecuritieshavebeenexclusivelytradedonthestock
exchange.Governmentanddebtnotescanbetradedeitheronthestock
exchangeorintheOTCmarket.

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ThePublicOfferingLawNo.17,811,asamendedbyExecutiveOrderNo.
677/011andsubsequentregulations,governthepublictradingof
securities.InaccordancewiththePublicOfferingLaw,thepublictrading
ofsecuritiesinexchangesmustbemadewithintheMercadosdeValores
(SecuritiesMarkets),whichareinstitutionsorganisedasstockcorporations
thatmustbeaffiliatedwiththedifferentstockexchangesorBolsasde
Comercio.EachMercadodeValoresisliableforalltransactions
performedbyitsstockbrokersandmayimposesanctionsonthem.
Transactionsenteredintobetweenstockbrokersaresecuredbyeach
MercadodeValores.
PursuanttoLawNo.20,643,debtnotesandpublicsecuritiestradedonthe
stockexchangesandtheOTCmarketaretobedepositedwithCajade
ValoresS.A.(CDV),whichactsasacentraldepositaryandclearing
houseforsecuritiestrading.TheCDVisacorporation,thesharesofwhich
areheldbytheBASEandtheMVBA.

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3.

Foreign investment

Foreigninvestorsenjoythesamerightsandundertakethesamedutiesas
domesticinvestorswheninvestinginfinancialorproductiveactivities.
Generally,ArgentineLawdoesnotsetanyrestrictionsorprohibitionson
foreigninvestments.Theyarenolongersubjecttopriorgovernment
approvalbeyondthoseapplicabletoanydomesticorforeigninvestorin
eachparticularactivity.
TheLeydeInversionesExtranjeras(ForeignInvestmentLawFIL)(Law
No.21,382/76)wasamendedseveraltimesforthepurposeofachieving
liberalisationandderegulationoftheseinvestments.Itwasrecently
amendedbyLawNo.23,697andExecutiveOrderNo.1,853/93.
TheFILsetsoutthatforeigninvestorsshallbetreatedaslocalinvestors,
providedtheyinvestinproductiveactivities(ie:industrial,mining,
agricultural,commercial,serviceorfinancialactivities,oranyother
activitiesrelatedtotheproductionorexchangeofgoodsorservices).
Investmentsmaybemadein:

Foreigncurrency
Capitalassets
Profitsfromotherinvestments
Repatriablecapitalresultingfromotherinvestmentsmadeinthe
country
Capitalisationofforeigncredits
Certainintangibleassets
Otherformsacceptabletotheforeigninvestmentauthoritiesor
contemplatedbyspeciallegislation.

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4.

Setting up a Business

ArgentineLawrecognisesthefollowingtypesofartificialpersonsorlegal
entities:

Branches
Partnerships(generalandlimited)
Corporations
Limitedliabilitycompanies.

AlthoughtheCompaniesLawprovidesthatacorporationmaynotbea
partnerorquotaholderinageneralorlimitedpartnership,oralimited
liabilitycompany,Argentinecourtshaveruledthatforeigncorporations
arenotsubjecttothislimitation.
Mostforeigncorporationsorganiselocalactivitiesthroughabranchora
stockcorporation,buttheuseoflimitedliabilitycompanies(whichinthe
pasthadarathernegativereputation)isnowbecomingmorecommon.
Branchofforeigncorporation
Aforeigncorporationdoesnotneedtoassigncorporatecapitaltoits
branchunlessthebranchisengagedincertainspecificactivities(e.g.
insurance,banking).Theforeigncorporationisliablefortheobligationsof
thebranch.Thelocalmanagerofthebranchmayalsobeliableforsuch
obligationsifthebranchwereimproperlyestablished.
Toestablishabranch,aforeigncorporationmustappointalocalattorney
infactwhoappliestotheRegistroPblicodeComercio(PublicRegistry
ofCommercePRC)forregistrationpurposes.
ThePRCnormallyregistersthebranchwithinthreeweeks,providedthe
applicationcontainsthefollowingdocuments:

Acertifiedcopyofthearticlesofincorporationoftheforeign
corporation;
Acertificateofgoodstandingoftheforeigncorporation;
Acertifiedcopyofthebylawsoftheforeigncorporation;
Certifieddocumentationevidencingwhethertheforeign
corporationis,orisnot,permittedtoconductbusinessattheplace
whereitisincorporatedorregistered;
Certifieddocumentationevidencingthattheforeigncompany
meetsatleastoneofthefollowingconditions:i)thatithasoneor
morebranchesorpermanentrepresentationsregisteredor
incorporatedoutsidetheArgentineRepublic;ii)thatitholds
equityholdingsorinterestsincompaniesincorporatedor
registeredoutsidetheArgentineRepublicthatareregardedas

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AcertifiedabstractoftheminutesoftheBoardofdirectors
meetingthatapprovedtheestablishmentofthebranch;
Apowerofattorneyauthorisingthelocalattorneytoregisterthe
branch;
Abroadpowerofattorneyauthorisinganindividual(i.e.:thelocal
manager)tomanagethebranch.

Additionally,theforeigncorporationshouldnotmeetanyofthefollowing
conditions:

itisnottoownassetsoutsidetheArgentineRepublic;
thevalueofitsnoncurrentassetsarenotassignificantas:(a)the
valueofthesharesorinterestsoftheforeigncorporationin
Argentinecompaniesand/ortheassetsoftheforeigncorporation
intheArgentineRepublic;or(b)theamountofeconomical
transactionscarriedoutbyandbetweentheforeigncorporation
andArgentineresidents;or
theactivitiesinvolvingtheadministrationandmanagementofthe
foreigncorporationsaffairsandbusinessesareeffectivelycarried
outattheplaceofbusiness(corporatepremises)oftheforeign
corporationintheArgentineRepublic.

IfthePRCweretoevidenceoneoftheconditionsdetailedabove,itmight
requiretheforeigncorporationtocarryoutthesocalleddomestication
process(i.e.adaptitsbylawstoprovisionssetbytheArgentine
CommercialCompanies,regardingArgentinecompanies).
Iftheforeigncorporationwerenottocarryoutthedomesticationprocess,
thePRCmightrequestthecourttowindupandcanceltheregistrationof
itsbranchwiththePRC.
Stockcorporations
Astockcorporation(sociedadannima)musthaveatleasttwo
shareholders.ThePRCcurrentlyconsidersthatastockcorporation,the
corporatecapitalofwhichisownedbytwoshareholders,oneofthem
holding99.99%ofthesharesandtheothertheremaining0.01%ofthe
shares,hasinfactonlyoneshareholder,andnottwo(thePRChasoffthe
recorddisclosedthatthesecondshareholdermustholdatleast5%ofthe
shares),andshallthusrejecttheregistrationofthestockcorporation.

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Shareholdersgenerallyarenotliableforcorporatedebtsandobligations
beyondthetotalamountoftheircapitalsubscriptions.TheBoardof
directorsofthecorporationmayconsistofoneormoredirectors.An
absolutemajorityofthedirectorsmustactuallybedomiciledinthe
ArgentineRepublic.
Alldirectors,whetherornotdomiciledintheArgentineRepublic,must
establishaspecialdomicilewithintheArgentineRepublic.Thearticlesof
incorporationmayprovideforastatutoryauditor,whomustbealawyer
oranaccountantdomiciledintheArgentineRepublic.Suchastatutory
auditorismandatoryifthecapitalofthecorporationexceeds$10,000,000.
Currently,acorporationmusthaveacapitalofatleast$12,000.
Nevertheless,accordingtothePRC,thecorporatecapitalmustbe
proportionatetothecorporatepurpose.Thecapitalmustbedividedinto
nominativeshares(eithernonendorsableorendorsable)ofequalpar
value.Thesharesmaybecommonorpreferred.Allsharesmustbe
subscribedbeforethecorporationisformallyincorporated.Upon
incorporation,theshareholdersshallhavepaidinalloftheircontributions
inkind,andatleast25%oftheircontributionsincash.Theremainingcash
contributionsmustbepaidinwithintwoyearsoftheincorporationdate.
ToincorporateastockcorporationinthecityofBuenosAires,the
incorporatorsmustfileitsproposedarticlesofincorporationandbylaws
withthePRCforapprovalandpublishanabstractofthecompanysby
lawsintheOfficialBulletin.
EachforeignshareholderofanArgentinecorporationmustapplyfor
registrationwiththePRC.Theforeignshareholdermustbedulyregistered
beforefilingtheproposedarticlesofincorporationandbylawsofthe
stockcorporationwiththePRC.

ThePRCusuallyregisterstheforeignshareholderwithinthreeweeks,
providedtheapplicationcontainsthefollowingdocuments:

Acertifiedcopyofitsarticlesofincorporation;
Acertificateofgoodstanding;
Acertifiedcopyofitsbylaws;
Certifieddocumentationevidencingwhethertheforeigncorporate
shareholderis,orisnot,permittedtoconductbusinessattheplace
whereitisincorporatedorregistered;
Certifieddocumentationevidencingthattheforeigncorporate
shareholdermeetsatleastoneofthefollowingconditions:
i)thatithasoneormorebranchesorpermanent
representationsregisteredorincorporatedoutsidethe
ArgentineRepublic;

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ii)thatitholdsequityholdingsorinterestsincompanies
incorporatedorregisteredoutsidetheArgentine
Republicthatareregardedasnoncurrentassets,as
definedbythegenerallyacceptedaccountingprinciples;
or
iii)thatitownsfixedassetsatitsplaceofincorporationor
registration,theexistenceandvalueofwhichshallbe
evidencedpursuanttogenerallyacceptedaccounting
principles.
AcertifiedabstractoftheminutesoftheBoardofdirectors
meetingthatapproveditsregistrationasaforeigncorporate
shareholderintheArgentineRepublic;and
Apowerofattorneyissuedbytheforeigncorporateshareholder
authorisingalocalattorneytoregisterit.

Additionally,theforeigncorporateshareholdershouldnotmeetanyofthe
followingconditions:

ItisnottoownassetsoutsidetheArgentineRepublic;
Thevalueofitsnoncurrentassetsarenotassignificantas:
(a)thevalueofthesharesorinterestsoftheforeign
corporateshareholderinArgentinecompaniesand/orthe
assetsoftheforeigncorporateshareholderintheArgentine
Republic;or
(b)theamountoftransactionscarriedoutbyandbetween
theforeigncorporateshareholderandArgentineresidents.
Theforeigncorporateshareholdersaffairsandbusinessesare
administeredandmanagedandeffectivelycarriedoutattheplace
ofbusiness(corporatepremises)oftheforeigncorporate
shareholderintheArgentineRepublic.

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IfthePRCweretoevidenceoneoftheconditionsdetailedabove,itmight
requiretheforeigncorporateshareholdertocarryoutthesocalled
domesticationprocess(i.e.adaptitsbylawstotheprovisionssetbythe
ArgentineCommercialCompaniesregardingArgentinecompanies).Ifthe
foreigncorporateshareholderwerenottocarryoutthedomestication
process,thePRCmightrequestincourtthecancellationofitsregistration
withthePRC.

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5.

Labour

ArgentineLawappliestoemploymentwithintheArgentineterritory,
irrespectiveoftheplacewherethecontractwasenteredinto.
Hiring
Unlessotherwiseagreeduponbytheparties,theEmploymentContract
Law(ECL)setsoutthepresumptionthatanemploymentrelationshipis
agreedforanindefinitetermandwithaninitialtrialperiodofthree
months.
Duringthetrialperiod,thecontractmaybeterminatedwithoutjustcause,
andtheemployeeshallnotbeentitledtothemandatoryseverancepays
dueuponunfairdismissal.
Inthecaseofterminationduringthethreemonthtrialperiod,the
employermustgiveapriorwrittennotice15daysbeforethetermination
date.Theemployersfailuretodosoentitlestheterminatedemployeeto
receiveaseverancepayinlieuofomittedpriorterminationnotice.
Indefinitetermemploymentcontractsdonotneedtobeevidencedin
writing,whereastheECLsetsouttherightsanddutiesofbothparties
alongwithminimumbenefits.
Indefinitetermemploymentcontracts,exceptforseasonalcontractsare
subjecttoatrialperiodofthreemonthsfromthebeginningofthecontract.
However,incertaincases,awrittencontractisrequiredand/oradvisable,
namely:

Fixedtermcontract:itstermmaynotexceedfiveyearsand
employersmusthaveanextraordinarycause;
Temporarycontract:executedtoperformaspecificpieceofwork
ortoprovideaspecificservice,wheneverextraordinary
circumstancessodetermine;
Seasonalcontract:executedbasedonthekindofactivity
performedbytheemployee,whoprovideshis/herservicesonlyat
aspecifiedtimeoftheyear;
Apprenticeshipandscholarshipcontracts:executedbyyoung
individualswhomeetcertainrequirementsforthepurposeof
learningacraft,tradeorprofession.

UndertheECL,employersmustregistertheiremployeesbasicdata
(includinghiringdateandsalary)withinaSpecialPayrollBook,whichis
providedbythelabouradministrativeauthorityandsubjecttoperiodic
controlsbytheMinistryofLabour.Failuretoregistertriggersseverefines.

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Employeesrights
Minimumsalary
Partiesmaynotagreeonasalarybelowtheminimumamountssetbylaw.
MostindustriesandactivitieshaveminimumsalariesstatedbyLawNo.
25,877,effectivefromMarch28th2004,thatwereagreedbetween
employerschambersandtradeunions,andwhichmaynotbelowerthan
theminimumsalaryfixedbytheGovernment(atpresent,theminimum
salaryis$1,500).
Equalpay
Theruleequalpayforequaltaskapplies.Nevertheless,employersmay
payincentivestothoseemployeeswhoperformoutstandingservices,or
payanadditionalamounttoemployeesundercertaincircumstancesor
categories(likethosewhohaveahigherseniority,aprofessionaldegree,
etc).
Overtimepay
Regularemployees(thosewhoaresubjecttomandatoryrulesregarding
workinghours)areentitledtoovertimepaywhenevertheyworkinexcess
oftheworkingschedule(i.e.morethan48hoursperweekoreighthours
perday).Employeeswhoworkunderanirregulardailyscheduleare
entitledtoovertimewhentheyexceedninehoursperday.Additionally,
nightworkandhazardousworkhavereducedworkingschedules.
Executivesandotherspecialcategoriesofemployeesarenotsubjectto
suchmandatoryrulesonworkinghoursand,subsequently,arenot
entitledtoovertimepay.
ThirteenthMandatorySalary
EmployersmustpaythesocalledSueldoAnualComplementario(SAC)
orSupplementaryAnnualBonus,orThirteenthMandatorySalary,intwo
instalments:thefirstonJune30th,andthesecondonDecember31steach
year.Theamountofeachinstalmentisequivalentto50%ofthehighest
remunerationearnedbytheemployeeoverthepertinentsemester.
Paidvacationleave
Thisleaverangesfrom14to35calendardays,dependingonthe
employeesseniority.

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Paidsickleave
Employeesareentitledtopaidsickleavefromthreeto12months,
dependingontheemployeesseniorityandfamilyresponsibilities(e.g.
minorchildren).
Paidholidaysandspecialleave
Employeesaregiven13holidaysandspecialleavessetoutbytheECL,or
theparticularCollectiveBargainingAgreement(CBA).
Lifeinsurance
Employersmusthirecollectivelifeinsuranceforthebenefitoftheir
employees.Theminimumcoverageperemployeeis9,000CBAsmay
establishmandatoryadditionalcoverage.
LabourRisksInsuranceorWorkersCompensationInsurance
Employersmusthireinsurancecoveringlabourdiseasesandaccidents
withaprivateandauthorisedAseguradoradeRiesgosdeTrabajo(ART)
(LabourRiskInsuranceCompany).
MedicalAssistanceprovidedbyHealthCareOrganisationsorHealth
CareProviders(ObrasSociales)
CoverageispaidforbythePublicSocialSecuritySystem,through
employeesandemployerscontributions.Bluecollaremployeesare
entitledtochoosefromalistofhealthorganisationsmanagedbythetrade
unions,andwhitecollaremployees(incertainsituations)areentitledto
choosefromalistofhealthorganisationsmanagedbyexecutives.
Subsidies
FamilyAllowancesandUnemploymentSubsidy,supportedbythesocial
securitysystem,arepaidfromemployeesandemployerscontributions.
Familyallowancesincludethreemonthpregnancy/maternitypaidleave
andtheunemploymentsubsidymayextendtooneyearofmonthly
payments(providedthattherespectivebeneficiariesmeetlegal
requirements).
Smallcompanies
CertainsmallandmediumsizedcompaniesknownasPyMEs(Pequeas
yMedianasEmpresas)aresubjecttoaspecificregulationandreceivea
particulartreatmentfromtheauthority.Afterfulfillingthecorresponding
legalrequirements,PyMEsmaybeentitledtoreceivebenefitsinspecific
areas(eg:governmentsubsidiesforcredits,preferenceinpublicbids,etc.).

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ArgentineLawNo.24,467/1995specificallyregulatesallemployment
relationshipsinsocalledSmallsizedCompanies(PequeasEmpresas).
Pursuanttothislaw,Smallsizedcompaniesarethosethatcomplywith
thefollowingconditions:

Havefewerthan40employees
Theirannualbilling(netofVAT)islowerthan:
(i) $2,500,000(rural)
(ii) $5,000,000(industrial)
(iii) $3,000,000(commercial)
(iv) $4,000,000(services).

Forcompaniesexistingbeforethelegallyeffectivedate,August6th1995,
thenumberofemployeesisbasedonstaffingatJanuary1st1995.Small
sizedcompaniesexceedingoneorbothoftheabovementionedconditions
mayremainunderthespecialregimesetoutinthislawforthreeyears
providedtheydonotdoubleeithertheirstaff(numberofemployeesin
theirheadcount/payroll)ortheirbilling.
Termination
Procedure
Theemployerand/ortheemployeemayterminatetheemployment
relationshipby:

Mutualconsent
Employeesresignation
Employersdismissal,withorwithoutjustcause
Employeesdeathortotaldisability
Employeesretirement
Employersbankruptcy
Expirationofanagreedfixedtermemployment.

Theemployermayterminatetheemploymentrelationshipwithjustcause
whentheemployeecommitsaseriousoffence.Activitiesthatmaybe
consideredoffensiveorprejudicialtotheemployerareevaluatedcaseby
case,anddeterminedinaccordancewiththegeneralprinciplesoflawand
legalprecedents.Theemployermustgivetheemployeeawritten
explanationofthegroundsforhisdismissal.Theemployeemayobjectto
theterminationgroundsbyfilingalegalactionincourt;theemployer
bearstheburdenofproof.Employeesmayalsoterminatetheemployment
contractwithjustcause(constructivedismissal).

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Whenanemployeeisdismissedwithjustcauseorresigns,orwhenthe
partiesagreetoterminatetheemploymentrelationshipbymutualconsent,
theemployerhastopayonlytheaccruals(i.e.wagesfordaysworked
duringthemonthoftermination,proportionalcompensationforaccrued
andnonenjoyedvacationsandaccruedthirteenthmandatorysalary),and
neednotmakeanyothermandatoryseverancepayments(i.e.severance
paybasedonseniority,severancepayinlieuofpriorterminationnotice,
etc.).
Employersmayreducethemandatoryseverancepaymentpackageby
paying50%oftheseverancepaybasedonseniorityinthecaseofjustified
redundancies,byprovingforcemajeure/lackorreductionofwork/
economicortechnologicalreasonsnotattributedtotheemployerand
beyondtheemployerscontrol.Insuchacase,layoffsmustbecarriedout
inorderofseniority.
Masslayoffsmustcomplywithaspecialprocedurebeforethelabour
authoritiesinthepresenceofthetradeunion,andtheemployermustgive
evidenceofthecriticalsituation.Insuchcases,theparties(theemployer
andthetradeunion)mayagreeuponareasonableseverancepaypackage,
whichtheMinistryofLabourthenevaluatesforapproval.
Employeesmayobjecttothereducedseverancepaymentpackagewhen
theyhavenotreachedanysettlement(labourcourtsusuallyacceptsuch
claims).
Inallcases,employersarefreetomakeadditionalpayments(overthe
minimumandmandatoryseverancepayments)totheterminatedor
resigningemployees.Theseadditionalpaymentsarebonusessubjectto
incometaxwithholdings,butexemptfromsocialsecuritycontributions
becausetheyareconsideredasextraordinaryandexceptionalbonuses(i.e.
onlypaiduponterminationoftheemploymentcontract).
Whenemployeesaredismissedwithoutjustcause,inadditiontothe
accruals(i.e.wagesforworkeddaysduringthemonthoftermination,
proportionalcompensationforaccruedvacations,andaccruedthirteenth
mandatorysalary),employersshallpayamandatorypackagethat
comprisesaseverancepaybasedonseniorityand,ifnopriorwritten
noticewasgiven,aseverancepayinlieuofomittedpriortermination
notice.
Mandatoryseverancepaybasedonseniority
Employeesareentitledtoaseverancepaybasedonseniorityequivalentto
onegrossmonthssalary(i.e.theemployeeshighestmonthlyandregular
salaryofthelast12months)foreachyearofserviceoranyfractionthereof
(inexcessofthreemonths).Innoeventmaythisseverancepaybelower
thantwoactualgrossmonthlysalaries.

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Tocalculatethisseverancepaybasedonseniority,thehighestmonthly
andregularsalaryofthelastyearhasastatutoryceiling:itmaynotexceed
threetimestheaverageofalltheremunerationcontemplatedbythe
applicableCBA.IfmorethanoneCBAisapplicabletotheemployers
activity,themostfavourableonetotheemployeeshallbeapplied.This
statutoryceilingisappliedtounionisedandnonunionisedemployees.
TheSupremeCourtofJusticeoftheProvinceofBuenosAireshasruled
thatemployerswhodismisstheiremployeeswithoutjustcausewithinthe
jurisdictionoftheProvinceofBuenosAiresmustalsopaytheproportional
partofthethirteenthmandatorysalaryonthisitem,whichisanadditional
onetwelfthofthemandatoryseverancepaybasedonseniority.
Theseverancepaybasedonseniorityisnotsubjecttoanytaxesorsocial
securitycontributionsorwithholdings.Themandatoryseverancepayment
inlieuofpriorterminationnoticeandthebalancesalaryofthemonthof
terminationaresubjectneithertosocialsecuritycontributionsnor
withholdings,buttoincometaxwithholdings.
TheNationalSupremeCourthasruledthatthelimitofthreetimesthe
averageoftheremunerationmentionedabove,doesnotapplyifthislimit
islowerthan67%ofthehighestmonthlyregularsalaryofthelastyear.
Basedonjurisprundence,incometaxwithholdingdoesnotapplyuptothe
67%.
Severancepaymentinlieuofpriorterminationnotice
Absenceofapriorwrittenterminationnoticeinduetimeentitles
employeestoclaimthefollowingseverancepay:

Employeesdismissedduringthethreemonthstrialperiodare
entitledtohalfoftheemployeesmonthlysalary;
Employeeswithlessthanfiveyearsofseniorityareentitledtoone
monthssalary;
Employeeswithmorethanfiveyearsofseniorityareentitledto
twomonthssalaries.

Themandatoryseverancepayinlieuofpriorterminationnoticefor
employeesofsmallsizedcompanies,asdefinedbyLawNo.24,467,is
equaltoonemonthssalary.Inaddition,employersmustpaythesalary
forthedaysremaininginthemonthinwhichtheterminationoccurred
(balancesalaryofthemonthoftermination)andtheemployermustpay
theproportionalpartofthethirteenthmandatorysalaryonthisitem,
whichisanadditionalonetwelfth(employeeswhoworkforSmallsized
companiesasdefinedbyLawNo.24,467arenotentitledtothispayment).
Themandatoryseverancepaymentinlieuofpriorterminationnoticeand
thebalancesalaryofthemonthofterminationarenotsubjecttosocial

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securitycontributionsorwithholdings,buttheyaresubjecttoincometax
withholdings.
Protectedcategories
Legislationprotectscertaincategoriesofemployeesinadifferentway.
Pregnant,recentmothersandjustmarriedemployeeswhoaredismissed
withoutjustcauseareentitledtoanadditionalseverancepayequaltoone
yearofsalaries.
Employersmaynotchangeworkconditionsoftradeunionrepresentatives
withoutanyjustcausewithinoneyearoftheendoftheirrepresentation.
TheemployermustfollowaspecialprocedurebeforetheLabourCourtsto
dismissaunionrepresentativewithjustcause.However,iftheprocedure
isnotfollowed,therepresentativemaychoosebetweenbeingreinstatedto
hisjoborreceiving,apartfromthemandatoryseverancepaypackage,an
additionalseverancepayequaltoallthesalariesthathewouldhave
receiveduptotheendofhisrepresentationperiod,plussalariesforone
additionalyear.
AccordingtotheAntiDiscriminationLawNo.23,592,thoseemployees
dismissedonthegroundsofdiscriminationbecauseoftheirrace,religion,
nationality,ideology,politicalorunionopinionandsex,financial,social
and/orphysicalconditionmayrequesttheirreinstatement,oranyother
measuretoremovetheeffectofthediscriminatoryact,ortoceaseinits
performancebymeansofsummaryproceedings,accordingtoSection43of
theNationalConstitution.
Discriminatedemployeeswhoarereinstatedareentitledtobackwages.
Theemployeesalsohavetheoptiontoterminatetheemploymentcontract
withcauseandclaimthemandatoryseverancepaysfromtheiremployers
underconstructivedismissal.UndertheprovisionsoftheCivilCode,
adverselyaffectedemployeesmayalsoclaimforcompensationforpain
andsufferingsoremotionaldistress.
Employeeswhoarenotproperlyregisteredintheemployerspayrollare
entitledtoadditionalamountsthatsignificantlyincreasethemandatory
severancepaypackage.

Othercasesinwhichemployersareexposedtoadditionalpayments
includetravellingsalesmen,breachofafixedtermemploymentcontract,
lackofpaymentofthemandatoryseverancepaypackageinduetime,and
failuretodeliveremploymentcertificatesinduetime.

CollectiveBargainingAgreements(CBAs)

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LawgoverningCBAsrulesthatpartiesmaynegotiatethescopeand
enforceabilityoftheCBAbasedon:

Theemployersindustry
Jobswithinanindustry
Theworkersjobduties
Companywiderepresentation.

Underthislaw,companiesmaynotoperateunionfree.Almostall
industriesandactivitiesalreadyhaveatradeunionthatcollectively
representsthoseemployees.
UnlesspreviouslyagreeduponintheCBA,executiveorsenioremployees
andmanagersaresubjectneithertoitsprovisionsnortounion
representation.However,employeeswhodonotqualifyasexecutiveor
senioremployeesormanagersaresubjecttoCBAsandunion
representation.
Employeesmayfreelybecomemembersofaunionoroptout,butthe
tradeunionshallstillmaintaincollectiverepresentation.
TheMinistryofLabourmustapproveCBAs.Ifsuchapprovalisobtained,
CBAsarebinding,notonlyonthemembersofthetradeunionsand
employersassociationspartytothem,butalsoonallworkersand
employersintheparticularactivityorindustryinvolved.Tosecure
compliancewiththeagreements,workersmustberepresentedby
recognised(acknowledged)tradeunions.
CBAsmayimposeadditionalcontributionsonthetradeunionthat
negotiatedtheagreement.
Collectivedisputes
TheLawgoverningcollectivedisputessetsoutthattheMinistryofLabour
maysummonthepartiestosettleacollectivedispute.Duringaspecific
termwhiletheMinistryisinterveninginthedispute,thepartiesmaynot
takedirectaction.TheLabourMinistryisempoweredtodirecttheparties
toretractanymeasuresthatmayhavecausedthedispute.
Ifduringtheappropriateperiodthepartiesdonotagreetoasettlementor
arbitration,theyarefreetotakewhateverlegalactiontheymaydeem
suitable,includingdirectaction(e.g.astrike,lockout,etc).
Speciallaws
Severallawshavebeenpassedtoregulatetheactivitiesofvarious
categoriesofemployees.Themostimportantofthemincludetheactivities
oftravellingsalesmen,seamen,workerswhoworkattheirhomes,farmers

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oragrarianworkers,professionaljournalists,privateteachers,and
domesticworkers.
Socialsecurityregulations
Employeessalariesaresubjecttosocialsecuritypayments.Both
employersandemployeesmustcontributetothesocialsecuritysystem.
Employersmustpaytheirpartofthecontributionsandmustalso
withholdtheemployeespartfromtheirremuneration.Socialsecurity
contributionsmustbemadefor:

Retirementandpensionplans
ObrasSociales(healthcareorganisationsorhealthcareproviders)
INSSJP(nationalinstituteprovidingmedicalassistanceforretirees
andpensioners)
Familyallowances
Unemploymentfund
ARTs(labourriskinsurancecompaniesorworkerscompensation
insurancecompanies).

Levelsofcontributionsrequiredfromemployersandemployeeshave
variedsignificantly.Currently,employerscontributionsdependupon
theiractivityandturnoveramount:

27%iftheemployerisengagedintheprovisionofservicesorin
commercialactivities
23%forallotheremployers.

Subjecttospecificregulations,certainemployersenjoyreductionsintheir
socialsecuritycontributionamountsasfollows:

Theexemptionisraisedtoonehalfoftheemployers
contributionsiftheemployeehiredtoholdthenewpositionisa
beneficiaryoftheHeadofHouseholdProgram(PlanJefesde
Hogar)

Employeescontributions17%inthepublicregime(public
retirementandpensionfundsystem).

Forthepurposeofcalculatingsocialsecuritycontributionspaidby
employees,thereisalegalceilingorlegalcap(maximumamount)tobe
appliedtotheemployeesmonthlygrosssalary.Currently,thislegal
ceilingis$9,351,30.Theportionoftheemployeesmonthlysalaryoverthe
legalceiling(i.e.theportionwhichexceeds$9,351,30)isnotsubjectto
socialsecuritycontributions.TheRetirementandPensionFundSystemisa
publicregimewheretheretiredworkersareentitledtoanearningsrelated
retirementpension(i.e.theamountofthepensiondependsontheir
earningslevelduringtheiremployment).

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EmployersmustpaythepremiumofthesocalledART(labourrisk
insurancecompany),becauseitisnotincludedintheabovementioned
contributionrates.Thispremium,agreeduponwiththepertinentART,
dependsontheactivity,andisusuallyanaverageof3%ofthepayroll.

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6.

Taxation

Sourceofincomerules
TheIncomeTaxLaw(LawNo.20,628/73,asamended),anditsregulations,
applytoallworldwidesourceincomeofindividualslivinginthe
ArgentineRepublic,andArgentinecorporations,branchesorother
permanentestablishmentsofforeignentitieslocatedintheArgentine
Republic,andtoalllocalsourceincomeofforeignbeneficiaries.
Broadlydefined,localsourceincomeisincomederivingfromassets
situatedintheArgentineRepublic,oractivitiescarriedoutinthe
ArgentineRepublic.Individualsandcorporationssubjecttotaxonglobal
sourceincomeareentitledtoacreditforsimilartaxespaidabroad,the
amountofwhichmaynotexceedtheincreaseofArgentineincometax
payableasaconsequenceofincludingtheforeignsourceincomeinthe
taxablebase.
Imports
Profitsobtainedbyforeignindividualsandcorporationsfromexportsof
goodsintotheArgentineRepublicareusuallyconsideredasforeign
sourceincomeoftheforeignexporter.
Iftheimportpriceofthegoodsagreeduponbytheforeignexporterand
thelocalimporterishigherthanthewholesalepriceofthesegoodsinthe
countryoforigin(plusanyapplicablefreightandinsurance),itis
presumedthatthereisaneconomiclinkbetweenthepartiesand,unless
thereissufficientevidencetothecontrary(i.e.theburdenofproofison
thetaxpayer),thedifferencebetweentheimportpriceandthewholesale
priceinthecountryoforigin(plusanyapplicablefreightandinsurance)is
considerednetprofitoftheforeignexporterandtaxedattheusual35%
rate.
Branch
Abranchistaxedattherateof35%,whetherornotbranchprofitsare
actuallydistributed.A35%withholdingapplies,aftercertainadjustments,
tothedistributionofprofitsnotsubjecttothe35%corporateincometaxat
branchlevel.

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Corporationandlimitedliabilitycompanies
Corporationsandlimitedliabilitycompaniesaretaxedattherateof35%.
A35%withholdingapplies,aftercertainadjustments,todividendand
revenuedistributionscorrespondingtoprofitsnotsubjecttothe35%
corporateincometaxatcorporatelevel.Dividendsarenotincludedinthe
taxableincomeoftherecipients.
Selectedtaxcomputationrules
Losses
Businessorganisationsmaygenerallydeductexpensesandlossesincurred
inobtaininglocalsourceincome.Netoperatinglosses(NOLs)maybe
carriedforwardforuptofiveyears.
Depreciation
Fixedassetsmaybedepreciatedonastraightlinebasis.Theusualannual
depreciationrateformachineryandequipmentis10%;fordies,toolsand
vehicles,20%;andforbuildings,2%.Inspecialcases,taxauthoritiesmay
authorisehigherdepreciationrates.
Transactionsbetweenrelatedparties
Specialrulesapplytodeductionsarisingfromtransactionsbetweenan
Argentinecorporation,orbranchofaforeigncorporation,andaforeign
relatedparty.
InthecaseofpaymentsundertheKnowHowTransferLaw,anArgentine
licenseemaydeductroyaltypaymentsonlyifthecorrespondingLicense
AgreementhasbeenpreviouslyregisteredwiththeINPI.
Forotherintercompanytransactions,anArgentinetaxpayermaydeduct
itsexpensesifthechargesareconsistentwitharmslengthpractices.
Presumednetincomeforforeignbeneficiaries
Paymentsofincomemadetoforeignbeneficiariesaregenerallysubjectto
35%incometaxwithholding.Forcertainkindsofincome,describedbelow,
theIncomeTaxLawpresumesafixedlevelofnetincometowhichthe35%
incometaxwithholdingrateapplies,whichgeneratesaneffectiverate
lowerthanaflat35%.

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AgreementstoAvoidDoubleTaxation(theAgreements)
TheAgreementsareexecutedtoavoidsuperpositionoftaxesamong
residentsintwoormoredifferentcontractingstatesonthesametaxable
issue,withinthesameperiodoftime,andchargedagainstthesame
taxpayer.
Thus,itisintendedtosoftenthetaxburdenonthetaxableissueina
transactionbetweentworesidentsindifferentcontractingstatesunderthe
Agreement.
Untilnow,theArgentineRepublichasexecutedandratifiedAgreements
with:

Germany
Australia
Austria
Belgium
Bolivia
Brazil
Canada
Chile
Denmark
Spain
Finland
GreatBritainandNorthernIreland
Italy
TheNetherlands
Sweden
France
Norway
Switzerland.

Ingeneral,theAgreementsratifiedbytheArgentineRepublicareapplied
totaxesonincomeorrevenue,shareholdersequity,andpotentialbenefits.
Inthissense,theseAgreementsprevailovertheIncomeTaxLawand,
therefore,foreignresidentswouldbenefitbytheapplicationofreduced
ratesestablishedintheAgreementwhenevertheymadeapaymentsubject
tothetaxwithholding,asalreadyexplained.

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ValueAddedTax(VAT)
ArgentinesVATissimilartotheEuropeanUnionsVAT.Itconsistsofan
outputtaxandinputtaxleviedonthesaleofgoodslocatedwithinthe
country,contractsforworkorcontractsfortheprovisionofservices,or
leaseagreementsexecutedwithinthecountryorinaforeigncountry,and
importsofmovablegoodsandservices.
Theexcessoftheoutputtaxovertheinputtaxmustbepaidwithina
certainperiod(e.g.20daysfromtheendofeachcalendarmonth).There
areexemptionsforsomeproductsandservices.VATisappliedtothenet
priceofthegoods,serviceorwork,generallyattherateof21%.Thisrateis
differentinsomespecificcases.
Minimumpresumedincometax
TheMinimumPresumedIncomeTax(MPIT),establishedbyLawNo.
25,063,isappliedattherateof1%toassetslocatedintheArgentine
Republicorabroad.Itisataxgeneratedonapresumptionofincome
obtainedbythetaxpayer;thispresumptionisassessedinrelationtothe
taxpayersassetsattheendofthecalendaryearorthefiscalyearfor
individualsandcorporations,respectively.
Individualsandcorporationssubjecttothistax
ThefollowingtaxpayersaresubjecttoMPIT:

CompaniesincorporatedintheArgentineRepublic
Foundationsandnonprofitorganisations
PermanentestablishmentsofArgentineresidents
Argentineresidentsandsucesionesindivisas(undividedestates
ofdeceasedpersons)whoownruralproperties
Trusts,excludingfinancialtrusts
Closedendinvestmentfunds(FondosComunesdeInversin
cerrados)
Permanentestablishmentsofcompaniesorindividualslocated
outsidetheArgentineRepublic.

Taxexemptions
Thefollowingassetsarenotcomputedtocalculatethistax:

AssetslocatedintheProvinceofTierradelFuego,Antarcticaand
SouthAtlanticIslands(inaccordancewithLawNo.19,640)
Assetsbelongingtoentitiesengagedinmininginvestment
activitiesfallingwithinthescopeofLawNo.24,196
Assetsbelongingtoentitiesexemptfromincometax
Assetsexemptbyfederallawsorinternationalconventions

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Sharesofcompaniessubjecttothistax
Assetstransferredbytrustorstotrusteesofnonfinancialtrusts
Interestsinnonfinancialinvestmentfunds
Capitalcontributionsandirrevocablecapitalcontributions
Assetswithanaggregatevaluenotexceeding$200,000.

Relatedparties
LawNo.25,063establishesthatforeignownedArgentinecompanies
shouldconsiderascomputableassetsforminimumpresumedincometax
purposes,allcreditsagainsttheirparentcompanyorindividualowneror
anyparentsbranches,orthosecorporationsthatdirectlyorindirectly
controltheformer.
Noncomputableassets
Thefollowingshouldnotbecomputedinthetaxbase:

Thevalueofnewpersonalpropertysubjecttodepreciation(except
forautomobiles)duringthefiscalyearinwhichtheyhavebeen
acquiredandthefollowingone;and
Thevalueofanyinvestmentsinnewbuildingsorsuch
improvementsonpreviouslybuiltonesduringthefiscalyearin
whichsuchtotalorpartialinvestmentshavebeenmade,andin
thefollowingone.

Taxcreditagainstincometax
Incometaxpaidinagivenfiscalyeariscreditedagainstthetaxliability
arisingfromMPITforthesamefiscalyear.Ifthereisnoincometaxtopay,
thepaymentonaccountoftheMPITmaybecarriedforwardagainstthe
incometaxliabilitycorrespondingtothefollowingtenfiscalyears.
Foreigntaxcredit
Taxpayersaretocomputeforthepurposeofthistaxandastaxcredit,any
taxleviedandeffectivelypaiduponitsassetslocatedoutsidethe
ArgentineRepublicuptotheincreaseoftheArgentinepresumed
minimumincometaxderivingfromtheinclusionofsuchassetsinthe
taxablebase.
Personalassettax(PAT)
Personalassettaxisleviedatanationallevelandonallpropertyowned
bythetaxpayer.PATisappliedattheratesdescribedbelowtothetotal
assets,fortaxpayerswhoownassetsvaluedatmorethan$305,000atthe
endofthecalendaryear,ontaxableassetslocatedwithintheArgentine

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Republicandabroad,belongingtoindividualsandestatesdomiciledinthe
ArgentineRepublic.

0.50%between$305,000and$750,000

0.75%between$750,000and$2,000,000

1%between$2,000,000and$5,000,000

1.25%over$5,000,000.

IndividualsandestatesnotdomiciledintheArgentineRepublicandnon
Argentinecompaniesaresubjecttothistaxattherateof0.5%ontheir
equityholdingsorinterestsinArgentinecompanies.
IndividualsandestatesnotdomiciledintheArgentineRepublicare
subjecttothistaxattherateof1.25%ontheirotherassetslocatedinthe
ArgentineRepublic.
A2.5%rateisapplied(insteadofthe1.25%rate)onunexploitedurbanreal
propertyownedbynonArgentinecompanies,amongothers.
InthecaseofcorporatevehiclesorganisedintheArgentineRepublic,non
residentequityholders(individuals,estatesorlegalentities)and
individualresidentswhoownequityinterestssubjecttothe0.5%personal
assetstax,thepersonalassetstaxshouldbedeterminedandpaidbythe
corporatevehicle.
Forthepurposesofthistaxonly,individualsareconsideredasdomiciled
intheArgentineRepublic,interalia,iftheyhavetheiractualdomicilein
theArgentineRepublicor,forexpatriates,iftheyhaveresidedinthe
ArgentineRepublicformorethanfiveyears.
IndividualsdomiciledintheArgentineRepublicareentitledtoacreditfor
similartaxespaidabroad,theamountofwhichmustnotexceedthe
increaseintheArgentinepersonalassetstaxasaconsequenceofincluding
taxableassetslocatedabroadinthetaxablebasis.
Taxondebitsandcreditsoncheckingaccountsandothertransactions
Thistaxapplies:

Toallcreditsanddebitsmadeinanybankaccount,whatevertheir
naturemaybe,openedwiththeentitiesgovernedbytheLeyde
EntidadesFinancieras(FinancialEntitiesLaw);
Toalltransactionscarriedoutbytheentitiesmentionedinthe
previousparagraph,thebeneficiariesofwhichdonotusethe
accountsspecifiedtherein,irrespectiveofthedenominationgiven
tothetransactionandthemethodsappliedtocarryitout,
includingthepaymentincash,anditslegalimplementation;

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Toallownorthirdpartiesfundsmovements,evenincash,that
anyindividual,includedthosefallingwithinthescopeoftheLey
deEntidadesFinancieras(FinancialEntitiesLaw)madeonitsown
accountoronaccountand/orinthenameofanythirdparty,by
anymeans,theirdenominationsandlegalimplementation,
includingthosemethodstocredittoestablishmentsadheredto
creditand/ordebitcardsystems.

Thegeneraltaxrateis0.6%forcreditsand0.6%fordebits.Incertainother
casestherateis1.2%.Moreover,therearespecialtaxratesforcertain
transactionsperformedbyspecifiedindividuals.
Grosssalestax
Thisisamunicipalorprovincialtaxleviedonthegrosssalesof
independentactivitiesperformedforprofit.IntheCityofBuenosAires,
forinstance,thegeneralrateforfiscalyear2005is3%.
Stamptax
Thestamptaxisalocaltaxondocumentsusuallyappliedattherateof1%
onanydocumentorexchangeofdocumentsevidencingthecreation,
amendmentand/orextinctionofpecuniaryrightsand/orobligations.In
eachoftheprovincesthistaxispayableuponlocalexecutionofwhatis
consideredtobeataxabledocument.
Italsoappliestoadocumenthavingeffectsinagivenprovince(local
effectswouldbetheacceptance,protest,orperformanceoftheobligation
orthefilingoftherelevantdocumentwithanadministrativeorjudicial
localauthorityforenforcementpurposes)otherthantheoneinwhichit
wasexecuted.
IntheCityofBuenosAires,thistaxispayableonlyontransactions
involvingrealestatepropertynotintendedasprimaryresidence.The
applicableratesare0.5%onleaseagreements,2.5%ontransferofreal
estateproperty,and0.8%onothers.

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7.

Accounting & reporting

Booksandrecords
CompanyLawsetsbasicrequirementsforkeepingaccountingrecordsand
financialstatementsofbusinessentities.
Allcommercialentitiesmustkeepofficialaccountingrecordsinbooks
registeredinthePublicRegisterofCommerce.Transactionsmustbe
enteredchronologicallyandinsuchafashionthateachonecanbe
identified.
Thedifferentregulatoryentitiessetrulesgoverningtheaccountingrecords
andsubmissionoffinancialstatementsforcertaintypesofregulated
entities,suchasbanks,insurancecompaniesandcompanieswhichare
listedonthestockexchange.
Argentineangenerallyacceptedaccountingprinciplesaresetbythe
InstituteofPublicAccountants,ofwhichallPublicAccountantspractising
inArgentinashouldbemembers.
Financialreporting
Allcompanieshavetoprepareannualfinancialstatementswhichhaveto
beauditedbyanindependentpublicaccountant.Theirfinancial
statementswiththeauditorsreportmustbefiledwiththeregulatoryand
taxauthorities.
TheNationalSecuritiesCommissionrequiresthatcompanieswhoseshares
arelistedonthestockexchangesubmitquarterlyfinancialstatements.
AccountingrecordsandfinancialstatementsshouldbewritteninSpanish
andexpressedinArgentinepesos.
Dividendsarepayableprovidedtheyarisefromrealisedandnetincomeas
pertheannualfinancialstatementapprovedbytheshareholdersmeeting.
Contentsoffinancialstatements
Annualfinancialstatementsmustinclude:

AreportfromtheBoardofdirectors
Balancesheet
Aprofitandlossstatement;
Achartshowingtheexpensesbreakdown
Astatementofchangesinshareholdersequity
Acashflowstatement.

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Thelastitemismandatoryonlyforcompanieswhosesharesarelistedon
thestockexchange,andthosesubjecttopermanentgovernment
supervision.Inbothcases,theywillalsohavetosubmitcomparative
financialstatementsforthecurrentandprecedingyear.
Financialstatementsofholdings
Consolidatedfinancialstatementsarealsorequiredifacompanycontrols
morethan50%ofthevotingsharesofanothercompany.
Whenacompanydoesnotown50%ofthevotingrightsofanother
companybutneverthelessexercisessignificantinfluenceoveritsdecisions,
thepresentationofconsolidatedfinancialstatementsisrecommended,
althoughnotmandatory.
Accountingprinciples
GenerallyacceptedaccountingprinciplesinArgentinaareverymuchalike
tothoseappliedintheUS.
Duetoinflationoverthepastyear,anadjustmentforinflationwasputinto
effectonceagain.Currently,inflationhasbeencontrolledandaonedigit
inflationisprojected.Asaresult,eliminationofthereferredadjustment
processisbeingconsidered.

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8.

UHY firms in Argentina

UHYMacho&Asociados
AuditoresyConsultores
Av.Cordoba12553er.Piso
BuenosAires
Argentina

Tel:
+541148158866
Website: www.uhymacho.com
Email:
rmacho@uhymacho.com

9.

UHY offices worldwide

For contact details of UHY offices worldwide, or for details on how to


contacttheUHYexecutiveoffice,pleasevisitwww.uhy.com

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