Argentina Business Legal Framework - August 2009

Legal Framework for
Investments in Argentina
Argentina’s National Investment Development Agency

August 2009

Legal Framework

ProsperAr offers a one stop shop in Argentina
for both domestic and foreign investors.

The Agency’s objective is to provide the technical
assistance required to facilitate and increase the level of
investment in Argentina. The Agency accordingly provides
potential investors with personalized professional services
at all stages of the investment process, from the initial
project evaluation to the post-investment phase.

The assistance provided includes comprehensive, trustworthy
and up-to-date information to make the investment decision-
making process easier. The Agency’s experts help to overcome
specific difficulties either directly or through contacts
in the competent government bodies, while the Agency
actively encourages associations between local and foreign
businesses to enhance the benefits of investing in Argentina.

This document provides the following information
in relation to the services provided:

1. The legal framework for foreign investment in Argentina;
equality of treatment with domestic investors.

2. The legal structures that companies may adopt.

3. General features of the Argentine taxation system.

4. Legal framework for the hire of personnel in Argentina.

5. Framework of norms for investment incentives.

Legal framework for foreign investment in argentina: equality
of treatment with national investors

Law 21.382

Introduction

In the Argentine Republic, foreign investors and investments are amply protected by the law, supported
by a package of national and international measures which place this country in pole position as an
attractive destination for foreign investors and investment.

The Argentine Constitution offers foreigners equal treatment as from its Preamble and recognizes that
non-nationals enjoy the same rights as nationals in Section 20.

Section. 20: Foreigners enjoy within the territory of the Nation all the civil rights of citizens; they
may exercise their industry, trade and profession; own real property, buy and sell it; navigate the
rivers and coasts; practice freely their religion; make wills and marry under the laws. They are
not obliged to accept citizenship nor to pay extraordinary compulsory taxes. They may obtain
naturalization papers residing two uninterrupted years in the Nation; but the authorities may shorten
this term in favor of those so requesting it, alleging and proving services rendered to the Republic.

a) Law on Foreign Investment

The Foreign Investment Law1 defines the legal framework regulating foreign investment 2.
This law covers the different ways in which foreign investors may invest capital in Argentina for the
purposes of carrying out established activities—in the industrial, mining, agricultural, trade, and
financial sectors of the economy, whether directly in the area of services or in other areas related to
the production and exchange of goods and services—without prior approval. The Law states that such
investors shall enjoy the same rights and be subject to the same obligations as defined for domestic
investors by the Argentine Constitution and Laws. The legislation regulating foreign investment
establishes certain definitions for this purpose.

• Foreign capital investment:
All capital contributions issuing from foreign investors applied to activities of an economic nature
undertaken in the country and/or the acquisition of shares in the capital of an existing domestic
company, on behalf of foreign investors.

• Foreign investor:
All individuals or legal entities domiciled outside national territory that make an investment
of foreign capital and domestic companies of foreign capital, when these invest in domestic
companies.

• Domestic company of foreign capital:
Any company domiciled within the territory of the Argentine Republic where individuals or legal
entities domiciled outside its borders directly or indirectly own over 49% of the capital or directly
or indirectly have the number of votes required to control shareholder or partner meetings.

• Domestic company of domestic capital:
1. law # 21.82
All companies domiciled within the territory of the Argentine Republic where individuals or legal
2. text to be found in Annexe 1
of Decree 185/9 -
entities also domiciled in this country directly or indirectly own no less than 51% of the capital and
http://www.infoleg.gov.ar directly or indirectly have the number of votes required to control shareholder or partner meetings.

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rights of foreign investors

• Foreign investors may remit abroad liquid profits arising as a return on their investment as well as
repatriate their investment.

• They may avail themselves of any of the legal forms of incorporation foreseen by Argentine
legislation.

• They may make use of domestic credits and loans with the same rights and under the same
conditions as domestic companies of domestic capital.

ways in which foreign investments can be effected

• Convertible foreign currency.
• Capital goods, spare parts and accessories.
• Capital or utilities in domestic currency belonging to foreign investors as and when this may meet
the legal requirements for transfer abroad.
• Capitalization of foreign loans in foreign convertible currency.
• Intangible assets, according to specific legislation.
• Other forms of contributions contemplated in specific or promotional regimes.

The Foreign Investment Law also provides for the treatment of provisional contributions and of the
relationship between controlling and controlled companies.

Provisional contributions (exception). Provisional foreign capital contributions made for the purposes
of implementing lease contracts for goods, works or services or others, are not covered by this Law
and shall be governed by the terms of the individual partnership agreements applicable according to
the legal requirements given. Nonetheless, the owners of these contributions may opt to make their
investment within the terms of the Law.

the relationship between controlled and controlling companies. Legal agreements celebrated
between a domestic company of foreign capital and the company directly or indirectly controlling
it shall be considered to all effects as celebrated between independent parties as and when their
stipulations and conditions are in line with common practices in the market by independent entities.

B) International negotiations related to investments

Argentina plays an active role in international negotiations concerning the environment for regional,
bilateral and multilateral investment in order to improve the investment climate at local level.

• regional scope: Argentina has underwritten a series of regional economic agreements which
offer foreign investors an outstanding platform from which to expand the scope of access to Latin
American markets for their products.

One of the most important of these agreements is the Treaty of Asunción (Tratado de Asunción) of
March 26, 1991 which established the MERCOSUR. The Treaty is enshrined in the framework of the
Latin American Integration Association (Asociación Latinoamericana de Integración - ALADI) as a
Partial Scope Economic Complementation Agreement.

MERCOSUR includes Argentina, Brazil, Paraguay, and Uruguay. Bolivia and Chile are Associate Members
of the MERCOSUR.


This process of regional economic integrations benefits and enhances foreign investments made in
Argentina as they thus have an unbeatable access to these markets. Similar agreements have been
signed with Colombia, Ecuador, Venezuela and Peru as well as Mexico.

Outside the ALADI, Argentina as a Member State of the MERCOSUR has signed fixed trade preference
agreements with the Republic of India and with South Africa, subsequently extended to include
the Southern African Customs Union. It has also underwritten framework agreements with Egypt,
Morocco, Israel, the Gulf Cooperation Council (Saudi Arabia, Bahrain, the UAE, Kuwait, Oman and
Qatar) and Pakistan.

• Bilateral scope: Argentina has 54 Bilateral Investment Promotion and Protection Agreements with
different countries which provide foreign investors and investment with ample protection. (See
Annex I).

• multilateral scope: Argentina has been a member of the World Trade Organization (WTO) since
it was created in 1995 and an observer of the Investment Committee of the OECD since 1996.
This country is thus a member of the Multilateral Investment Guarantee Agency (MIGA), whose
objective is to mitigate the risks of investment and provide advice and information on investment
opportunities in emerging economies.

C) exceptions to the exchange control regime concerning the inflow of foreign
currencies for the purposes of Foreign Direct Investment (FDI)

The inflow of foreign currencies for FDI in the Argentine Republic is exempt from the exchange control
regime.

The Central Bank of the Argentine Republic regulations exempts from its control those imports of
foreign exchange to be used for: (i) contributions required for direct investments in the country, or (ii)
the purchase of stock in domestic companies by direct investors.

The following operations are therefore exempt from controls:

1. The inflows of funds from non-residents for the purpose of the purchase of real estate, under certain
conditions.

2. Income arising from loans taken out with multilateral and bilateral credit organizations as well as
official credit agencies.

3. Income arising from foreign financial loans within the non-financial private sector, aimed at
investment in non-financial assets or training for micro-enterprises and/or improvements to be made
in residences and family homes, inasmuch as such loans are incurred and repaid over a period of no
less than two years, including capital and interest repayments.

4. All inflows of foreign currencies either aimed at, or originating in, the primary underwriting of stock
certificates, bonds or debt papers issued by trust funds whose purpose is to develop infrastructure
works in the energy sector and whose underlying assets are wholly or partially made up of the
specific remits provided for by Law Nº 26.095, as long as these are paid off or covered wholly or
partially over periods of no less than 365 consecutive days, irrespective of the method of payment.

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2. Legal structures that companies may adopt

Introduction

The main legal forms of business that foreign investors may establish when installing themselves in
Argentina with any degree of permanence include setting up an overseas Branch, the acquisition of
stock in an existing company or the creation of a new one.

a) overseas branches

A Branch is effectively the same company which opens an office in the country. It is not necessary
to create a new legal entity. It should be noted that the Branch answers in terms of assets to the
total value of the capital owned by company’s Head Office (HO) and not to the value of the branch in
Argentina as assigned by HO.

The branches of foreign companies are required to register their presence. They may undertake all the
activities pursued by HO, in the name of HO and through the person designated as its representative.

The branch must be managed by a legal representative with administrative powers which may be
limited according to circumstances. However, as said earlier, HO is responsible for all the Branch’s
liabilities. Its administrative authority should be sufficiently broad-based to allow for transactions with
financial institutions and other local suppliers to be carried out efficiently.

The branches are subject to on-going control on behalf of the stockholder control organization and
must comply with the same requirements as incorporated business companies. Their accounting must be
managed separately from HO and they must periodically present their financial statements to this entity.

registering Branches

For a Branch to operate legally, the following is required:

1. A certificate testifying to the length of time the company has been operational in the country of
origin and that it is not in liquidation or involved in any legal process that implies a restriction on its
goods and/or activities.

If the legal system of the country where the company is registered does not make official provision
for issuing this certificate, it may be replaced by a report signed to this effect by an attorney or
notary originally from the country where this situation occurs.

2. Foreign documentation including:

a) The partnership agreement or company statutes and any amendments.
b) The resolution adopted by the registered body which resolved to create the branch, affiliate or
permanent representation in the Argentine Republic.
c) The date of the close of the company’s financial year.
d) Its registered office in the City of Buenos Aires, with the exact address (and the representative
must have power of attorney for this purpose).
e) The capital assigned to it, if this is the case.
f) The designation of the representative, which must be an individual.


3. Foreign documentation signed by one of company’s executives (who must provide proof of said
faculties before a public notary or official) stating that:

a) There are no restrictions or prohibitions in the place where the company was incorporated which
hinder or prevent it carrying out all of its activities, or its main activity / activities.

b) It possesses, outside the Argentine Republic.
• One or more operational agencies, branches or representations, and/or
• Non-current fixed assets or exploitation rights for third-party assets of this nature, and/or
• Stock in other companies not subject to takeover bids, and/or
• The practice of transacting investment operations in stock markets as foreseen in its statutes.

c) The individualization of the partners at the time the decision to apply for registration was taken.

4. Original proof of the publication of the edict, when applied to a stockholding company of limited
liability or of a form unrecognized by Argentine law, including:

a) Concerning the branch, affiliate or representation, its registered offices, capital assigned if
relevant and the date of the close of its financial year.

b) As regards the representative, his/her personal data, legal address, term of representation if
relevant, limits to his/her authority, in each case if more than one representative is designated.

c) As regards a foreign company, the data foreseen in Article 10 of Law 19.550 in relation to its
statutes and amendments. (See 4. Publication of Edicts).

5. A document signed by the representative designated certified by public notary or personally ratified
prior to registration in which said representative must:

a) Provide personal data.

b) Establish the registered offices if so authorized.

c) Establish a fixed place of business within the radius of the City of Buenos Aires.

B) Creation of a new company or acquisition of shares in an existing one

The Law of Commercial Companies (LCC) contemplates a broad variety of corporate forms, amongst
which the most widely used by foreign investors in Argentina are the incorporated business company
(Sociedad Anónima – SA) and the limited liability company (Sociedad de Responsabilidad Limitada -
SRL). In these cases, unlike Branch offices, these kinds of companies are only answerable in principle for
the capital of the company incorporated or in which stock is acquired.

Unlike domestic companies, foreign undertakings which wish to set up a company or acquire stock in
an existing one must previously be able to prove that they are legally incorporated in their countries of
origin on the one hand, and register their statutes, amendments and other documentation authorizing
them to operate, as well as the documentation relating to their legal representatives, in the appropriate
Public Registry of Commerce.


Incorporated Business Company (Sociedad Anónima - SA):

This format establishes that the company’s property belongs to the stockholders whose responsibilities
are limited by the contributions they make. Its incorporation requires a minimum of two stockholders.
The stock may or not be quoted on the Stock Exchange. In the case of Incorporated Business
Companies, there is no limit on the number of stockholders in the company (limited liability companies
may be partners in an incorporated business company).

The operation of these companies is regulated by their statutes. Administration is the responsibility of
a Board made up of one or more members, whether they are stockholders or not. The majority of those
sitting on the Board must be resident in the country. However, there are no limits on the residency or
nationality of the stockholders, although if these are foreign commercial companies they should be
registered at the Public Registry of Commerce.

The directors answer unanimously as one and without limits for the company, to the stockholders
and third parties for poor job performance, breaking the law, statutes or regulations, and any other
damages arising from fraud, the abuse of responsibilities or gross negligence.

Incorporated Business Companies must be registered via public deed. In the City of Buenos Aires they
must be registered with the General Inspection of Justice (Inspección General de Justicia - IGJ) and
require a minimum capital of AR$ 12.000 (twelve thousand Argentine pesos).

In Argentina incorporated business companies are subject to internal and external tax audits.

External tax audits are undertaken by the Public Registry of Commerce corresponding to the
jurisdiction. There are also special regulatory organizations for certain activities. For example,
companies which quote on the stock exchange are audited by the National Securities Commission
(Comisión Nacional de Valores - CNV), financial entities by the Central Bank of the Argentine
Republic (Banco Central de la República Argentina - BCRA); insurance companies by the Insurance
Superintendent (Superintendencia de Seguros - SSN).

Internal tax audits are usually the responsibility of one or more trustees nominated at the stockholders’
meeting. This is optional for those companies not permanently under the supervision of a government
entity. Furthermore, the Law contemplates the control of the supervisory board, a broad-based entity,
established by the statutes. It should be pointed out that in practice this alternative form of supervision
is not frequent.

Limited Liability Company (LLC):

LLCs share a number of features with the incorporated business companies except for the following
conditions:

• The number of partners may not exceed 50 persons;
• Incorporated Business Companies may not be partners;
• They may not quote on the Stock Exchange;
• A change in one of the partners requires the company statutes to be modified;
• The procedures for setting up the company are simpler; and,
• The statutes are more flexible.

As with the Incorporated Business Companies, the partners’ responsibilities are limited to the amount
of stock they underwrite or acquire, but in this case, the partners must provide unlimited and mutually-
binding guarantees of their contributions. Partners may own more than one share. Although the Law


places no restrictions on transfers, the partnership agreement may do so.

The task of administering and representing the company corresponds to one or more managers or
partners or others. The managers are held responsible at personal or mutually-binding level, according
to the way management is organized and the rules governing its working as established in the
partnership agreement.

LLCs may be established by means of public or private instruments. They must register with the General
Inspectorate of Justice (IGJ). There are no minimum capital requirements, however this should be related
to the company’s stated aims.

Common issues regarding the registration of Companies in argentina

The registration of commercial companies in Argentina is carried out at the Public Registry of
Commerce corresponding to their fixed business address. In the case of the City of Buenos Aires, the
organization and activities of the Public Registry of Commerce are the responsibility of the IGJ.
The process for establishing a company at the IGJ takes approximately 30 (thirty) days and involves the
following requirements:

1. Application for “Reservation of name or denomination (“Reserva de nombre o denominación”)
This involves filling in form # 3, which includes three proposals, available at the IGJ and returning the
original and one copy to the Sector called “Reservation of names” (“Reserva de nombres”).

2. Presentation form
Form # 1. Establishment and amendments:
a. The partnership agreements or statutes with certified copies.
b. Legal Opinion on professional pre-qualifications.

3. Payment of Corporate Establishment Tax or Retributive Tax, as required
If an Incorporated Business Company is to be established, a one-off payment of the corporate
establishment tax must be made at the Banco de la Nación Argentina.

If a Limited Liability Company is to be established, a one-off payment of the retributive tax must be
made at the Banco de la Nación Argentina.

4. Publication of Edict
Article 10 section A of the Law of Commercial Companies establishes that limited liability companies
and stockholder companies must publish an advertisement in the official journal for legal publications.

The advertisement must cover certain information, including:

• Name, age, marital status, nationality, profession, address and identity document number of each
of the partners;
• Date when the documents establishing the company were drawn up;
• The name or denomination of the company;
• Company address;
• Company aims;
• Duration;
• Stockholders’ equity
• Make-up of the administration and audit departments, names of their members and amount of
time in these positions where relevant;


• Details concerning legal representation;
• Date of close of financial year.

5. Initial deposit
An initial deposit of 25% of the liquid capital contributed must be made at the Banco de la Nación
Argentina. This may be done at the time of applying for registration.

6. Foreign companies establishing a Company in Argentina
Foreign companies wishing to set up a company in the Argentine Republic must, in addition to the
points mentioned above:

• Prove that they have been established in accordance with the laws in force in their countries of
origin before the judge of their respective Public Registry of Commerce.

• Register the company’s original partnership agreement, amendments and any other
documentation concerning its authorization, as well as that relating to its legal representatives
at the Argentine Public Registry of Commerce (if this is a stockholders’ company it should also be
registered at the Stockholder Company Register).

• State whether there are any prohibitions or legal restrictions on the company’s activities, main
activity or activities in its country of origin. This information must be given in the partnership
agreement or statutes of the company or subsequent amendments, if relevant.

• Prove that as of the date of the application for registration, the company complies with at least
one of the following conditions outside the Argentine Republic:

Existence of one or more branches or permanent representatives, accompanied to this effect by
documentation certifying the validity of these, issued by the competent administrative or legal
bodies from the location where they are based.

Ownership of stock in other companies which comes under the heading of non-current assets
according to the definitions given in accounting standards in general use.

Ownership of fixed assets in the place of origin, whose existence and value must be verified by
the definitions given in accounting standards in general use.

The two requirements mentioned immediately above must be supported by the financial
statements of the company and/or certification documentation signed by one of the company’s
executives, taken from the accounting entries transcribed into the company’s books.

• Provisions related to documentation originating abroad:
Documentation originating abroad must be presented according to the requirements established
by the legislation in force in its country of origin, duly authenticated, stamped or legalized by
the Ministry of Foreign Relations, International Trade and Worship of the Argentine Republic as
required, and if necessary accompanied by a version translated into Spanish by a sworn translator
whose signature must be legalized by the relevant professional association for this purpose.

notary protocols
Documentation originating abroad which must be registered may also be presented under a notary
protocol signed before a registered notary of the Argentine Republic with its corresponding translation
into Spanish.


3. general overview of the argentine tax system

Introduction:

In Argentina, tax revenue is collected by the Argentine Government, the Provinces and municipal
authorities. The tax system is structured on the basis of dues levied on income, wealth and
consumption.

At a national level, the Federal Administration of Public Income (Administración Federal de Ingresos
Públicos - AFIP), the independent entity which answers to the Ministry of Economy and Public Finance,
is responsible for the taxation of income, wealth and consumption.

The main taxes levied at national level include: Income Tax, Value Added Tax, Presumed Minimum
Income Tax, Internal Taxation, Personal Estate Tax, and Taxes on Debits and Credits in Bank Accounts
and Other Operations.

In the provincial ambit, taxation is collected and administered by the provincial Duties Departments,
entities subordinate to the respective Ministries of Economy in the provinces. The main provincial taxes
are Income Tax, Stamp Duties and Real Estate Tax.

Finally, at municipal level, revenue arises from the collection of a number of taxes and duties.

a) national taxation

Income tax: All income, including capital gains, is subject to this tax. Companies resident in Argentina
pay taxes on their global income, although they may submit as payment on account of these taxes
those amounts effectively paid as similar taxes on their activities abroad up to the limits established of
the increase in tax obligations arising from the incorporation of the earnings gained abroad.

Argentines and nationalized foreigners, foreigners with permanent residence in the Argentine Republic
or those who have legally resided in the country for twelve months are considered residents, as are
the following; the undivided estate of taxpayers who fulfill the condition of Argentine residents on the
date of decease; incorporated business companies and other business forms (one-person companies,
civil associations, foundations, etc.) established in the country. Branches established in the Argentine
Republic of companies established abroad are considered resident entities and thus subject to taxation.

The tax applicable to resident companies and branches set up in this country belonging to non-resident
companies is 35% of total earnings.

Non-resident companies that do not own branches or any other permanent establishments in the
Argentine Republic are only subject to taxes on income earned in Argentina. The tax is withheld by
a payment agent in Argentina according to a taxation scale dependent on the kind of income. These
taxes arise from the application of a 35% levy on presumed earnings as established in the Law on
Income Tax.

Double Taxation Treaties: The Argentine Republic has signed Broad Agreements with different countries
in order to avoid double taxation. The agreements seek to avoid companies or individuals being taxed
twice with regard to income, capital and/or wealth taxation. (See Annex II).

value added tax (vat): VAT is a tax applied on the price of the sales of goods and services at each
stage of the commercialization process, taking as payment on account the amounts erogated by the
payment of this tax during earlier stages in the process.


General VAT is 21% while the differential VAT rate is 10.5%, half the general rate. The latter is applied
to different goods and services: the sale of capital goods, transport (except for international travel, the
sale of newspapers, magazines, brochures and periodicals, prepaid health coverage and interests on
foreign and domestic bank loans.

Imports are also subject to this tax at the same rates as domestic goods or services. Exports are not
taxable and exporters may thus apply for VAT refunds on their purchases.

The provision of certain services such as electricity, natural gas and water to properties not for
residential use is subject to greater taxes.

Payments must be made monthly, unlike fiscal credits arising from purchases and fiscal debt arising
from sales operations.

tax on Presumed minimum Income: This tax is applicable to all assets (located both in the Argentine
Republic and abroad) of Argentine companies at an annual rate of 1%. It is also applied to goods
located in Argentina which are the property of permanently-established foreign individuals or entities.

The amount to be paid as Income Tax is considered as payment on account for this particular tax. If the
Income Tax to be paid is greater than the Tax on Presumed Minimum Income, only the former is to be
paid. If, however, the Tax on Presumed Minimum Income is greater than the Income Tax established,
the excess may be used for a maximum period of 10 (ten) years to compensate for the potential over-
charge of Income Tax defined concerning the allowance mentioned in the first instance.

The calculation of tax credits for parallel taxes paid abroad for goods located outside Argentine
territory may be admitted. Similarly, advances received on account of the taxes to be levied in each tax
period should be recorded.

tax on Personal estate: This is a wealth tax as it is applied to personal goods owned up to December 31
each year, and is applicable to both individuals and undivided estates.

Individuals residing in the country are obliged to pay this tax on an annual basis, consisting of a sum
equivalent to 0.5% of their personal estate with a value of between AR$ 305,000 and AR$ 750,000.
Amounts over this figure and up to AR$ 2,000,000, are taxed at 0.75%; from AR$ 2,000,000 to AR$
5,000,000, at 1%, and values over these figures are taxed at 1.25%.

It should be noted that subjects established in Argentina are liable for taxes on goods located both in
the Argentine Republic and abroad.

Individuals domiciled abroad are only subject to taxes on goods located in the Argentine Republic. The
regime applied is that of liable proxy subject to a tax of 1.25%.

Nonetheless, as from the 2002 tax year there is a presumption in force which does not admit evidence
to the contrary, according to which, individuals domiciled abroad or undivided estates established
there may indirectly own stock and/or shares in the capital of Argentine companies whose owners are
companies or any other kind of legally valid entity, companies, stable establishments, appropriation of
wealth or exploitations, domiciled or established abroad.

Likewise, as from then, Argentine companies are obliged to calculate and pay the taxes on the stock
and/or shares in the capital of Argentine companies as liable proxy, calculating the rate on the basis of
a 0.50% charge on the value assigned to the stock/shares (net assets of the Argentine company as of
December 31 of each year, excepting certain circumstances).


Internal taxes: These are applied to the consumption of certain products at different rates and
according to different payment and declaration regimes. In general, these taxes are applied to
manufacturers or importers at the moment of selling their product.

tax on Debits and Credits in Bank Current accounts: This tax is applied to credits and debits incurred
in the bank accounts of the company account holder at a rate of 0.6% for debits and 0.6% for credits.
All movements or transfers of money will be taxed at 1.2% when carried out using payment systems
which replace the use of banking current accounts. It should be noted that there are certain differential
rates and exemptions which may be applied to specific operations.

tariffs on the Import of goods: Import duties are levied at between 0 to 35%, except in specific cases
where minimum thresholds are applied or the goods are from a category which receives special tax
treatment.

Generally, goods from ALADI members are subject to preferences on a percentage basis. As far as
MERCOSUR is concerned, import duties for inter-zone trade have virtually been eliminated. At the same
time, a common external tariff has been established for goods sourced and originating outside the zone.

Other taxes that importers must pay are: Statistics Duty (0.5% on cost, insurance and freight – CIF up to
USD 1,750) and in some cases, Destination Confirmation Tax (2% of CIF). Imports are also subject to VAT
(21% or 10.5% in certain cases) and Income Tax (usually 3% in most cases.

B) Provincial taxation

Income tax: All Argentine jurisdictions (provinces and the City of Buenos Aires) apply this tax to
the gross income of any company carrying out a commercial, industrial, agricultural, financial or
professional activity.

The tax is levied on each commercial transaction and no fiscal credits are awarded for taxes paid during
preceding stages. The taxes levied differ according to the kind of activity and the Law in force in each
jurisdiction varies from 1.5% to 4%. (Primary and industrial activities in general are exempt). The taxes
are paid over a calendar year with payments made on a monthly basis or every two months, depending
on the jurisdiction.

stamp Duties: These are provincial taxes levied in each province generally applicable to the
transactions, partnership agreements and operations of any value in the form of public or private
instruments.

In general, the tax rate charged is 1% although it may vary according to the deeds and legislation in
force in the jurisdiction where the afore-mentioned deeds apply. In the City of Buenos Aires, this tax is
only applied to the transfer of ownership for property and lease contracts or the sublet of properties in
which commercial activities are carried out. The rate applicable to the transfer of property is 2.5% and
to the lease or sublet of the same is 0.5%.

Property tax: Properties in every jurisdiction are liable for annual taxes which are calculated by
applying the rates fixed by the Law on the taxation of the fiscal valuation of land free of improvements,
and of improvements.


Property Tax is a realty tax applied to the value of the land and buildings without taking into account
the personal situation of the taxpayer. The amount is set by the application body and is calculated
according to the tax laws of each fiscal period which establish the valuation and rate scales to be
applied on taxable income according to the system foreseen for each kind of property.

C) municipal taxes

retributive services taxes: Municipal tax departments charge rates for providing industrial health and
safety and other services on the basis of income or other fixed parameters such as numbers of person-
nel, driving force capacity/horse power, etc.


4. Legal framework for the hire of personnel in argentina

Introduction:

Employment contracts may take different forms. However, the standard rule is the non-fixed term
employment contract which aims to ensure the continuity and permanence of the working relationship.

Forms of hire:

Employment contracts are non-fixed term, unless there is a specific provision to the contrary. The Law
establishes a trial period of three months which may be extended to six under a collective agreement.
During this period the employee may be fired without receiving any form of indemnity.

Domestic legislation foresees the possibility of part-time employment contracts. Working hours may
not exceed 2/3 of a normal working day and the duration of the contract must be fixed by a collective
work agreement. A part-time regime does not allow for over-time.

annual Bonus salary:

The Law provides that full-time workers and employees may take home an extra salary as a bonus
(“aguinaldo”) paid in two six-monthly quotas in June and December. Each quota is equal to 50% of the
highest monthly salary paid during the previous six-monthly period.

vacations:

The duration of the vacations depends on the length of the working relationship to-date; if this
exceeds six months and is less than five years’ service it is 14 days; 21 days if the period served is five
to ten years; 28 days if this is 10 to 20 years, and 35 days if the employee’s period of service is 20 years
or more.

If the employee has been in service for less than six months, he/she may be given one day off for each
twenty days worked.

If the contract expires without the employee having taken his/her vacation, he/she must receive
financial compensation proportionate to the period worked, as and when this is at least three months.

redundancy:

Employment contracts must be terminated with prior notice. Prior notice shall be given by the
employee 15 days prior to the termination of the contract, while the employer must give 15 days
warning when the employee is in the trial period, one month when the employee has been employed
for a period not exceeding five years and two months when the period exceeds this.

Redundancy indemnity is equivalent to a twelfth part of the highest basic monthly salary paid to the
employee during the last year o during the time worked if this period is less, for each month of work or
fraction greater than 10 days.

The highest remuneration which is taken as the baseline may not be greater than three times the
monthly average contemplated in the collective agreement applicable to the employee in question.


The minimum indemnity may not be less than two twelfths of the highest basic monthly remuneration
paid the employee during the last year of service.

When the employer fires the employee because the latter has committed a work-related offense (of
sufficient gravity) which hinders the continuity of the relationship, the latter is not entitled to receive
the indemnity provided for by labor legislation.

social security contributions:

Companies make employer contributions to cover the social security services of their employees. These
contributions cover family allowances, medical services, pension plans and unemployment funds. The
rates are 27% of the gross salary paid for employers whose main activity is the provision and lease of
services, and 23% for other employers.

In order to foster new job creation in Small and Medium-Sized Enterprises, those employers who
increase the number of persons in their full-time non-fixed term employment are eligible for
a reduction in the social security contribution rates. This discount applies to one-third of the
contributions made. At the same time, all the companies based outside the metropolitan area whatever
their size may offset against VAT a percentage of the amounts paid as employer contributions.

working hours:

Normal working hours are 8 hours a day, or 48 hours a week. The working day may be extended to
include hours worked over-time which should be paid at an additional 50% of the normal hourly rate.
The hourly rate on Saturdays after 1 pm, Sundays and national holidays is double the normal rate. Night
work is permitted but may not exceed the daily period of 7 hours between 9 pm and 7 am.

There are twelve national holidays in the year

Month Date Reason for holiday
January 1 New Year’s Day
March 24 National Day of Memory for Truth and Justice
March/April * Holy Week – Good Friday
Day of the War Veteran and those Fallen in the South Atlantic
April 2**
Conflict (Guerra de Malvinas)
May 1 Labor Day
May 25 Anniversary of the First National Government
June 20*** National Flag Day
July 9 National Independence Day
August 17*** Anniversary of the death of General José de San Martín
Octuber 12** Columbus Day
December 8 Feast of the Immaculate Conception
December 25 Christmas

* Variable date.
** If this holiday falls on a Tuesday or a Wednesday it is passed to the preceding Monday, and if it coincides with a Thursday or
Friday, it is passed to the following Monday.
*** The holiday is celebrated on the third Monday of the month.


minimum Living wage:

In Argentina, the Minimum Living Wage is set by the National Board for Employment, Productivity and
Wages, made up of representatives from the trade unions, employers’ associations and the Executive
Power. The resolutions passed by this body require a majority vote of two-thirds of its members. Currently,
the minimum living monthly wage stands at AR$ 1,400 (USD 364).

The main laws and regulations in force which regulate labor and welfare issues in Argentina are the
following:

• Employment Contract Law Nº 20.744;
• Law of Union Associations Nº 23.551 and Decree # 467/88;
• Collective Working Agreements Nº 14.250 and 25.250;
• National Employment Law Nº 24.013;
• Labor Reform Regime Laws Nº 25.013 and 25.877;
• Occupational Hazard Law Nº 24.557;
• Integrated Retirement and Pension Systems Law Nº 24.241;
• Family Allowance Regime Law Nº 24.714; and
• National Health Insurance and Coverage System Nº 23.660 and 23.661.


5. Framework of norms for investment incentives

Argentine legislation includes norms designed to encourage development in specific areas of the
economy. This chapter covers some of the incentives in force at the time which may be taken into
account when making decisions.3

1. Incentives for investment in capital goods and infrastructure

1.1. Promotion of investments in capital assets and infrastructure works
1.2. Reduction in the import allowances of capital assets
1.3. Reduction in VAT
1.4. Incentives for the production of capital goods, IT, telecoms and agriculture machinery
1.5. Import of goods to be integrated into large-scale investment projects
1.6. Used production lines
1.7. Temporary import of capital goods

2. sectoral incentives

2.1. Automotive Promotion Regime
2.2. Software Industry Promotion Regime
2.3. Promotion of the Development and Production of Modern Biotechnology+
2.4. Biofuels Promotion Regime
2.5. Mining Promotion Regime
2.6. Forestry Regime
2.7. Program of Incentives for the Exploration and Exploitation of Hydrocarbons
2.8. Public infrastructure works

3. Incentives for re-location: provincial regimes and free zones

3.1. Provincial regimes
3.2. Free zones

4. Incentives for technological development and innovation

4.1. Argentine Technological Fund (FONTAR)
4.2. Trust Fund for the promotion of the Software Industry (FONSOFT)
4.3. Fund for Scientific and Technological Research (FONCYT)
4.4. Federal Board of Science and Technology (COFECYT)
4.5. Promotion of Technological Innovation

5. employment incentives

. For more information see 5.1. Integrated plan for the Promotion of Employment: More and Better Jobs
the report entitled “Investment
Incentives”, prosperAr, 2009.
5.2. Training and Skills Certification Program
(http://www.prosperar.gov.ar) 5.3. Tax credits for SME training
5.4. Tax credit regime for technical education courses


6. Financing programs

6.1. Credit lines from the Banco de la Nación Argentina (BNA)
6.2. Credit lines from the Banco de Inversión y Comercio Exterior (BICE)
6.3. Credit lines from the Consejo Federal de Inversiones (CFI)
6.4. Subsidized rates for loans for Micro-SMEs
6.5. National Development Fund for Micro-SMEs (FONAPyME)

7. export promotion

7.1. Export refunds
7.2. Draw Back
7.3. Temporary imports for industrial improvements
7.4. Export of turn-key factory installations
7.5. Regime of in-factory Customs
7.6. Regime of in-house Customs
7.7. Refunds on exports from ports in Patagonia
7.8. Subsecretariat of SMEs and Regional Development
7.9. Export.Ar Foundation


annex I
1. Algeria (2000) 28. Luxembourg (1992)
2. Armenia (1994) 29. Malaysia (1995)
3. Australia (1992) 30. Mexico (1998)
4. Austria (1994) 31. Morocco (1997)
5. Bolivia (1995) 32. Nicaragua (2000)
6. Bulgaria (1994) 33. Panama (1998)
7. Canada (1992) 34. Peru (1996)
8. China (1994) 35. Philippines(1999)
9. Chile (1991) 36. Portugal (1995)
10. Costa Rica (1999) 37. Czech Republic (1998)
11. Croatia (1995) 38. Rumania (1995)
12. Cuba (1997) 39. Russia (2000)
13. Denmark (1994) 40. South Africa (2000)
14. Ecuador (1995) 41. South Korea (1996)
15. Egypt (1993) 42. Spain (1992)
16. El Salvador (1998) 43. Sweden (1992)
17. Finland (1995) 44. Switzerland (1992)
18. France (1992) 45. Thailand(2000)
19. Germany (1992) 46. The Netherlands (1994)
20. Guatemala (2000) 47. Tunisia (1994)
21. Hungary (1994) 48. Turkey(1994)
22. Indonesia (1997) 49. Ucrania (1996)
23. India (1999) 50. The United Kingdom (1992)
24. Israel (1997) 51. The United States (1992)
25. Italy (1992) 52. Venezuela (1995)
26. Jamaica (1995) 53. Vietnam (1997)
27. Lithuania (1998)


anexo II
Country DATE OF AGREEMENT LAW N°
25.332
Protocol 09/16/1996
B.O. 11/14/00
25.238
AUSTRALIA 08/27/1999
B.O. 12/31/99
22.589
AUSTRIA 09/13/1979
B.O. 05/20/82
24.850
BELGIUM 06/12/1996
B.O. 07/22/97
21.780
BOLIVIA 10/30/1976
B.O. 04/25/78
22.675
BRAZIL 05/17/1980
B.O. 11/17/82
24.398
CANADA 04/29/1993
B.O. 12/13/94
23.228
CHILE 11/13/1976
B.O. 10/01/85
26.232
Protocol 02/23/2003
B.O. 02/26/07
24.838
DENMARK 12/12/1995
B.O. 24/07/97
24.654
FINLAND 12/13/1994
B.O. 07/10/96
22.357
FRANCE 04/04/1979
B.O. 12/30/80
26.276
Protocol 08/15/2001
B.O.08/13/07
22.025
GERMANY 07/13/1978
B.O. 07/23/79
22.747
ITALY 11/15/1979
B.O. 02/24/83
25.396
Protocol 12/03/1997
B.O. 01/15/01
25.461
NORWAY 10/08/1997
B.O. 09/13/01
26.185
RUSSIA 10/10/2001
B.O. 01/03/07
24.258
SPAIN 07/21/1992
B.O. 11/19/93
24.795
SWEDEN 03/05/1997
B.O. 04/14/97
---
SWITZERLAND 04/23/1997
---
Protocol of ---
Amendments and 11/23/2000
---
Additions.-
24.933
THE NETHERLANDS 12/27/1996
B.O. 01/15/98
THE UNITED 24.727
01/03/1996
KINGDOM B.O. 12/04/96

* retroactive provisional application : 1/12/2002.-


annex III
Useful information:

1. Legal framework for foreign investment in argentina: equality of treatment with national
investors:

Law 21.382 – Decree 1853/93: www.infoleg.gov.ar
http://www.infoleg.gov.ar/infolegInternet/anexos/55000-59999/56254/texact.htm

2. Legal structures that companies may adopt:

Inspección General de Justicia (IGJ)
Av. Paseo Colón 285 – Ciudad Autónoma de Buenos Aires
Tel. 0800-333-3445
www.jus.gov.ar/registros/IGJ/

3. general overview of the argentine tax system:

Administración Federal de Ingresos Públicos (AFIP)
Hipólito Irigoyen 370 – Ciudad Autónoma de Buenos Aires
Tel. 0810-999-2347
www.afip.gov.ar

4. Legal framework for the hire of personnel in argentina :

Ministerio de Trabajo, Empleo y Seguridad Social
Av. Leandro N. Alem 650 – Ciudad Autónoma de Buenos Aires
Tel. (5411) 4310-6000
www.trabajo.gov.ar


For more information:

www.prosperar.gov.ar
info@prosperar.gov.ar
+54-11-4328-9510

Argentina Business Legal Framework - August 2009

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