Main aspects to consider to start a business in Argentina
Article 4 minute read

Main aspects to consider to start a business in Argentina

07 December 2017

When we talk about business complexity, Argentina is usually among the first places in the world. In this article, I will briefly describe some aspects that make Argentina a complex country for the compliance that every company must achieve.

In this regard, I will develop some aspects of the regulations on corporate, accounting, tax, labor and foreign trade and foreign exchange.

Corporate regulations

Existing regulations are legislated at each jurisdiction level and the General Inspection of Justice (IGJ) is the comptroller agency in Capital Federal. This agency has a slow, complex system that is difficult for the investor to understand. The minimum time required for the registration of companies is no less than 30 days for Limited and Limited Liability Companies, and no less than 60 days for branches abroad (Law 19,550, Article 118). In both cases, these terms are met as long as there are no observations from the controlling agency. With respect to the bookkeeping and corporate accounting books, it is necessary to have at least 15 days.

It should be noted that the Argentine government considered this and created the Simplified Joint Stock company (Sociedad por Acciones Simplificadas, in Spanish) through the Ministry of Production and by means of the Law of Support for Entrepreneurial Capital. The creation of this type of company is allowed within a period of 24 hours and includes obtaining the CUIT (Unique Tax Identification Code). Currently, the registration of the Limited Liability Companies under the "urgent" modality is also expected within 24 hours (as long as there are no observations). These modalities were recently created and are currently in the implementation stage.

Accounting and tax regulations

In terms of accounting regulations, the trend is towards the application of IFRS (International Financial Reporting Standards). Currently, its application is mandatory only for entities listed on the Stock Exchange.

In the case of tax regulations, Argentina's tax legislation is extremely complex. Currently, there are three levels of taxation: national, provincial and municipal and, in many cases, the same taxable event is taxed by more than one level of taxation. There are also various taxes, information regimes and withholding systems and tax perceptions that companies must comply with. Regarding the frequency of the obligations, the can be biweekly, monthly and annual.

Regulations of social security and foreign trade and foreign exchange

According to the social security regulations, every employer must register before the AFIP (Federal Administration of Public Revenues), as well as the company and each of the labor relations. In addition, he or she must register before  the Secretary of Labor and obtain the payroll book before the Risk Insurance Company, health coverage, Insurance Company and the Union (if applicable).

In terms of labor costs, and from a company perspective, social security (including social work) represents between 23% and 27%, which places Argentina as one of the jurisdictions with the highest labor taxes.

In terms of foreign trade and foreign exchange regulations, since the assumption of the current administration at the end of 2015, we can affirm that this is the area where the greatest progress was noticed, through the elimination of the exchange rate existing since 2011 and until then, allowing the free purchase and sale of foreign currency, the possibility of payment of rents (interest and dividends), the automatic settlement of currencies and the elimination of the previously existing reserve against financial debts, among others.

Argentina in the global context

Considering a global context, the following table details the level of taxation in Argentina, in comparison with the global average and Latin America.

Main Taxes and Aliquots of Taxation (average 2017)

1) Non-distributive profits (2) General rate (3) Applicable in some countries only (4) Includes Social Works. Source: DNIAF / MH and other private public - Ministry of Finance - Argentina

The current administration stated, through the members of the national cabinet, the need to simplify the complex regulatory framework, as well as the need to reduce existing burdens to companies and workers. To this end, it recently approved a social security reform, and a tax and labor reform plan is under discussion, which will surely be applied by 2018. The possibility of implementing the reforms is closely related to the possibility of reducing the fiscal deficit, which, in short, will be discussed in the National Congress.

If you want to know more about the main considerations that companies should consider when starting operations in Argentina, contact us.

Written by

Claudio Cirocco

Managing Director of Argentina, Uruguay and Paraguay

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