Compliance Requirements for Foreign Corporations in Argentina

Argentina, with its dynamic market and strategic location in South America, offers attractive opportunities for foreign companies looking to expand their operations. However, like any international venture, doing business in Argentina requires a thorough understanding of the local legal and regulatory landscape. Compliance with Argentina’s corporate and tax regulations is essential for avoiding penalties, safeguarding your business, and ensuring smooth operations.

In this comprehensive guide, we’ll outline the key compliance requirements for foreign corporations operating in Argentina, including corporate registration, tax obligations, labor laws, and reporting requirements. Whether you’re planning to open a branch, set up a subsidiary, or establish a joint venture, understanding these regulations is crucial for a successful business venture in Argentina.

1. Corporate Registration and Legal Structure

Before starting operations in Argentina, foreign corporations must choose an appropriate legal structure and register their entity with local authorities. Argentina offers several options for corporate structures, but the most common choices for foreign businesses include:

• Sociedad Anónima (SA) – Corporation
  This is the most common type of legal entity used by foreign corporations in Argentina. An SA is a joint-stock company, and the shareholders’ liability is limited to their share capital contribution. This structure is often chosen by large businesses due to its flexibility and the ability to issue different classes of shares.
• Sociedad de Responsabilidad Limitada (SRL) – Limited Liability Company
  The SRL is another popular option, especially for small and medium-sized businesses. In an SRL, the liability of each member is limited to their capital contribution. It offers simpler administrative requirements compared to the SA, making it more suitable for smaller operations.
• Branch Office (Sucursal)
  Foreign companies can also choose to establish a branch office in Argentina. A branch is not a separate legal entity, but rather an extension of the parent company. While the branch is subject to local laws and taxation, the parent company remains responsible for its liabilities.

Once the legal structure is chosen, foreign corporations must register with the Public Registry of Commerce (Inspección General de Justicia – IGJ) in Buenos Aires or with the provincial registries if operating outside the capital.

Key steps for corporate registration in Argentina:

• Obtain a unique corporate tax identification number (CUIT) from the Argentine tax authority (AFIP).
• Submit the company’s bylaws, articles of incorporation, and proof of the shareholders’ capital contributions.
• Register with the General Inspectorate of Justice (IGJ) or the equivalent provincial body.
• Appoint a legal representative who is a resident of Argentina.

2. Tax Compliance

Argentina’s tax system is complex, and foreign corporations must navigate various tax obligations to remain compliant. Taxes are managed by the Federal Administration of Public Revenue (Administración Federal de Ingresos Públicos – AFIP), and the key tax requirements for foreign companies include:

• Corporate Income Tax (Impuesto a las Ganancias)
  Foreign corporations operating in Argentina are subject to corporate income tax on profits derived from their Argentine operations. The current corporate tax rate is 35%. It’s essential to note that Argentina follows a worldwide income principle, meaning that both Argentine-sourced and foreign-sourced income may be subject to taxation, depending on the nature of the business entity.
• Value-Added Tax (VAT – Impuesto al Valor Agregado)
  VAT applies to the sale of goods and services within Argentina, with a standard rate of 21%. Certain goods and services, such as pharmaceuticals, have a reduced VAT rate of 10.5%. Businesses must file VAT returns monthly and pay the corresponding amount to AFIP.
• Withholding Taxes
  Argentina imposes withholding taxes on certain payments to foreign entities, including dividends, interest, royalties, and fees for technical assistance. The rates vary depending on the nature of the payment and the existence of any double taxation treaties between Argentina and the country of the foreign corporation. For example, royalties are subject to a withholding tax rate of 21%, while technical assistance may be taxed at 31.5%.
• Transfer Pricing
  Argentina’s transfer pricing regulations require companies to conduct transactions with related parties at arm’s length. This means that the prices charged in these transactions should be the same as if they were conducted between unrelated parties. Companies must submit annual transfer pricing reports to AFIP to demonstrate compliance.
• Gross Revenue Tax (Impuesto sobre los Ingresos Brutos)
  In addition to national taxes, businesses in Argentina may be subject to provincial and municipal taxes. The gross revenue tax is a provincial tax imposed on companies based on their turnover, with rates varying by province and industry. For example, the rate in Buenos Aires can range from 1.5% to 5%.

3. Labor Law Compliance

Foreign corporations operating in Argentina must comply with the country’s labor laws, which are heavily regulated to protect employees’ rights. Key labor compliance requirements include:

• Employment Contracts
  Argentine labor law mandates that all employees must have a formal written employment contract. Contracts can be for an indefinite period, a fixed term, or for temporary employment. Employers must clearly state the terms of employment, including salary, working hours, benefits, and conditions for termination.
• Minimum Wage and Working Hours
  Argentina has a national minimum wage, which is periodically updated by the government. As of 2024, the minimum wage is set at ARS 118,000 per month (approximately USD 460 at the time of writing). The standard workweek is 48 hours, with any additional hours considered overtime, which must be paid at a higher rate.
• Social Security Contributions
  Both employers and employees in Argentina must make contributions to the country’s social security system, which covers pensions, healthcare, unemployment, and workers’ compensation. Employers are required to contribute approximately 23-27% of an employee’s gross salary, while employees contribute 17%. These contributions must be paid monthly to the AFIP.
• Severance Pay
  Argentina has strict labor laws concerning employee termination. If an employee is dismissed without just cause, they are entitled to severance pay, which is calculated based on the employee’s length of service and salary. The severance payment is typically one month’s salary for each year of service.

4. Financial Reporting and Accounting Standards

Foreign corporations in Argentina must comply with specific financial reporting and accounting standards. These regulations ensure transparency and allow for oversight of business activities. Some of the key requirements include:

• Statutory Financial Statements
  Companies operating in Argentina are required to prepare and file annual financial statements in accordance with the Argentine Generally Accepted Accounting Principles (GAAP). These statements must include a balance sheet, income statement, cash flow statement, and accompanying notes.
• External Audit Requirements
  Large companies and corporations, particularly those operating as SAs, are required to have their financial statements audited by an independent external auditor. The audit report must be submitted annually to the Public Registry of Commerce.
• Monthly and Annual Reporting
  In addition to annual financial statements, businesses must file monthly tax returns for VAT, payroll, and income tax with the AFIP. Companies must also submit annual tax returns detailing their income, expenses, and tax obligations for the fiscal year.

5. Foreign Exchange Controls

Argentina has stringent foreign exchange controls, and businesses must comply with these regulations when transferring funds in and out of the country. Foreign companies must navigate these controls to repatriate profits, pay dividends, or settle debts with foreign entities.

Companies wishing to transfer funds abroad must first obtain authorization from the Central Bank of Argentina (Banco Central de la República Argentina – BCRA). The government also imposes restrictions on purchasing foreign currency and may require companies to conduct certain transactions in Argentine pesos.

Operating a foreign corporation in Argentina offers many opportunities, but it also comes with a complex set of compliance requirements. From corporate registration and tax obligations to labor law compliance and financial reporting, understanding the legal and regulatory landscape is crucial for long-term success. By staying compliant with Argentina’s corporate regulations, foreign companies can mitigate risks, avoid penalties, and establish a strong foundation for growth in one of South America’s largest economies.

For businesses looking to enter the Argentine market, partnering with local legal and tax experts is often essential to ensure full compliance with all relevant regulations.

Get Assistance from Easyco Experts!

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At Easyco, we make company formation in Argentina easy; our team of corporate experts has vast experience helping companies and individuals register their business in Argentina, with a proven track record of success across all of our services. Easyco aims to tackle the complex company formation processes across LATAM. We make business registration easy by providing a hassle-free online company registration experience. Start your company in Argentina today!

Easyco also provides additional services to guarantee your company’s compliance, which include:

• Appointment of legal representation,

• Providing a registered office address

• Handling tax and accounting

• Hassle-free Payroll Services

• Manage your Trademark Registration

• Recruiting and Hiring Talent

• Corporate Legal Services.