Guide to Doing Business in Argentina

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2013 Guide to Doing Business in Argentina

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Table of Contents

Chapter ONE: The Republic of ArgentinaGeography and Natural Resources……..…….………............................ Population……..…….……….................................................................... Legal and Political System...................................................................... Foreign Relations.....................................................................................Education.................................................................................................Economy of Argentina............................................................................ Reliability of Officials: CPI Estimates......................................................Inflation in Argentina .............................................................................. Income Inequality ...................................................................................

Chapter TWO: Corporate Structures to Doing Businessin Argentina Investment Vehicles................................................................................(i) Branch of a Foreign Corporation........................................................(ii) Corporation or S.A. ........................................................................... (iii) Limited Liability Company – S.R.L. ..................................................Business Formation.................................................................................General Business and Investment Climate ............................................

Chapter THREE: Investment Climate to Doing Business in ArgentinaVISA Requirements by Argentina’s DNM...............................................MERCOSUR Nationals.............................................................................Immigration Permits required to Doing Business in Argentina……......Permanent Residence..............................................................................Temporary Residence..............................................................................Transitory Residence................................................................................Provisional Residency..............................................................................

Chapter FOUR: InvestmentsForeign Investments...............................................................................Currency. Official and Unofficial Exchange Rates…..........................…Exchange Controls and Central Bank Regulations…….........................Transferring Funds into and from Argentina.........................................Public Support to Foster Investment………………........................……


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Chapter FIVE: Trade RegulationHow to Export from and Import to Argentina….....................................…Exports Procedure…………….................................................................…Export Refund System, Export Duties and VAT Exceptions.....................Imports Procedure to Argentina.................................................................Antidumping Practices and Regulations…………......................…….....…

Chapter SIXTax System in Argentina.............................................................................Federal Government Taxes………………………...................................…..Income Tax ……………………................................................…………......Minimum Presumed Income Tax - MPIT…………….............................….Value Added Tax – VAT……………....................................................……..Excise Taxes…………………….....................................................…………Tax on Bank Accounts Debits and Credits……..........……………………... Personal Assets Tax……………………………..................................………Provincial Taxes…………………………………….................................…… Turnover Taxes…………………………….............................................……Multilateral Agreement………………….........………………..………..…….Stamp Tax…………………………………….............................................…Real Estate Tax…………...............................................................…………Municipal Taxes……………….......................................…………………… Taxation Agreements…………..............................................………………

Chapter SEVEN: Insolvency and Bankruptcy in Argentina Anti-Money Laundering Regulations.........................................................

Chapter EIGHT: About LIMERES, BARASSI, VES LOSADA & STANZIONE, ATTORNEYS Contact Information....................................................................................

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Chapter ONE: The Republic of Argentina Geography and Natural Resources

The Republic of Argentina is located between latitudes 23°S Tropic of Capricorn and 55°S Cape Horn. It is the eighth-largest country in the world and the second largest in Latin America. It is also the largest Spanish-speaking nation in the world. Argentina’s continental land extends 3.694 kilometers from north to south and 1.423 kilometers from east to west between longitudes 53° and 63° with a total area of 3.761.274 square kilometers. There is also a sector of the Antarctica and a group of islands located south of the Atlantic Ocean with an area of 969.464 square kilometers. The national territory of Argentina is formed by 23 provinces and the City of Buenos Aires.

The east coast has access to the South Atlantic Ocean and the South Pacific Ocean through the Magellan Straits. The bordering countries are Uruguay and Brazil to the east; Chile to the south and west; and Bolivia and Paraguay in the north border.

Argentina has a wide range of climates and a significant biodiversity due to the large territory and topographical diversity. Its many climates provide multiple landscapes and terrains.

Argentina is endowed in natural resources that offer abundance and diversity. For instance, the Pampas cover a surface area of 170 million hectares, which provide fertile agricultural lands

Geography and Natural Resources1

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ideal for grain production, oilseeds and cattle, which position the country as the world’s top food producers.

The northeastern and western Patagonia provides abundant forests. The Andes Mountains provide mineral richness that includes gold, silver, copper, zinc, oil, magnate lithium, uranium and sulfide along 4,500 kilometers. Substantial quantities of wine grapes and other fruits are produced in this area.

Argentina has extensive aquifers and oceans, rivers, streams and inland waterways that are rich in fishing and hydrocarbon resources. Argentina promotes sustainable development and protection of its natural resources such as reduction of carbon dioxide emissions.

The country stands out for its natural highlights such as the Iguazú Falls, which is one of the largest fresh water reservoirs in the world. It was declared a World Natural Heritage Site by UNESCO and named one of the seven wonders by the Swiss Foundation. Also, the Republic has the highest mountain in the western hemisphere called Aconcagua with 6,959 meters in the Andes area. Another Unesco World Natural Heritage Site is the Perito Moreno glacier.

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PopulationAccording to the 2010 census made by INDEC – National Institute of Statistics and Censuses - Argentina has over 40 million inhabitants and an average density of 14.4 people per square kilometer. It is interesting to notice that 92% of the population lives in urban areas. The Buenos Aires Metropolitan area concentrates 33% of the total population. Buenos Aires is the most populated province of Argentina with 15,594,428 inhabitants, followed by Córdoba and Santa Fe.

The Argentine population comprises 19,575,219 males and 20,516,140 females. The sex ratio is 95.4, which refers to the number of males every 100 females.

The first inhabitants of the Argentine territory were indigenous that lived in tribes and developed their culture at different extents. It was not until the XV Century when Spanish Conquerors imposed their own values and customs generating a cultural convergence. In the XVIII Century the Viceroyalty of the Río de la Plata was created. The territory was known as a Spanish immigrant’s area and the descendants with indigenous and Spanish origin were known as criollos.

Foreign investment and a large immigration wave took place between 1850s and 1940s. There were 3.5 million immigrants with 45% of Italian origin and 32% Spanish. Prior to the 1960s Argentina received immigrants from Britain, Germany, France, Switzerland, Denmark,

Poland and Russia. Argentina has a multi-cultural society with 85% of its population with European origin.

The ethnical composition of Argentina is varied and it is composed of a mixture of local population and immigrants. Many people moved from rural areas to the different cities being the city of Buenos Aires the most populated of the country. Neighboring countries like Bolivia and Paraguay contribute with the ethnical composition of Argentina.

Spanish is the official language. However, it is frequent to find people that speak English, French, Portuguese and Italian as a second language.

Argentina has no official religion although most of the population is Roman Catholic. Freedom of worship is provided for by the Argentine Constitution. There are over 2500 registered cults in the National Registry of Worship.

The official currency is the argentine peso usually referred with the symbol $ or AR$. Convertibility came to an end on 2002 with the enactment of Law No. 25,561, Decree No. 214/02. The peso was devalued and today the official USD price is $5,30 whereas the black and non-official USD can be exchanged for $8.00.1

1. Exchange rates last updated on July 2013. Exchange rates subject to daily changes.

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Legal and Political SystemThe Argentine Republic is formed by the Judicial, the Legislative and the Executive branches. The Argentine Constitution adopted in 1853 established the tripartite system following Montesquieu premises of separation of state powers. The Argentina Constitution was amended in 1860, 1898, 1957 and 1994. The last amendment allowed the President one additional term for re-election.

The Legislative branch made of the Senate and the House of Representatives pass, amend, revoke and repeal laws in the Congress.

A President a Vice-president and the Ministries appointed by the President forms the Executive. The President serves a four-year term. Currently, the President of the Argentine Republic is Cristina Fernandez de Kirchner who was appointed in 2007 and re-elected in 2011 with 54.11% of the votes.

The Judicial branch is divided into federal and provincial courts. Each jurisdiction has its own lower courts, courts of appeal and supreme courts. The Supreme Court of Justice holds the Supreme judicial power.

23 provinces and the Autonomous City of Buenos Aires as its capital city form the national territory

Elections are held by universal suffrage. Voting age was reduced to 16 years old allowing 16 and 17 years old voters’ optional participation in the elections as per Act 26774.

The main political parties are Front for Victory (FPV) which holds the majority in the Congress, Justicialist Party (PJ), Radical Civic Union (UCR), Broad Progressive Front (FAP) and Republican Proposal (PRO) among others.

The Autonomous City of Buenos Aires is currently conducted by Mauricio Macri from the Republican Proposal (PRO) who won the local elections in 2007 and was re-elected in 2011 with 83% of the votes.

Foreign RelationsArgentina is part of a regional agreement called Mercosur comprising Brazil, Paraguay, Uruguay and Venezuela. Mercosur aims to eliminate tariffs barriers among its members and set a common external tariff with the rest of the world. Associate member countries include Bolivia and Chile. Argentina is also part of Union of South American Nations (UNASUR) and Community of Latin America and Caribbean States (CELAC).

On a global scale, Argentina is member of United Nations (UNO), founding member of World Trade Organization (WTO) and the Inter-American Development Bank (IDB), founding member of Organization of American States (OAS)

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EducationEducation is mandatory from the ages of five to eighteen. Education is free in Argentina.

Economy of ArgentinaThe economy of Argentina is an upper middle-income economy, and Latin America’s third largest.The country benefits from rich natural resources, a highly literate population, an export-oriented agricultural sector and a diversified industrial base. Historically, however, Argentina’s economic performance has been very uneven, in which high economic growth alternated with severe recessions, particularly during the late twentieth century, and income mal-distribution and poverty increased. Early in the twentieth century it was one of the richest countries in the world and the third largest in the Southern hemisphere. Though now an upper-middle income economy, Argentina maintains a relatively high quality of life and GDP per capita.Argentina is considered an emerging market by the FTSE Global Equity Index, and is one of the G-20 major economies.

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Economy of Argentina

Currency Argentine Peso (ARS)

Fiscal year Calendar year

Trade organizations WTO, Mercosur, Unasur

GDP

GDP growth

GDP per capita

GDP by sector

Inflation (CPI)

Population Below poverty line

Gini coefficient

Labor force

Labor force by occupation

$475.0 billion (nominal) (26th, 2012)$743.1 billion (PPP) (21st, 2012) 1.9% (2012)

$11,576 (nominal) (61st, 2012)$18,112 (PPP) (52nd, 2012)

Agriculture, forestry and fishing, 9.0%; mining, 3.8%; manufacturing, 19.5%; construction, 5.9%; commerce and tou-rism, 15.7%; transport, communications and utilities, 8.9%; finance, real estate and business services, 16.0%; government, 7.8%; education, health care and other, 13.4%. (2012) 10.8% (2012)Congressional estimate: 25.6% (2012) 8.3% (2011)

≈ 0.445 (2010)

17.9 million (2012) categories: private sector employees, 49%; employers and the self-employed, 27%; public-sector employees, 21%; unpaid family workers, 3% (2001).

Agricultural, 7.3%; manufacturing, 13.1%; construction, 7.6%; commerce and tou-rism, 21.4%; transport, communications and utilities, 7.8%; financial, real estate and business services, 9.4%; public administra-tion and defense, 6.3%; social services and other, 27.1%. (2006)

Statistics

Puerto Madero Financial

District in Buenos Aires

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6.9% (12/2012)

US$10,806 (2012, includes part-time wage earners)

Food processing and beverages; motor vehicles and auto parts; appliances and electronics; chemicals, petrochemicals, and biodiesel; pharmaceuticals; steel and aluminum; machinery; glass and cement; textiles; tobacco products; publishing; furniture; leather.

113th

US$81.2 billion (2012)

Soy and soy products, 21.8%; motor vehicles and parts, 12.1%; cereals (mainly maize and wheat), 12.1%; fossil fuels, 8.0%; chemicals, 7.2%; fruit and vegetable products, 4.1%; aluminum and steel, 3.5%; electric machinery, 3.0%; gold, 2.8%; beef and poultry, 2.5%; biodiesel, 2.3%; rubber and plastic, 2.3%; all other (mainly agro-industrial goods), 18.3%. (2012) Brazil 21.6% China 7.3% Chile 5.5% United States 5.5% (2011 est.) US$68.5 billion (2012)

Capital goods and parts, 34.3%; interme-diate goods, 28.6%; refined fuel and lubri-cants, 13.5%; automobiles and parts, 8.6%; freight and farm vehicles, 4.0%; consumer durables (except auto), 3.8%; all other (mostly consumer non-durables), 7.2%. (2012) Brazil 33.2% United States 14.4% China 12.4% Germany 4.7% (2011 est.)

$100.4 billion (12/2012)

$141.1 billion (12/2012)

Unemployment

Average gross salary

Main industries

Ease of Doing Business Rank

ExternalExports

Export goods

Main export partners

Imports

Import goods

Main import partners

FDI stock

Gross external debt

EXTERNAL

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35.6% of GDP, US$168.2 billion (Treasury securities, 69%; direct loans, 17%); of which external, US$71.3 billion (12/2012)

US$156.9 billion (2012) (social security, 31.3%; value-added taxes, 25.8%; taxes on income and capital gains, 19.4%; trade and customs duties, 11.0%; taxes on assets, 6.9%; excise taxes and other, 5.6%)

US$169.0 billion (2012) (social security, 32.2%; subsidies and infrastructure, 17.5%; health, 13.8%; debt service, 9.7%; education, culture and research, 6.4%; social assistance, 6.1%; defense and security, 5.4%; other, 8.9%)

B (Domestic)B (Foreign)B (T&C Assessment)(Standard & Poor’s)

$41.8 billion (3/2013)

Public finances

Revenues

Expenses

Credit rating

Foreign reserves

Main data source: CIA World Fact Book . All values, unless otherwise stated, are in United States Dollars.

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Argentina’s economy recovered strongly from the 2001–02 crisis, and was the 21st largest in purchasing power parity terms in 2011; its per capita income on a purchasing power basis was the highest in Latin America. A lobby representing US creditors who refused to accept Argentina’s debt-swap programs has campaigned to have the country expelled from the G20. These holdouts include numerous vulture funds, which had rejected the 2005 offer, and had instead resorted to the courts in a bid for higher returns on their defaulted bonds. These disputes had led to a number of liens against central bank accounts in New York and, indirectly, to reduced Argentine access to international credit markets.Argentina’s economy grew by 9% in 2010, and officially, income poverty declined to 8% by 2011; an alternative measurement conducted by CONICET found that income poverty declined to 22.6%. Argentina’s unemployment rate in the fourth quarter of 2011 was reportedly down to 6.7% from 8.4% in the fourth quarter of 2009, according to INDEC data. The jobless rate has declined from 25% in 2002 largely because of both growing global demand for Argentine commodities and strong growth in domestic activity.Given its ongoing dispute with holdout bondholders, the government has become wary of sending assets to foreign countries (such as the presidential plane, or artworks sent to foreign exhibitions) in case courts at the behest of holdouts might impound them.

Reliability of Official CPI Estimates

Official CPI inflation figures released monthly by INDEC has been a subject of political controversy since 2007. Official inflation data are disregarded by leading union leaders, even in the public sector, when negotiating pay rises. Some private-sector estimates put inflation for 2010 at around 25%, much higher than the official 10.9% rate for 2010. Inflation estimates from Argentina’s provinces are also higher than the government’s figures. The government stands by the validity of its data, but has called in the International Monetary Fund to help it design a new nationwide index to replace the current one.The government threatens inflation analysts with fine of up to 500,000 pesos if they don’t report how they calculate their inflation estimates, which these economists consider as an attempt to limit the availability of independent estimates.

Inflation in Argentina

High inflation has been a weakness of the Argentine economy for decades. Inflation was unofficially estimated to be running at more than 25% annually in December 2010, despite official statistics indicating less than half that figure; this would be the highest level since the 2002 devaluation. A committee was established in 2010 in the Argentine Chamber of Deputies by opposition Deputies Patricia Bullrich, Ricardo Gil Lavedra, and others to publish an alternative index based on private estimates. Food price increases, particularly that of beef, began to outstrip wage increases in

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2010, leading Argentines to decrease beef consumption per capita from 69 kg (152 lb) to 57 kg (125 lb) annually and to increase consumption of other meats. President Cristina Kirchner insists inflation is not a problem.

Income Inequality

Argentina, in relation to other Latin American countries, has a moderate to low level of income inequality. Its Gini coefficient of about 0.445 (2010) is reported to be the lowest among Latin American countries. The social gap is worst in the suburbs of the capital, where beneficiaries of the economic rebound live in gated communities, and many of the poor (particularly undocumented immigrants) live in slums known as villas.In the mid-1970s, the most affluent 10% of Argentina’s population had an income 12 times that of the poorest 10%. That figure had grown to 18 times by the mid-1990s, and by 2002, the peak of the crisis, the income of the richest segment of the population was 43 times that of the poorest. These heightened levels of inequality had improved to 26 times by 2006, and to 16 times at the end of

2010. Economic recovery after 2002 was thus accompanied by significant improvement in income distribution: in 2002, the richest 10% absorbed 40% of all income, compared to 1.1% for the poorest 10%; by 2010, the former received 29% of income, and the latter, 1.8%.Argentina has an inequality-adjusted human development index of 0.641, compared to 0.519 and 0.652 for neighboring Brazil and Chile, respectively. The official, household survey income poverty rate was 8.3% in 2011. The National Research Council, however, estimated income poverty in 2010 at 22.6%, and private consulting firms estimated that in 2011 around 21% fell below the income poverty line. The World Bank estimated that, in 2009, 2.4% subsisted on less than US$2 per person per day.

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Chapter TWO: DOING BUSINESS IN ARGENTINA

Foreign companies can do business in Argentina on a permanent basis. There are different options that will depend on what your specific business may require. The frequent corporate structures used in Argentina to do business are the setup of a branch of a foreign company, the corporation and the limited liability company.

There are other types of entities that may be constituted. However, we will not refer to them in this article due to the little use given in the real business world in Argentina.All businesses are required to keep accounting books separate from their parent business in accordance with the Argentine regulations.

Investment Vehicles

Any foreign company incorporated in accordance with the laws of the country of origin can do business in Argentina by utilizing the main investment vehicles such as (i) a Branch of a foreign corporation, (ii) the Corporation known as Sociedad Anónima (SA) and (iii) the limited liability company known as Sociedad de Responsabilidad Limitada (SRL). All three need to follow the regulations established by the Superintendence of Corporations known as the IGJ

Corporate Structures to Doing Business in Argentina

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located in the City of Buenos Aires. The IGJ is the regulatory agency to legally register a business.

(i) Branch of a Foreign Corporation

A foreign entity branch does not necessarily need to allocate capital in Argentina. There is no minimum capital requirement. The Parent Company will limit its scope of action and may assign capital. Transactions can be carried out by a local representative appointed by the Parent Company. The Parent Company will be liable for transactions carried out by the Branch. The Branch must keep accounting books separate from the Parent Company and file its own financial statements annually. With regards to tax, the Branch is subject to 35% of income tax. The branch needs to fulfill several formal requirements from the IGJ.

(ii) Corporation – S.A. or Sociedad Anonima

This is the most frequent investment legal structure used in Argentina to do business. It has a legal existence separate and from its owners.

Shareholders: a minimum of two shareholders resident or non-resident is required. They can be either foreign companies or individuals.

Minimum capital: the Argentine law – Decree 1331/2012 - requires a minimum of AR$ 100.000 which is approximately USD20.000 to establish a Corporation. The share capital must be fully subscribed upon incorporation. Only 25% needs to be paid on such shares and the balance within the subsequent 2 years. Shares must be nominative, non-endorsable and may or may not be represented by certificates. The corporation will

have a Shares Registry Book or a commissioned third party may carry out such registry.

Shares must be equal par value and have equal rights within the same class but it is possible to have different classes of shares. Transfer of shares is unrestricted unless they effectively prevent the transfer of shares.

Contributions like real estate, equipment or any other non-monetary assets must be made in full at the time of incorporation.The corporate capital must have connection with the corporate object. If the IGJ finds it appropriate it may demand a higher amount of capital if the business plans to carry out several activities that exceed the scope of the corporate purpose.

Management: the SA Corporation is managed by a Board of Directors which includes a President that will sign and seal in the Corporation’s name and Vice-Presidents that may be appointed optionally. Its members do not necessarily have to include shareholders or local residents but the majority need to reside in Argentina. The Board of Directors is appointed by the shareholders.

Shareholder meetings: must be held annually to consider the financial statements, determine allocation of profits and appoint new authorities or discuss their fees. Shareholders resolutions must be recorded in the appropriate minutes books. The majority of its members must be Argentine residents. Meetings could be ordinary or extraordinary. Anything that does not involve regular matters of the business - discussed in ordinary meetings - is considered extraordinary.

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Audits: internal or external audits may take place in a SA Corporation upon shareholders request. Internal auditors are appointed by shareholders meetings. External audits are undertaken by the authority of the jurisdiction where the Corporation is located. A surveillance committee may be established to audit the Corporation’s management.

There are regulatory organizations that review certain activities. For instance, financial institutions are controlled by the Central Bank of Argentina known as BCRA; insurance companies are controlled by the Insurance Superintendence known as SSN and listed Corporations that are controlled by the National Securities Commission known as CNV.

Shareholders liability: shareholders that have subscribed their shares are not liable beyond their capital contribution to the Corporation. Shareholders with partly paid up shares are required to pay any outstanding balance within 2 years since the date of incorporation.

Shareholders with interest in conflict with those of the business must abstain from voting on matters related to such conflict. Otherwise, such shareholder will be held responsible for damages resulting from a final resolution of the matter in conflict provided the vote contributed to form the majority needed to adopt such resolution.

Board of Directors liability: a standard of loyalty and diligence must be carried out. Non-compliance may result in unlimited joint and several liabilities for damages arising from such non-compliance.

(iii) The Limited Liability Company – SRL or Sociedad de Responsabilidad Limitada

This is the second most frequent legal structure used in Argentina to do business after the Corporation.

Partners: a minimum of 2 and a maximum of 50 that may be either individuals or corporate entities. There are no nationality or residency restrictions. Liability is limited to the full payment of the subscribed amount.

Capital: it is represented by partnership quotas. There is no minimum amount although the quota capital must be fully subscribed and 25% needs to be paid upon by the partners upon the creation of the SRL. The balance needs to be paid no later than 2 years since the incorporation date. Quotas issued for contributions in non-monetary assets must be fully paid up.

Management: carried out by one or two managers that have no nationality restriction. Managers must reside in Argentina. Managers are appointed by partners and the position could be managed by a partner, an employee or a third party.

Partners meetings: resolutions are taken as established by-laws. Amendments require the other partner to reaffirm the vote in cases where there is a sole partner representing the majority vote.

Audits: appointing a syndic is not mandatory until the stock capital reaches AR$ 10M or more. The rules of an SA Corporation generally apply once the syndic begins its role.

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Business FormationIn order to start doing business in Argentina as a new corporation or as a limited liability company certain requirements need to be fulfilled in order to register within the Registry of Companies. The public office that regulates such is called Inspección General de Justicia - IGJ - and it is located in the City of Buenos Aires.

The following requirements are needed:

1. Reservation of name – complete Form B and pay the corresponding fee within the IGJ office. This will grant the reservation of the name for 30 days.

2. Submission of the organization, incorporation and amendments as per Form H of the IGJ. Form H includes accompanying the following documentation:

a) Certificate of incorporation – good standing – or equivalent document that can prove that the foreign company was created following the laws of the country of origin. It must include professional´s opinion on quorum and majorities, company’s head office and good standing. Prequalification report from a certified accountant is required if the capital contributions are made in any other form than cash.b) A non-certified and a

notarized copy of the articles of incorporation, by-laws and amendments. Acceptance of the company’s managing and surveillance bodies. All signatures must be certified by an Escribano or ratified before the IGJ.

c) Fulfill requirements mentioned in Resolution 07/2005 of the IGJ. Such requirements include a statement informing if the foreign company is subject to legal restrictions to carry out activities related to its corporate purpose in the location of incorporation. Also, show if the foreign company has any other branches outside Argentina; owns shares in other companies outside Argentina if the investment is a non-current asset; and owns fixed assets in its country or anywhere else other than Argentina.

d) Formal resolution appointing a registered agent in Argentina with the required power of attorney. A local domicile needs to be provided for legal purposes. The Head Office domicile needs to be informed too.

3. Payment of incorporation and proof of payment before the Banco Nación – BNA.

4. Original and certified copy of the publication of a notice - in the official gazette for limited liability companies and incorporation – and submission of such notice. The notice must include name, age, marital status, nationality, occupation, address, date of the articles of incorporation, company name, purpose, term, capital, managing and surveillance members and terms if applicable, legal representatives and date of closing the fiscal year.

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5. Initial deposit of 25% of the capital made within the BNA. Proof of the contributions. For cash contributions - deposit slip. For non-cash contributions - any other relevant documentation.For branch formation the procedure is similar to the one that was just mentioned. The foreign company needs to register within the IGJ and accompany the following documentation:

1. Proof that the foreign company was incorporated in accordance with the laws of its home country.2. Submit the company’s original articles of incorporation, amendments, etc.3. Submit the resolution where the creation of the foreign branch in Argentina was determined. Include information related to the fiscal year closing, legal representative and place of business.4. Inform if there is any legal prohibition in the company’s home country to carry out its activities.5. Provide financial statements or supporting documentation to prove the company meets one of the following requirements outside Argentina: (i) existence of other branches elsewhere than Argentina; (ii) owns non-current assets in other companies; (iii) owns fixed assets in its home country.

General Business and Investment Climate

Foreign companies may invest in Argentina equally as local companies. Foreign companies and local companies have the same rights and obligations at the time of doing business in Argentina.

There are several tax incentives available in Argentina for certain activities such as forestry, mining, software production, biotechnology, and biofuel production. The province of Tierra del Fuego offers tax incentives for certain technology activities. The city of Buenos Aires offers incentives to certain industries too. The Government controls prices in some areas like local telephone services, electricity, water, gas distribution, urban transport, highways and rivers.

Argentina is currently experiencing a decrease of capital inflows. The Argentine government has been changing the rules without previous notice for the last two years making it difficult to investors to trust Argentina.

This has made neighbor countries like Brazil and Chile receive much more investment than Argentina within the last year according to ECLAC - the Economic Commission for Latin America and the Caribbean. For instance, Foreign Direct Investment – FDI – in Brazil was of US$65 billion in 2012 whereas in Chile it came to US$30 billion and Argentina amounted US$12 billion only.

Lack of credible official statistics with regards to inflation is a point of concern. Argentina denies inflation and is not willing to accept INDEC is not providing transparent statistics if we compare them with the private surveys results that seem to have a closer connection to reality.

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Chapter THREE: Visa requirements to doing business in Argentina.

In Argentina, most foreign citizens are not required to obtain a Visa in order to enter the country for up to three months in case they visit Argentina for tourism.

Foreign citizens willing to reside and do business in Argentina need to process a residence permit within the National Immigration Board (Dirección Nacional de Migraciones) known as DNM.

Visa Requirements by Argentina’s DNM.

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There are different residence categories – permanent, temporary, transitory and provisional residences. All four types of residences can be filed in Argentina within the DNM. The residence permit can be filed by the foreigner directly or a close relative in Argentina.

MERCOSUR Nationals

Foreigners coming from Mercosur countries like Brazil, Paraguay, Uruguay and Venezuela can request an initial 2-year residence. This benefit was extended to other countries known as Mercosur associate countries such as Bolivia, Colombia, Chile, Ecuador and Perú.

Foreigners coming from any other country that does not belong to Mercosur or Mercosur-associate countries are considered a non-Mercosur citizen and other requirements may apply. Mercosur and non-Mercosur citizens living in Argentina can request a national identity document - known as DNI - provided they fulfill certain requirements. An entry permit and a Visa are required among other requirements.Please check with us before starting your residence process.

Immigrations permits required to Doing Business in ArgentinaPermanent Residence

Foreign residents from Mercosur or associate Mercosur countries can obtain a permanent residence provided they can prove an uninterrupted temporary residence of two or more years. Non-mercosur citizens need to prove 3 uninterrupted years of residence in Argentina.

Permanent residence can be granted when related to an Argentine citizen such as spouses, children under 19 years-old or parents. Also, permanent residence is granted to people that have worked in diplomatic or consular tasks or worked in international organizations.

Permanent residence can be obtained after having extended the temporary residence for a while.

A permanent residence allows a foreigner to have the same rights as a national citizen and obtain the necessary legal protection from the national laws either working as an employer or as an employee.

The formal requirements to process permanent residence filings include criminal records, birth and marriage certificates issued in Argentina and the country of origin.

Temporary Residence

A temporary residency can be provided to any foreigner willing to reside in Argentina for a specific period of time. Applicants can

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be investors, migratory workers, pensioners, scientists, a company’s employee, athlete, artist, members of an official religious order, a patient receiving medical treatment, students, asylum seeker or refugee or a foreigner invoking humanitarian reasons.

The most usual scenarios of temporary residence for people willing to do business in Argentina are: (i) foreign employee that enters into an agreement with an Argentine company; (ii) a foreign company’s employee that is being transferred to an Argentine company. Firstly, the DNM will issue an entrance permit once the employer or local company initiates a filing.

Secondly, the applicant will present such entrance permit and personal documentation to the Argentine consulate in his country of residence. Then, the consulate will grant the temporary residence permit. The temporary residence can be granted for a maximum period of one year and may be renewed for an equal period.

Non-Argentine citizens can obtain a temporary residence provided they fulfill the necessary paperwork such as criminal records, birth and marriage certificates.

When entering Argentina for the first time the foreigner needs to submit to the immigration officer with a valid passport, a valid entry permit as a temporary resident and a valid consular visa as a temporary resident.

Transitory Residence

Transitory residence is the one granted to foreign citizens willing to remain in the country for a limited period of time. It may apply to tourists, transit passengers, border passes, international transport crew, seasonal migrant workers, academics and patients seeking special treatment among other special cases that may apply.Transitory residents cannot do business in Argentina in any way except seasonal migrant workers or any other exceptions the DNM may determine applicable.A two month transitory residence may be given to foreigners doing business or engaged in economic activities either under their sole risk and responsibility or as a stakeholder or representative for a company. Also, a transitory residence can be given to people that come into the country taking part in fair exhibitions.The documentation to be requested by the migration officer includes a valid passport and a valid argentine visa. Also, the foreigner will be requested to show supporting documentation of the activities he will be undertaking in Argentina.

Provisional residency

There is a fourth type of residency called provisional residency. This type of residency is the one that the immigration officer provides to the foreigner until there is a resolution on his definite migration status residency. It may last as much as 180 days and could be renewed until the final resolution is available.

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Chapter FOUR: Investments

Argentina has created a series of regulations in order to attract foreign investments to the country. The purpose of all regulations is to protect local interests of foreign investors in Argentina.

Foreign investments in Argentina are regulated by Act 21.382 enacted in 1976 and amended several times in 1980, 1989, 1990 and 1993. It was not until this last amendment with Decree 1853/93 that Argentina got its definite text for Act 21.382.

The first principle of Act 21.382 is that foreign investors may invest in any economic activity in Argentina without any prior approval. This principle provides foreign investment the same equality status as local Argentine investments. Economic activities include commercial, financial, industrial, agricultural, production and exchange of goods, among others. The only exceptions to economic activities are broadcasting and real estate in border areas.

Foreign Investments

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The second principle is related to investment repatriation and the right to remit profits abroad at any time as per section 5. This principle is somehow limited by the regulations of the Central Bank of Argentina known as BCRA. The purchase of foreign currency by non-Argentine residents is limited to a certain amount. (More information about currency limitations found later on this same chapter.)

The third principle is related to eliminating the former need of approval required to transfer technology. Such agreements now need to be filed before the INPI, that is to say, the National Institute of Intellectual Property. This principle aims to eliminate the avoidance of double taxation ruled by local laws and treaties ratified by Argentina.

The Foreign Investment Act set forth certain guarantees that have been reinforced by Bilateral Investment Treaties entered into by Argentina in the nineties. Such treaties are meant to reinforce foreign investment guarantees by the host State and provide rules in case of dispute resolution.

Some basic principles included in the many Foreign Investment Acts ensure legal security, equitable treatment and full protection to foreign investments. It also excludes arbitrary or discriminatory measures that the host State may take against the foreign investment. Furthermore, adequate compensation should be granted in case of expropriation or nationalization among many other principles.

The Bilateral Investment Treaties established that in case of dispute local

laws must guarantee the protection of foreign investment. As a result, the Vienna Convention on the Act of Treaties states that a party cannot invoke its internal law provisions to justify its failure to enforce a treaty. Argentina has granted constitutional hierarchy to international treaties in Section 75 Paragraph 22.

In case of disputes, many foreign investors have chosen to bring their investment disputes before arbitration tribunals under UNCITRAL Arbitration Rules or the International Center for Settlement of Investment Disputes known as ICSID.The ICSID purpose is to facilitate settlements of disputes between foreign investors and host States following the rules set forth in the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. The Convention was firstly ratified and enforced by Argentina in November 1994.

Currency. Official and Unofficial Exchange Rates

The currency in Argentina is the Argentine Peso - $ - and it is represented with the international exchange acronym ARS.

After the end of convertibility on January 6th 2002 the Argentine Peso no longer pegged the US dollar at a AR$1 = US$1.

Convertibility made possible the Argentine Peso equal a United States Dollar in AR$1 = US$1 rate until the enactment of Law 25.561, Decree 214/02. Ever since then the Peso was devalued.

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Currently, Argentina has two different exchange rates – the official exchange rate and the unofficial rate. Since October 2011 General Resolution 3210 of the AFIP - Federal Administration of Public Revenues – was the first resolution of many to enforce the limitation of currency purchases in order to avoid capital flights. US dollar can only be acquired in the official exchange market for restricted reasons – tourism, real estate purchases, and a few other reasons that could only be justified on an income basis. Anyone who would not qualify to legally exchange money at official rates is forced to exchange US dollars at the unofficial rates.

The official exchange rate for a US dollar has reached AR$5.29 whereas the unofficial exchange rate is of AR$8.55 according to exchange rate values measured in June 2013.

Exchange Controls and Central Bank Regulations

The foreign exchange system in Argentina is used as a way to control the value of the Argentine Peso and the US Dollar, which is the main foreign currency, used for commercial transactions influencing the flow of capitals.

Transfer of foreign funds into and from Argentina is subject to recordings of the Central Bank of the Argentine Republic.

The currency exchange transactions of individuals and artificial persons are audited by the AFIP – Federal Administration of Public Revenues, that is, the entity in charge of approving or denying currency exchange purchases on a very strict income basis.

The following chronology outlines the main resolutions that modified the US Dollar purchase in Argentina in order to prevent speculative currency exchange.

August 2011: AFIP begins to control exchange purchase of US dollars. Resolution 3210 of AFIP establishes artificial entities and physical persons a verification process to purchase exchange depending on their registration before AFIP through their CUIT – or Tax Id. Exchange transactions no longer available through online banking or ATM.

November 2011: since AFIP’s criteria were not consistent Resolution 3212 was released informing how to get over inconsistencies related to insufficient economical capacity. Supporting documentation to justify income could be submitted to AFIP.

May 2012: AFIP Resolution 3333 was released informing additional criteria to approve or deny exchange purchases for tourism. Real estate transactions were also affected by the exchange restrictions.

June 2012: several resolutions were released informing availability of exchange purchases for tourism, real estate, medicine, books, studies scholarships. The contributor had to oblige himself to return the US dollars purchased in case his trip was cancelled.

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August 2012: Resolution 3356 stated that in cases of tourism exchange could only be obtained in the legal currency in the country of destiny. Resolution 3378 restricted credit card purchases made outside Argentina with an additional 15% charge. Then, AFIP Resolution 3379 extended such 15% charge to abroad online transactions made with debit card.

March 2013: the BCRA limited the use of credit card in casinos outside Argentina to avoid chips purchase that would enable US dollar exchange.

Transferring Funds into and from Argentina

Argentina has a foreign exchange system regulated by the BCRA - the Central Bank of the Argentine Republic. Currency transfer of funds made in the Argentine exchange system require a mandatory deposit for a minimum term of 365 days without accruing interest known as “encaje” (insertion). The insertion aims to discourage temporary funds transfer into Argentina that may affect the Capital Market exchange rates. It is meant to prevent financial speculation by foreign investors in the Argentine local market for productive investments.

The regulations of Decree 616/05 established a system for:

(i) Registration of Foreign Exchange Market funds transferred into Argentina by the BCRA;(ii) Restrictions to transfer funds from Argentina for a minimum term of 365 days;

(iii) Fulfill the funds required in US dollars for 30% of the amount to be transferred to Argentina – mandatory deposit without accruing any interest for a minimum of a 365 days term.

There are some activities that are excluded to comply with the encaje mandatory deposit, such as:• Foreign trade debts.• Debt issuance and payables to multilateral credit agencies.• Loan repayment and creation of foreign assets.• Investment in non-financial assets.• Direct foreign investment in Argentine companies, which include at least a 10% in contributions for capital stock increases, registered within the IGJ.• Repatriation of investments made by residents with a maximum amount of US$ 2.000.000 monthly.• Non-residents funds transferred to Argentina to purchase real estate property under construction.In order for foreign investors to qualify for the insertion mandatory exemption the following documentation needs to be filed before the bank:

a) For capital contributions to create new companies or capital stock increases for existing companies – the investor needs to provide supporting documentation demonstrating he has started the registration process before the IGJ and the IGJ approval of the capital contribution within the term of 250 days from the initiation process. If the contribution is not capitalized the investor has 10 business days to make the mandatory deposit.

b) Stake-holding sales to foreign investors provided the purchases made comply with direct investment criteria. The foreign investor needs to

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prove he has filed before the IGJ the procedures to register the certificate of incorporation.

c) Equity reimbursements related to capital contributions or funds transfer to an Argentine subsidiary that has no equity funds allocated to cover negative equity. The foreign investor will require audited balance sheets, minute’s book, and a statement-indicating destination of the funds. The foreign investor has 90 days since the transfer of funds to Argentina to submit the required documentation.

d) External financial liabilities with at least two years and non-financial assets such as investment and acquisition of exploitation rights included in the balance sheet under intangible assets among other accounting formalities. Unless proof is presented in a timely manner, the foreign investor will have to make the insertion mandatory deposit. BCRA Communication “A” 4672 provides the formal requirements needed to apply for an exemption.

Public Support to Foster Investment

Argentina has many incentive programs meant to foster internal and foreign investment within the country.

Such programs are motivated by the local authorities and are available to almost every economic activity.

a) Investment incentives for capital goods and infrastructure works as

per Law 26360. Such incentive is meant to provide an accelerated depreciation for income tax or early refund of VAT.

b) Reduction of import duties on capital goods as per Decree 1026/2012. Importers of new capital goods may apply for this incentive before the Customs Office. The incentive is meant to apply to extra-Mercosur capital goods with import duties that go from 2% to 14% as applicable according to the tariff classification of Mercosur NCM.

c) National production of goods, IT, Telecommunications and Agricultural machinery enforced by the Ministry of Industry. This incentive is governed by Decrees 379/2001, 927/2010 and 362/2011 and is designed to provide local manufacturers with a tax refund of 14% of the values of the goods produced. Such tax refund could be applied against VAT, Income Tax, Excise Taxes and Minimum Presumed Income Tax.

d) Reduction of VAT - Value Added Tax - enforced by AFIP as per Decrees 493/2001, 496/2001, 615/2001, 733/2001 and 959/2001. Since the standard VAT is of 21% a reduced VAT of 10.5% is applied towards the purchase of capital goods, IT & Telecommunications products and parts. Personal property imports VAT is also reduced.

e) Import of capital goods for large investment projects following the regulations established by Resolution 256/2000 as amended and enforced by the Secretariat of industry or Ministry of Industry. This incentive is meant to reduce to zero tariffs for imported capital goods that make up a complete and independent capital

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line. Replacement parts could be imported up to a value of 5% FOB of the production line.

f) Temporary import of capital goods as per Law 22415, Decree 1001/1982, Customs Office Resolution 34/1998, Decree No. 142/2010. Such capital goods may be temporarily imported for a specific purpose and for a fixed term. The capital goods are subject to re-export for consumption before the expiry of the term. In this way, the capital goods enter the country without being subject of import duties for a maximum term of 3 years that may be exceptionally extended.

The Argentine government offers other sector-specific incentives.

• Automotive and auto-part industries• Software industry •State-of-the-art biotechnology development and production • Biofuels• Motorcycle and motorcycle parts industries• Mining• Forestry•Exploration and exploitation of hydrocarbons• Public infrastructure works• Use of renewable sources of energy• Audiovisual industry

Argentina offers incentives for innovation and technological development too.

•Argentina Technology Fund - FONTARSoftware Industry Fiduciary Fund - FONSOFT• Fund for Scientific and Technological Research - FONCYT• Argentine Sector Fund –

FONASERC• National Science and Technology Council – COFECYT• Promotion and Encouragement of Technological Innovation

With regards to Investment Financing available to potential foreign investors, credit may be requested to each of the following banking entities.

BNA – National Bank of ArgentinaBICE - Investment and Foreign Trade BankCFI - Federal Investment CouncilFonaPyme - National DevelopmentBicentennial National Program for industrial park developmentFinPyme

In terms of Export Promotion there is a series of incentives audited by the Customs Office available to exporters of tangible assets.

• Draw Back• Export refunds• Inward Processing Relief• RAF - Turnkey exports In-company customs system • In-house customs• Under secretariat for Investment Development and Trade Promotion• Fundación Exportar• ProArgentina

If you would like to read more about each specific incentive program please refer to the Ministry of Foreign Affairs and Worship where you will find detailed information on each incentive in

Argentina has Free Trade Zones where goods are not subject to the usual customs controls and duties and taxes are not levied on imported and exported goods. The aim of Free Trade Zones is to promote trade by reducing costs and tax procedures

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along with tax incentives.

Argentina has a total of eleven Free Trade Zones in the following provinces.

• Buenos Aires: La Plata and Bahía Blanca• Córdoba: City of Córdoba• Chubut: Comodoro Rivadavia• La Pampa: General Pico• Mendoza: Luján de Cuyo• Misiones: Puerto Iguazú• Salta: General Guemes• San Luis: Justo Daract• Tucumán: Cruz Alta• Entre Ríos: Concepción del Uruguay

Since investment incentives are modified constantly do let us know should you have any inquiry regarding any specific activity not mentioned in this chapter.

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Chapter FIVE: Trade Regulation.

The first step to be fulfilled in order to export or import a product to Argentina is to register within the National Registry of Importers and Exporters. This is a mandatory one-time process that would allow you personally or your business to export or import in any customs office of the country.

Exports are defined by the Customs Code as the withdrawal of goods from a national customs territory. The withdrawn goods are assigned with an ultimate end-use. This end-use may be definitive or non-definitive which may include temporary exports for goods in transit.

Exporters willing to export specific product from Argentina need to be familiar with customs procedures, refunds each product may have as established by the Government and applicable export duties, among many other details to take into consideration.

AFIP – the tax authority - sets forth regulations, tariff schemes and audits the Customs Office in order to prevent tax evasion.

There are also other agencies that may participate in the process of controlling imports or exports such as the Secretariat of Agriculture, Cattle, Fishing and Food; the Industry under Secretariat; the Ministry of Public Health and Social Welfare; the National Foreign Trade Commission.

How to Export from and Import to Argentina

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In the past, the Argentine customs procedures used to be lengthy and required the physical submission of paperwork. Today, the customs procedure was improved to make the necessary submissions through an online system called Maria System allowing payment of duties too.

Exports Procedure

When exporting the first characteristic to take into consideration is identifying the MERCOSUR tariff classification or position in the Common Nomenclature - NCM - of the product to be exported. This information will provide you with applicable export refunds; export duties, government incentives and tariff or non-tariff barriers that may exist in other destination countries.

It is also important to determine the ultimate end-use of the product to be exported. The exporter needs to fill out a shipment permit. The shipment permit will be accompanied by an affidavit from the manufacturer indicating details of the operation and of the goods value for customs purposes. The purpose is to define the taxable base used to levy export duties, establish an exchange rate and apply export refunds if there were any.

Once the shipment permit and affidavit are approved the system will automatically determine the selection channel, that is, the control applicable to the goods. There are three different channels:

- Green Channel – neither documentation control nor physical

control of the goods is made by the Customs Office

- Orange Channel – only the documentation submitted needs to be reviewed by Customs Office

- Red Channel – both documentation and the goods are controlled by Customs Office

The channels are assigned randomly to some products that do not necessarily require controls and they may be assigned a specific red channel for products that do require a specific control such as pharmaceutical products.

The legal conditions to be able to export goods from Argentina are met with the presentation of the end-use application form and documentation required for the operation. However, the goods will only be released upon fulfilling Customs requirements. The release may depend on the payment or duties.

The following documents may be required when exporting goods from Argentina:

• Commercial Invoice• Packing List•Certificate of Origin - COV• Bill of Lading - B/L• Pre-shipment inspection certificate

Usually a knowledgeable dispatcher who will set forth the necessary submissions through Maria System carries out this procedure.

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Export refund system, export duties and VAT exemptions

The export refund system includes total or partial refund on domestic taxes that are paid during different stages of the manufacturing process of brand new products. The aim is to deduct domestic taxes that have already been paid from the export value. In other words, the refund is made on the value added in Argentina.

Export duties may vary from 5% to 40% on the product FOB value or even more. Depending on the good to be exported the duties may be for a fixed amount or for a specific percentage called ad valorem of the FOB price.

With regards to VAT exemptions it could be reimbursed in any of the following cases:

• Set off – this exemption takes place when there are own debits from previous operations in the domestic market.• Credits – the exporter may use such credit for other tax liabilities he may have with AFIP.• Return – tax credit holder either cash or bonds• Transfer – the transfer of VAT credit to another taxpayer.

Any of the VAT exemptions credits may be used against tax liabilities of the exporter.

Imports Procedure to Argentina

Imports are defined by the Customs Code as the entry of goods into the

general national customs territory from a destination outside such territory. Hiring services abroad is treated as goods if used or exploited within the country. Copyright and intellectual property follows the same treatment.

There are different types of imports in Argentina:

According to ultimate use, goods can be definitive and non-definitive. We have referred to definitive imports as consumption goods and those that may remain in the customs territory indefinitely, which may be valued in order to determine the corresponding tax and duties to be levied.

With regards to non-definitive imports, these include temporary imports in transit and goods stored in a warehouse. Temporary imports are those where the merchandise imported may remain for a specific purpose and within a fixed term in the customs territory, subject to the obligation of re-export for consumption before the expiry of the term, which begins at the moment of its release.

Also, we have imports of goods meant to be stored in public-bonded warehouses for a fixed period of time until they are authorized to leave to another destination.

In order to be able to import goods to Argentina an import license is required called Non-automatic import license. The Secretariat of Foreign Trade of the Ministry of Economy and Public Finances prior to the shipment needs to issue an import certification. This is an official approval certificate authorizing the operation to take place.

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Also, a Sworn Affidavit Prior to Import is requested. Usually, any Argentine company willing to import goods to Argentina will require such approval before the purchase of the goods is made.Not to forget that services provided abroad will also require a Sworn Affidavit. Services included are: information and IT services, patents and trademarks, royalties, copyrights, payments under football player transfers, business, professional and technical services, personal, cultural and recreational services, payment of commercial guarantees for exports of goods and services, acquisition of rights to foreign movies, video and audio, technology transfer under Law 22426 (except patents and trademarks), other profits paid abroad, purchase of non-produced, non-financial assets.Furthermore, Argentine residents hiring foreign services for USD10,000 monthly or USD100,000 per year also need to file a Sworn Affidavit Prior to Rendering Services.With regards to tariff rates applied to imports they vary from 5% to 35% of the total value including the cost, insurance and freight.Other import taxes include 21% of VAT. 10% of VAT needs to be paid in advance when the initial import submission is made except for capital goods that are going to be imported by end users. As mentioned before, AFIP tries to prevent tax evasion in the Customs Office. According to Decree 618/1997 AFIP can enter into collecting agreements with provincial tax authorities and act as a collector agent of local taxes levied on goods consumption. Furthermore, AFIP’s resolution 1408/2003 establishes that importers registered in jurisdictions that have

been collecting agreements with the AFIP need to pay 1% of the VAT taxable base.There may be other specific taxes for certain products such as alcohol and cigarettes, among many other. In any case, taxes need to be paid and registered prior the Customs Office grants clearance on the goods.

Antidumping Practices and Regulations

Foreign trade between Argentina and other nations has expanded in the last few years. Many businesses have developed their own strategies in order to motivate foreign trade into their local markets. In some cases, foreign trade has been much more attractive than local prices in Argentina. As a result, antidumping laws have been created to work a way out of unfair pricing of imported goods. If an imported product is found to negatively impact the local industry that produces such product in Argentina import duties are meant to compensate the level of dumping. Argentina signed the General Agreement on Tariffs and Trade in 1992. The Agreement was put into effect with Decree 2121/04 and added into the Argentine legal system with Law 24176.

Also, Decree 1219/06 determined that authorities could go to a third country market economy to verify prices. This regulation aims to compare prices between imports to Argentina and imports to any other nation. The same concept applies to exports.

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The authorities in charge of carrying out investigations about dumping practices are:

- The National Foreign Trade Commission or NFTC – its purpose is to carry out investigations related to injurious imports and damages that may impact the Argentine economy.

- The Fair Trade Department or FTD – it also investigates dumping practices or subsides that may exist.

A local interested party - usually a local producer or a trade association representing at least 25% of the local production - will file a complaint within the authorities. Supporting documentation that evidences the dumping claim needs to be submitted.

Also, the FTD will determine the admissibility of the case and then the NFTC will carry out the investigation to determine the existence of the alleged damage. Both authorities need to render an opinion about the investigation in order to continue.

Provisional measures will only be available if there is a preliminary determination indicating dumping practices have been taking place or there is a connection between the prices in effect and the damages caused to the local market.

The NFTC will submit a report to the FTD analyzing the necessary elements that support the case. The FTD will, in turn, render its own conclusions, which need to be based on the arguments stated by the NFTC. Both conclusions are then submitted to the Ministry of Economy and Public Finance who will inform its final decision in the Official Gazette. Final resolutions may be appealed in judicial courts.

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Chapter SIX: Tax system in Argentina

Argentina has three different levels of authorities that set forth their own rules and regulations, and levy taxes:

(i) The Federal Government. Its tax authority is AFIP.(ii) The Provinces – 23 provinces plus the City of Buenos Aires.(iii) The Municipalities.

The main taxes determined by each authority are the following:

(i) Federal Government taxes

Corporate and/or Personal Income Tax Minimum presumed income tax Value Added Tax Excise Tax Tax on bank accounts debits and credits Personal Assets Customs duties

(ii) Provincial taxes

Turnover Tax Stamp Tax Real estate Tax

(iii) Municipal taxes

Health and safety Tax Street lighting Sweeping and cleaning taxes Advertising taxes

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We will now outline the main aspects of the taxes afore mentioned. However, it is important to notice that new rules and regulations are approved constantly by the authorities.

We suggest an in-depth analysis of your business with our Certified Public Accountant prior carrying out business in Argentina.

Federal Government Taxes

Income Tax

Income tax includes all income from an Argentine and/or any foreign source of income obtained worldwide by an Argentine resident. Non-residents are only taxed on their Argentine source of income.

With regards to the income tax rate applied to a business including local companies and branches that belong to non-residents it is 35% of the net taxable income. Such 35% must be paid by the end of the fiscal year.

Tax returns need to be filed and tax must be paid within 5 months after the fiscal year closing date. However, prior to the fiscal year closing, ten installments need to be monthly paid in advance. New businesses are not required to pay such advance installments for the first fiscal year.

Furthermore, net-operating losses of a net fiscal year can be carried forward up to 5 years.

Authorities have 5 years as of January 1st of the year following the income tax due date to claim any tax differences.

Minimum Presumed Income Tax - MPIT.

An Argentine business must pay the minimum presumed income tax. This annual tax of 1% is calculated on the value of all corporate assets located in the country and abroad.

A business must pay either the income tax or the minimum presumed income tax, whichever is larger. Taxpayers with assets in the country under AR$200,000 are exempt from the minimum presumed income tax. Shares and other participations in the capital local market are exempt from this tax too.

Tax paid on assets located abroad could be computed as tax credit.

If the MPIT is higher than the income tax, it may be used as a credit for the next ten-tax period of the Income Tax liability of the future tax period.

Value Added Tax – VAT.

Most of the economic transactions that take place in Argentina are affected by the VAT tax. VAT is levied on taxable supplies of goods and services plus imports of goods and services too. Exports of goods and services are not affected by tax.

The usual rate on VAT is 21%. However, there may be some exceptions to this rule. Some transactions like interests to be paid to a local financial entity

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could have a 10.5% reduction on VAT and some other public services like energy and water supply may have a 27% VAT tax rate applied.

The VAT tax rate is applied to each stage of production or distribution of goods and services depending on the value of what was added on each of the stages.

Goods and services that are not affected by VAT include: newspapers, magazines and books; natural water, bread and milk; medicines for human use; education services that follow the official curricula; real property for dwelling; life insurance; healthcare services; international passenger transport; financial investments.

Reimbursements for VAT on purchases cannot be claimed when a VAT-exempt activity is carried out. However, VAT on purchases can be credited on VAT on sales in order to tax the value added to the taxpayer’s supplies.

Excise Taxes

Excise taxes are levied upon the transfer and imports of certain goods specifically detailed by law. Such goods include tobacco, alcoholic drinks, non-alcoholic drinks, extracts, phone services, luxury objects and engines.

Excise taxes are also levied on electronic products such as GPS, IP phones, air conditioning and heating equipment, among others. Some services are subject to excise taxes too.

The tax rate for excise will depend on the value of each good or service rendered.

Tax on Bank Accounts: Debits and Credits

This tax has a 0.6% rate on all bank account debits and credits. Although this tax is paid by the account holder, it is the bank’s responsibility to enforce such regulation.

Any transfer of money that is not executed through a bank account may be subject of a 1.2% tax rate.

The bank account tax can be computed as income tax and MDIT.

Personal Assets Tax

Personal Assets Tax is imposed on assets existing on December 31st of each year owned by Argentine residents located in Argentina and abroad, and non-residents located in Argentina.

Argentine individuals owning assets over AR$305,000 need to pay Personal Assets Tax which may vary from 0.5% to 1.25% depending on the amount of the assets owned. Non-residents are applied the 1.25% tax rate on Personal Assets.

Tax Rate

0.5%

0.75%

1%

1.25%

Personal Assets value

AR$305.000 – AR$750.000

AR$750.000 – AR$2 million

AR$2 million - AR$5 million

Over AR$5 million

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It is important to consider that shares and interest pay a Personal Assets flat tax rate of 0.5%. This amount is paid by the company that issued such shares.

Provincial taxes

Turnover Tax

Turnover Tax is known as Impuesto sobre los Ingresos Brutos, that is, tax on gross income.

Turnover Tax levies tax on gross income arising from the commercial activity carried out by each business. Its rate varies depending on the activity itself and the jurisdiction where the activity takes place. This is the most important tax paid in Buenos Aires and City of Buenos Aires.

For instance, non-residents that own shares of a business in Argentina are subject to pay Turnover Tax. The local business will pay and has the right to be reimbursed by the shareholders.

Applicable Turnover Tax rate in the City of Buenos Aires may go from 1% to 3% depending on the activity that is being carried out. There are some specific activities that have their own Turnover Tax rate, such as real estate agents that pay 6%, construction pays 3% and financial activities 5.5%. Some industrial activities may be exempt of Turnover Tax.

Multilateral Agreement

Any entity doing business in more than one province is subject to

Turnover Tax. For such calculation the tax base is distributed among the various jurisdictions and the Multilateral Agreement is applied.

Stamp Tax

Stamp Tax is levied on documents indicating transactions for consideration like contracts, incorporation of companies, corporate capital increases, acknowledgement of debts and transfer of real estate among others.

Usually, the rate applied on Stamp Tax is 1.5% of the value of the document itself. There are some exceptions to this rule such as real estate transfer in the Province of Buenos Aires that levies 4%.

It is levied in the jurisdiction where the transaction was instrumented. However, it may be levied in the jurisdiction where it causes its effects.

Real Estate Tax

This tax is levied on real estate in all provinces. It is calculated based on a fixed rate of the real estate value made by the province. Municipalities may collect Real Estate Tax.

Real estate tax does not consider the ability of the real estate owner to pay in its calculation rate.

Municipal taxes

Municipal taxes may include health, safety, street lighting, sweeping and cleaning taxes, advertising taxes, granting permission for starting a new economic activity, and taxes levied

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on the right of using public spaces, among many others. Municipal taxes are not relatively significant and are based on net income from the jurisdiction involved. Each municipal jurisdiction has its own rules and regulations to levy municipal taxes.

Double taxation agreements

Argentina has subscribed several agreements with many countries it deals with. The aim of such treaties is to avoid double taxation and fiscal evasion.

The enforcement of international agreements would allow a non-resident of Argentina to reduce Argentine withholding taxes such as Income Tax. Also, shareholdings from non-residents may be excluded from Personal Assets Tax.

Agreements signed with Latin American countries follow the Andean Group model based on territoriality whereas agreements signed with European nations follow the OECD and UN Model Convention that increase the source-country taxing rights.

For instance, transfer-pricing rules apply to transactions that involve an Argentine and a foreign business. Argentina adopts the OECD rules based on the arm’s length principle. Once per year, the Argentine business needs to file a tax return and transfer pricing report in order to account for the price transactions that took place.

As of 2011, Argentina has signed double taxation agreements with the following countries: Australia, Belgium, Bolivia, Brazil, Canada, Chile,

Denmark, Spain, Finland, France, Germany, Great Britain & Northern Ireland, Italy, Norway, Netherlands, Russia, Sweden, Switzerland.

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Chapter SEVEN: Insolvency and Bankruptcy in Argentina Insolvency and bankruptcy proceedings are ruled by Law 22.522 and contemplate three main insolvency proceedings:

(i) Out-of-court agreement(ii) Reorganization(iii) Bankruptcy

The general provisions apply to both individuals and entities. There are a few exceptions of the Bankruptcy Law that do not apply to financial institutions, pension funds and insurance companies. Also, certain organizations such as banks are excluded from the Bankruptcy Law.

To begin with, an out-of-court agreement allows a debtor under economic and financial difficulties reach a repayment plan agreement with his creditors and then submit it for judicial homologation.

The debtor needs to fulfill certain requirements prior to submitting the out-of-court agreement to the judge such as authenticated documents by a CPA, statements of assets and liabilities, a list of creditors, ongoing litigation proceedings or proceedings with an unenforced judgment, the commercial books of the company or corporation, the amount of principal and the percentage it represents to all registered creditors.

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Law 22.522 requires fulfilling the necessary legal majorities, which must be two thirds of the ordinary creditors. This would allow the debtor request approval of the repayment plan to Court. Such approval has the same effects as the effects obtained from a regular reorganization proceeding.

Then, we have the reorganization proceedings – or concurso preventivo – initiated by either the insolvent debtor or the creditors regardless of their residence. Creditors that own assets in Argentina and are domiciled in Argentina or abroad may begin reorganization proceedings. Abroad creditors need to prove reciprocity rules between Argentina and the country where the credit is payable in order to file a reorganization proceeding in Argentina. If the reorganization proceeding is initiated by the debtor proof of his inability to pay debts as they fall due and a reorganization or repayment plan needs to be submitted.

Once the opening of the reorganization proceedings begins the debtor or members of a company with unlimited liability must comply with the prohibition order of disposal of property. Still, the debtor retains his property administration under the supervision of an appointed trustee. Creditors need to prove their credit before the appointed trustee who will indicate the Court if their credit is to be admitted in the reorganization proceedings. The appointed trustee will verify the books of the debtor and confirm the existence of the creditor’s claims. The Court has the final decision in admission of credit.

The trustee needs to inform the creditors about the initiation of the reorganization proceedings and

creditors will have a deadline to submit their filings. Creditors must prove their credit and submit the supporting documentation to the trustee. Both, debtor and creditors may challenge the filings of creditors should they consider it necessary.

Just like the out-of-court agreement, the reorganization proceedings require a repayment plan from the debtor that needs to be approved by two thirds of each class of the creditors. If the majorities are not obtained to approve the repayment plan and the debtor is a limited liability company or corporation a new special record opening is provided for by the Law.

This special opening allows any creditor or third party interested in acquiring shares to file a repayment plan too. There are no limitations of the entities or individuals that could register in the salvage proceedings. Registered entities or individuals may file a repayment proposal to the same category of creditors that have been submitted by the debtor. It is possible to propose new categories of creditors and their agreement is required within twenty days of the proposal in order to reorganize and prevent bankruptcy. If there were no interested parties or the special opening majorities were not obtained within five days the Court will declare bankruptcy.

If the creditors plan is approved then the debtor shares must be transferred to the third party that proposed the plan. The repayment plan will have to be enforced by the creditor. Usually, the creditor that is transferred the shares is the first one to obtain the legal majorities in the special opening.

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Finally either creditors or the insolvent debtor could initiate bankruptcy filings if the reorganization proceedings failed. Any creditors willing to initiate the bankruptcy proceedings must prove their debt was not paid as it fell due. The debtor has 5 days to prove that he is not insolvent. The Bankruptcy Law indicates some acts that presume there is enough evidence to consider the insolvency of the debtor. Unless the debtor proves he is not insolvent bankruptcy is declared.

The debtor is forbidden to administer most of his assets except those specifically allowed by Law. The trustee administers the assets of the debtor in order to preserve the property of the debtor. Payments made to the debtor must be collected in court. The debtor will have to close down their premises and the trustee will have to sell the assets of the debtor to begin the distribution of the proceeds obtained. Exceptionally, the court may request the debtor continue their activities in cases of public utilities under the supervision of the trustee.

Bankruptcy could be extended to third parties that apparently administered the debtor’s property as their own and individuals or entities that controlled the bankrupted company and abused of their control.

Liquidation may occur with the sale of the business, the sale of all assets, or the sale of the assets in an auction. Once the process comes to an end the trustee submits his report to the court. Such report must include the proposal of distribution of the proceeds. Any creditor may submit their objections against the distribution report of the trustee. After the approval of the trustee’s

report occurs, the distribution to the creditors takes place.

Finally, the debtor is discharged and the bankruptcy proceedings conclude. The creditor cannot propose a repayment plan. The court carries out the bankruptcy proceedings, although the court-receiver and the creditors committee play an important role too.

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Statistics taken from UIF Annual Report 2011, Ministry of Justice and Human Rights.

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Chapter EIGHT: About Limeres, Barassi, Ves Losada & Stanzione, Attorneys

Limeres, Barassi, Ves Losada & Stanzione, Attorneys, specializes in offering a broad range of legal services in the Argentine Republic. LBVL&S, Attorneys, represents high net worth individuals as well as small, medium and large Argentine companies around the world.

The firm has grown fast to become one of the most prestigious and distinguished international boutique law firms in Buenos Aires, engaged in the practice of law as a full service law firm participating in some of the most important domestic and international transactions involving Argentine as well as foreign-international corporations.

Moreover, the firm was profiled as the number one option for the foreign communities residing in Argentina and due to this fact LBVL&S, Attorneys has been retained by clients from diverse places around the world such as Russia, India, China, Brazil, United Kingdom, Japan, Iceland, Scotland, Wales, Switzerland, Ireland, Chile, Israel, Vietnam, Canada, Mexico, Germany, France, Spain, Uruguay, Singapore, Korea, Australia, Taiwan, New Zealand and Ukraine among other countries.

Contact Information.

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Contact: Limeres, Barassi, Ves Losada & Stanzione, Attorneys:

Mailing Address: Montevideo 513, Piso 1 Ciudad Autonoma de Buenos Aires C1019ABK República Argentina

Phone Argentina: +54 (11) 5239-0011 Phone USA: +1 (650) 690-7050

Email: [email protected]: http://www.limeres.com

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Information Sourceswww.ign.gob.arwww.censo2010.indec.gov.ar/ www.mrecic.gov.arwww.mrecic.gov.arwww.mercosur.intwww.migraciones.gov.ar/ www.jus.gob.ar/igjwww.uif.gov.ar/ www.knowyourcountry.com/ www.anti-moneylaundering.org/www.mecon.gov.arwww.inversiones.gov.arwww.afip.gov.arwww.anses.gov.arwww.mrecic.gov.arwww.limeres.comwww.limeres.com.arwww.limeres.orgwww.limeres.uswww.limeres.net

Date post:	12-Jan-2015
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