Argentina Tax & Business Guide - Deloitte

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Basic facts
Population 39.1m Inflation 9.5% (2005)*
Main languages Spanish (official), others GDP per head US$4,613*
Currency Peso (ARS) GDP growth 8.2% (2005)*
Economic communities Latin America Integration Association, Mercosur, WTO
GDP sources 9.6% agriculture, 37.6% industry, 52.8% services
*Economist Intelligence Unit.
Political environment

Argentina has a presidential system, checked by a bicameral Congress. The Partido Justicialista (PJ) controls the Senate and has a majority in the Chamber of Deputies.

N»stor Carlos Kirchner is the president. His term lasts until December 2007.
Foreign trade and investment
Exports US$40.8bn (2005)* Imports US$28.5bn (2005)*
*Economist Intelligence Unit.

Main export markets: the EU, Mercosur, NAFTA and Asia.

Import substitution is a major trend.

Investment approval is automatic. Incentives are available to both foreign and local investors.
Business and financing
Business forms Joint stock company, limited liability company

Only a joint stock company (sociedades an€nimas or SA) may issue shares to the public. The limited liability company (sociedades de responsabilidad limitada or SRL) is in effect a partnership, but the liability of the partners is limited to their subscribed capital. If one partner is a foreign company, an SRL is taxed like a branch.

Most foreign firms begin operations with independent agents and representatives, or make arrangements with local manufacturers and distributors to test the market.

Licensing arrangements between related firms require official vetting and approval.
Labour environment
Unemployment rate 11.7% (2005)* Minimum wage ARS 350 (monthly)
*Economist Intelligence Unit.

Foreign nationals employed in Argentina must obtain an immigrant visa, which is usually granted if it is demonstrated that the workerÌs particular skills are not available on the local market.

Variable remuneration is becoming more widespread.

The pension system consists of two separate funds: a state-run fund and a private sector fund operated by private pension funds.
Taxation
Corporate tax
Main rate 35%

Resident companies are taxed on worldwide income with a credit for foreign tax; non-resident companies are taxed only on income sourced in Argentina. An entity is deemed to be resident for tax purposes if it is incorporated in Argentina. Dividends paid between resident companies are generally not taxed, although an equalisation tax applies where distributions are in excess of taxable profits. Limited partnerships and partnerships limited by shares are subject to the corporate income tax, but the income of general partnerships is allocated to the partners for tax purposes.
Individual tax
Progressive rates up to 35%

Residents are taxed on worldwide income; most Argentinian-source income of non-residents is taxed. Residents are defined as Argentinian nationals and foreigners with permanent residence status in Argentina, or persons who reside legally in Argentina for 12 months. There are seven income tax brackets ranging from 9% to 35%. Foreign individuals with a work contract for up to five years are taxed only on Argentinian-source income (provided that they hold a temporary visa).
Capital gains
Included in taxable income and subject to normal corporate income tax

Capital gains of companies are generally included in taxable income and are subject to tax at the normal corporate income tax rate. Capital gains derived from public or private bonds are exempt. Most capital gains of individuals are exempt unless the gains relate to goods used to generate taxable income.
Indirect tax
Standard rate VAT 21%; regional gross turnover taxes average 1Ò5% Other rates 10.5%, 27%

Value-added tax (VAT) applies to most transactions. The normal rate is 21% with a reduced rate of 10.5% applying to capital goods, certain types of livestock and public transport. The higher 27% rate applies to certain utilities and telecommunications services. Education, books and the rental of domestic property are exempt. Exports are zero-rated. Registration is compulsory for businesses.
Tax administration and compliance
Tax year Corporations: corporate year; Individuals: calendar year

Legal entities must make ten monthly prepayments of tax, beginning in the sixth month of the tax year, and the tax return must be submitted in the fifth month of the corporate tax year. Individuals make five prepayments at bi-monthly intervals beginning in June of the tax year. Final payments of tax are made when the tax return is submitted.
Additional tax information
Withholding taxes Dividends 0% (although a 35% equalisation tax is imposed where distributions exceed taxable profits), Interest 35% and 15.05%, Royalties 28% (patents) and 12.25% (copyrights). Rates may be reduced by an applicable tax treaty.
Tax treaties Argentina has more than 15 tax treaties.
Dividends Dividends paid between resident companies are not taxable. Distributions that exceed taxable profits are subject to the 35% equalisation tax.
Revenue protection There is transfer-pricing, thin-capitalisation and controlled foreign company legislation.
Groups There is no group taxation.
Incentives Mining; forestry; research and development, software development; investments in capital goods.
Other taxes Excise duties, Gas oil transfer tax, Stamp duties, Import duties, Immovable property tax, Tax on deemed minimum income, Real estate transfer tax, Tax on personal assets (including shares owned by foreign companies), Tax on credits and debits in bank accounts.