Over the last few years, Argentina has experienced economic fluctuations that makes the volatility of its market unappealing to foreign investors. The Macri government aims to prop up sectors where foreign investment is needed. Amidst this dark overture, some promising areas of foreign investment include: Agribusiness, Energy, Oil and Gas, and Mining. Here are 11 thing I learned about investing in Argentina.
- Can I own a company?
Yes. There is no restriction on corporate foreign ownership. A typical corporate structure is either a stock corporation (sociedad anónima), a limited liability company (sociedad de responsabilidad limitada), or a foreign branch (sucursal). Some others include a single-shareholder entity (Sociedad anónima unipersonal) and a “simplified” stock corporation (sociedad anónima simplificada) but the three traditional business associations remain the preferred forms of doing business.
- How long does it take for a company to become incorporated?
Argentina is not a place to buy a “shelf company.” Even if a company had no real business activity, it could have latent tax or labor contingencies that would go along with the purchase. Unless you are buying an existing business, you will want to form a new company. In the city of Buenos Aires, you can charter a company within 24 hours however you need time to obtain a tax ID, open a bank account and register with the Federal Tax Authority as an employer. If the company will be owned through foreign legal entities, it may take longer to have these entities “qualified.” To operate in the meantime, you can have the equity held by non-resident individuals as nominees, who will transfer the shares once the qualification process is completed.
- How much Argentine tax would my company pay?
Tax is levied at a federal and provincial level, with local taxes assessed according to the “locus of activity” (not necessarily the place of incorporation or headquarters).
- Can my company employ foreign persons?
Yes. In general, there are no restrictions on the employment of foreign nationals since Argentine labor law does not distinguish between foreign and Argentine citizens. Work visas are available, including company sponsored visas. Employees are required to register with Registro Nacional Único de Requirentes (RENURE).
- What are Argentine labor laws like?
Argentine labor laws can best be described as “protectionist.” Wages are relatively low by world standards (the minimum monthly wage for full-time workers is ARS $12,500 (about USD $295)) but employees are entitled to various statutory benefits that would surprise many around the world, especially those coming from countries applying the “at-will” doctrine. These statutory benefits cannot be waived or adversely affected (though an employer is free to improve on them). Here are a few of the most notable features:
- What about doing business through distribution and agency agreements?
Yes, however there are restrictions on what can be purchased. A foreign investor cannot own more than 1,000 hectares of land in “core zones” (fertile agricultural lands in the provinces of Buenos Aires, Santa Fe and Córdoba) or land within 150 kilometers of a border. Any land that contains or is adjacent to a large body of water is also restricted from foreign ownership. In Argentina, no more than 15% of rural land can be foreign owned. Individuals or entities of the same nation may not hold more than 30% of the 15% limit. The restrictions apply to companies whose foreign ownership exceeds 50% or can prevail in the entity’s decision-making process regardless of how the shares are owned. While these restrictions remain in place, the current government has taken steps, via executive decree, to relax interpretation of the rules.
- How much property tax will I be expected to pay?
There is a range of provincial and federal taxes that apply to the purchase and sale of real property. When a property is purchased, the buyer is expected to pay a provincial stamp tax with the rate varying between 1% to 4% of the sale price. Unlike residential property, agricultural land is not subject to personal assets tax.
The capital gain will be subject to federal income tax upon the sale of the property. If the seller is a non-resident company, the income tax rate is 17.5% over the purchase price (not the capital gain). VAT does not apply to the sale of land but does apply to any improvements on the property.
- Does Argentina protect intellectual property?
Yes. The protection of intellectual property is a constitutional right and Argentina’s adherence to international standards providing protection for trademarks, patents, copyrights, industrial models, trade secrets, denominations of origin, and domain names. A company may register a trademark for 10 years with the right to renew. A trademark holder can obtain an injunction to stop infringement by an unlicensed user. A patent can be granted for 20 years for any novel invention or one that has an industrial application. There is a patent prosecution highway (“PPH”) available to registrants as an option to obtain expedited local protection based on priority applications granted abroad.
- What about environmental laws?
Any activity undertaken in Argentina is subject to federal, provincial and municipal government environmental laws. Argentine law sets environmental standards and measures that companies must adhere to. According to Argentine regulation, an activity capable of significantly degrading the environment or adversely affecting the quality of life is subject to an environmental impact evaluation. If an individual or legal entity believes an activity is causing environmental damage they have the right to seek an injunction from the court to stop the activity.
The foregoing article is adapted from a previous article written by James Addington, “11 Things I learned about Investing in Argentina.” It is for informational purposes only and not intended as legal advice or as a comprehensive analysis of the matters referred to herein.