Doing Business in

2021 onwards

www.pwc.com.ar

1 Contents

1 2 3 4 5 Reference Information P. 31

Contacts P. 33

Geographical and and Type of Foreign Foreign Trade System Demographical Challenges in Investment / and Customs Background Argentina Structuring the Deal Regulations

P. 03 P. 09 P. 14 P. 16 P. 22

2 1

Geographical and Demographical Background

3 Location Brief History of the Country

The Republic of Argentina1 is located in The history of Argentina began in 1776, rotating civilian and military governments. rapid growth driven mainly by commodity South America, between latitudes 23°S with the creation of the Virreinato del Río In the thirties, the effects of the Great . During the period 2003-2011, the (Tropic of Capricorn) and 55°S (Cape Horn). de la Plata, the name given to the colonial Depression severely affected the country, country’s GDP grew at an average rate of The Andes separates the country from Chile territories of Spain. In 1810, Argentina essentially due to a drop in trade and almost 8%. As from 2012, the economy to the west and Bolivia to the northwest; initiated a process that led to independence volumes. From the beginning of the fifties recorded a strong deceleration, with a 2012- Paraguay lies directly to the north, with in 1816, although for over sixty years, into the seventies, Argentina changed its 2016 compound annual growth rate (CAGR) , Uruguay, and the South Atlantic there were internal battles for control of economic model to substitute imports, in an of 0.08%, always at constant prices. This Ocean to the east. income from Customs, monopolized by the attempt to create an industrialized economy. drop was mainly caused by the growing Province of Buenos Aires. After this period In the seventies, under a new military regime, imbalances in both the internal and external of civil war, the country began a process of the country adopted an open economic sectors. During Mauricio Macri’s presidency, modernization in 1880, with the creation of model, eliminating mechanisms to protect the country returned to the international new public institutions and efforts to build a industry. Once democracy returned in the stage, and in 2018 Argentina chaired the G20, foundation to incorporate the country into the early eighties, the country faltered in finding which is a key international forum with other international system of division of labor as a clear path to growth. GDP was stagnant, countries for discussing and decision-making an agricultural commodity producer. At the as in most Latin American countries, with on adopting concrete solutions for the chief beginning of the twentieth century, Argentina episodes of toward the end of challenges of the global agenda. However, in followed an agro-export economic model the decade. At the beginning of the nineties, the last two years of his administration (2018- which turned it into a leader in the world Argentina adopted a convertibility plan with a 2019), the country went into a recession. In economy. This model was based on three pegged exchange rate. Many of the country’s December 2019, Alberto Fernández took pillars: a) high prices of commodities, b) the public utility companies were privatized office as Argentina’s new president. incorporation of extensive croplands to the during this decade. After the 2001-2002 production process, and c) the incorporation economic and social crisis, convertibility and Undoubtedly, 2020 has been an of hundreds of thousands of relatively highly- the pegged exchange rate were abandoned unprecedented year. The outbreak of the skilled immigrants to the labor market. and replaced with a controlled floating COVID-19 pandemic posed new challenges Between 1930 and 1983, there was a period rate system. During the first decade of the for the world and, in particular, for Argentina. 1 Argentina has six major regions: Northwestern, Northeastern, Western (Cuyo), Central of institutional instability, characterized by twenty-first century, Argentina experienced (Pampeana), Southern (Patagonia), and the Greater Buenos Aires metropolitan areas

4 The climate Education in Argentina Area2 2.78 million km2 The climate varies from subtropical in the Education access in Argentina is free; Population 45.37 million (estimated 2019) north to sub-Antarctic in the south, featuring however, to encourage high rates of school Population per km2 16 a wide temperate belt between these two attendance, it is mandatory from the age of extremes. The city of Buenos Aires and most 4 to 18. Over twelve million students attend Population growth per year 1% of the other main cities and industrialized public and private schools and universities. areas are situated in this temperate region, Urban Population 92% where maximum summer temperatures average between 27° C (81° F) and 32° Form of Government Republican, Representative and Federal C (90° F), with temperatures occasionally Language Spanish exceeding 38° C (100° F). Winters are relatively mild, with occasional frost. Snow Currency ($) and prolonged frost are rare, except in the Prominent Industrial western mountainous areas and in the south. Sectors in the Major Cities 24 autonomous provinces with their own political, Political division administrative and economic administrations (23 Petrochemicals, steel, foodstuffs, textiles, provinces and the City of Buenos Aires) metalworking, cement, other construction materials, printing and publishing, glass, Capital City City of Buenos Aires pharmaceuticals, industrial gases, Mineral and Energy agrichemicals, tires for vehicles, basic chemical products, and sugar. Though Source: INDEC. Estimates and projections made based on the results of the National Population, Households and Dwellings Census 2010. Resources Agriculture is the productive sector with Energy resources: oil & gas, holding the the main and most dynamic assets, the world’s fourth and second largest non- knowledge-based economy is also a strong 2 Argentina is 2nd in territorial size in Latin conventional reserves, respectively, and promising area in which Argentina is America and 8th in the world and electricity, now having a noticeable focused on. momentum with generation from renewable sources –wind, solar and biomass mainly-. Mineral resources: gold, copper, lithium, lead, zinc, natural borates, bentonite, clays, and construction stone.

5 Political and Legal System Economy

2020 has been an unprecedented year. The Since it was not until August that Argentina Major government authorities since December 10, 2019: outbreak of the COVID-19 pandemic posed managed to restructure its debt, access to new challenges for the world and, in particular, international financial markets had been for Argentina. Following other countries trend, restricted, and, therefore, these extraordinary President3 Alberto Fernández the policy pursued to contain the virus spread expenses — in months in which tax revenue was the closure of the economy. In Argentina, decreased as a result of the halt in activity—, Vice President Cristina Fernández de Kirchner the social, preventive and mandatory isolation were basically financed with monetary was decreed on March 20, which, in principle, issuance. Cabinet Cabinet appointed by the President involved the full closure of most of the economic activities, while limited operations Notwithstanding the foregoing, were maintained in the case of essential decelerated, and 2020 ended with a 36.1% Brief Description of the Legal activities. year-on-year variation compared with the Framework 53.8% variation recorded in the previous Restrictive measures were relaxed as time year. The main causes for the behavior of Argentina is a federal republic. The federal government went by, and the Government implemented a inflation were the halt in economic activity, consists of an Executive Branch, headed by the President; a series of measures to mitigate the economic a set of regulated prices to which increases Legislative Branch in the form of a Congress, which is divided impact of this policy in view of the supply were limited, and an increase in the demand into two chambers: the Senate and the Chamber of Deputies; shock generated by the lockdown, such as for real money balances for precautionary and a Judicial Branch. Provincial governments are generally the National Emergency Family Allowance (IFE reasons. organized along similar lines. for its Spanish acronym), and the Emergency Labor and Production Assistance Program Legislative Branch (ATP for its Spanish acronym); or the increase in the National Treasury Contributions to the The Bicameral National Congress (Congreso Nacional) is 3 The President is both the Chief of State and Head of Government provinces, among others. 4 One-third of the members are elected every two years for a six- made up of 72 seats in the Senate and 257 seats in the year term to the Senate, and one half of the members are elected Chamber of Deputies. All members are elected by direct every two years for a four-year term to the Chamber of Deputies. vote4. Currently the governing party (Frente de Todos) has majority in the Senate.

6 As mentioned above, August was key As from that date, a change in strategy components of aggregate demand. Exports as a consequence of the pandemic. Imports for the debt restructuring. After difficult was introduced, by reducing the issuance of goods and services dropped by 17.7%, reached USD 42.35 billion, accounting for a negotiations, the Government announced a required to meet treasury needs and trading followed by private consumption (13.1%), drop of 14% compared with the previous year, formal agreement with external debt private the recently-swapped bonds held by the investment (13%) and public consumption mainly due to a slump in demand caused by creditors, which provided for the exchange of BCRA and other public agencies in alternative (4.7%). In turn, imports of goods and services the decline in economic activity. This resulted 21 series of bonds for a total eligible amount exchange markets. decreased by 18.1% year-on-year. in a trade surplus of USD 12.53 billion. of USD 66.07 billion, and the issue of 5 new Meanwhile, the balance of services recorded a bonds denominated in US dollars (maturing By the end of the year, the monetary Likewise, when analyzing sectoral behavior, deficit of USD 2.37 billion. in 2030, 2035, 2038, 2041, and 2046). Thus, authorities managed to control the US it may be seen that 14 out of the 16 the new maturity profile would be USD 7.49 exchange rate in informal markets and reduce economic sectors showed a decline in 2020 By the end of the year, the economy started billion in the period 2020-2023, instead of the exchange gap, which had shown an compared with the previous year. Hotels and showing signs of recovery, as infection curves the USD 54.84 billion profile prior to the upward trend since mid-September. In 2020, Restaurants (-49.2%) and other community were gradually decreasing. However, the renegotiation. At the same time, Congress the official exchange rate was depreciated service activities (-38.9%) were the most country is not immune to the possibility of a approved a law for restructuring its local- by 38% year-on-year, and the gap reached affected. In addition, among the activities rebound in infections and a new wave, which, law debt under the same conditions as its 70.25% in December, after exceeding 100% recording the lowest decreases are those if occurring before enough vaccine doses foreign-law debt. Despite having reached an in October. which were least affected by the COVID-19 appear, may hamper the slow recovery of the agreement with local and foreign holders of restrictions: wholesale, retail and repairs economic activity. debt under foreign-law, and in view of the The National Public Sector ended 2020 with (-5.4%); real estate, business and rental continual decrease in BCRA international a primary deficit of ARS 1.75 trillion (6.5% of services (-6%); and agriculture, livestock, 2021 will be a challenging year for Argentina, reserves, the BCRA decided to tighten GDP) and a financial deficit amounting to ARS hunting and forestry (-6.9%). The only two as the country must negotiate the debt restrictions to access the currency market 2.29 trillion (8.5% of GDP). The above figures activities recording a positive year-on-year with the multilateral creditors, mainly the and compel companies with foreign financial were influenced by revenue (-0.7% of GDP) variation are financial intermediation (2.1%) International Monetary Fund, and redress the debt to refinance a portion of the foreign and expenditure (3.5% of GDP) extraordinary and energy, gas and water (0.9%). macroeconomic imbalances which still persist, currency payments due in the following measures adopted by the Government to in a context of mid-term elections. six months. The immediate consequence contain the pandemic. As regards , exports of of those restrictions was the rise in the goods totaled USD 54.88 billion in 2020, exchange gap in the different informal With regard to the economic activity, official which accounted for a decline of 16% in markets, which, in October, exceeded the data show that GDP fell by 9.9% in 2020 US dollars compared with 2019. They were official exchange rate by 100%. compared with 2019. This decline affected all affected by international trade contraction

7 Real GDP in Year GDP growth Pesos Balance of Payments Estimates 2004 485,115 2013 2014 2015 2016 2017 2018 2019 2020 2005 528,056 8.9% 2006 570,549 8.0% Current Account Total -13,124 -9,179 -17,622 -15,105 -31,151 -27,049 -3,997 2,985 2007 621,943 9.0%

2008 647,176 4.1% Goods 4,635 5,541 -785 4,416 -5,447 -743 18,227 14,413 2009 608,873 -5.9% 2010 670,524 10.1% Services -5,329 -4,641 -5,815 -8,452 -9,695 -8,965 -5,215 -2,367 2011 710,782 6.0% 2012 703,486 -1.0% Interests -13,165 -11,614 -12,105 -12,192 -16,380 -18,619 -17,836 -10,218 2013 720,407 2.4% Current 2014 702,306 -2.5% transfers 734 1,535 1,083 1,123 371 1,279 827 1,158 2015 721,487 2.7% 2016 706,478 -2.1% Financial Account Total -16,165 -9,321 -18,498 -13,964 -31,273 -27,985 -5,153 4,158 2017 726,390 2.8% Net Errors and -3,074 -198 -928 775 -295 -1,019 -1,282 1,053 2018 707,755 -2.6% Omissions 2019 692,977 -2.1% Variation in International -11,824 1,195 -4,906 14,311 14,556 11,277 -21,375 -7,727 2020 624,336 -9.9% Reserves

Source: Based on data from the INDEC

8 2 Investment and Challenges in Argentina

9 Investment Climate Consumption

Argentina will face many challenges during production). Argentina has also strong After a steep decrease in 2020, consumption Tax Law. Salaries and pensions below ARS the year 2021. The country – which has an talent based on a well-educated middle is expected to partially recover in 2021. The 150,000 will be exempted from Income Tax. already fragile economy, with high inflation, class, an energetic and entrepreneurial magnitude of the increase will be highly This measure would apply retrospectively frail consumption and high political and business community that could allow for dependent on a series of variables, including to the first quarter of 2021. As a result, macroeconomic uncertainty – is running exponential growth if managed consistently. the resolution of the sanitary crisis, the pace approximately 1.2 million income taxpayers behind in the race to apply vaccines and October legislative elections could provide of vaccination programs and, primarily, will be exempted, with direct impact on control the impact of the COVID-19. The an attractive tipping point that could depict inflation control. consumption. Government plans to further implement the country’s path in the near future, with palliative measures to aid mainly SMEs presidential elections coming in 2023. The Government launched a series of and vulnerable individuals, and navigate measures in its effort to boost consumption the months before the legislative elections It is worth noting that in times like this, in 2020, and plans to continue this trend, set for October this year as seamlessly as there are always attractive investment since 2021 is an electoral year. Some possible. opportunities for those willing to take the of the key measures adopted include appropriate risk, especially for investors with promised in public works and Based on the recent poor macroeconomic a long-term view. Many well-established infrastructure, lines of credit for SMEs, performance, combined with the high companies – mainly international ones, maintaining subsidized utilities tariffs without political uncertainties the country is with valuable assets, renowned brands significant increases, intensifying efforts facing, international investors are hesitant and consolidated businesses – are willing to control prices with the aim to dominate to consider Argentina as an attractive to relocate, selling their local business at a inflation, increasing social assistance and investment destination. However, there are steep discount. In turn, lots of companies food card programs, among others. few sectors that still attract international and projects are companies and projects capital, especially those relating to natural are in need of financial support for financial Additionally, the Government plans to resources which abound in the country, support, which cannot be easily accessed inject between ARS 13 and 15 billion into such as mining, agribusiness and energy from local banks and financial institutions the economy by amending the Income (especially renewable and shale oil & gas under the current conditions.

10 Industry Highlights

Oil & Gas and Mining Agribusiness The Oil and Gas sector in Argentina currently Mining is another sector in which Argentina Argentina has the world’s largest and most holds high growth expectations. After the offers interesting investment and growth competitive soybean complex, being within price decrease in 2020, mainly given by the opportunities thanks to its massive potential. the top three exporters of most soy-related worldwide lockdowns due to the COVID-19 The country is one of the top three producers products, including biodiesel. The country pandemic, oil prices began to recover, and holds one of the largest lithium reserves is also ranked in the top five for beef, changing the scenario. in the world. This mineral is a key input to wheat and corn exports. All the Argentine the manufacture of electric batteries, which agricultural-related exports combined totalize Argentina has the world’s second largest are trying to oust fossil fuels as the world’s over USD 30 billion. Last year, external unconventional gas and the fourth largest main source of power for transportation. conditions improved considerably for this unconventional oil reserves, the Vaca The current administration intends to launch sector, with significant rises in the price of Muerta formation in the southern province of a program to boost mining exports from commodities. The S&P index of agricultural Neuquén. Its development and exploration around USD 3 billion to over USD 10 billion products was up over 65% in 2020, and it remain a top priority for the current by 2030. Potassium and copper, other two continued the upward trend in 2021. China’s administration. It also opens up interesting minerals with growing global demand, are quick economic recovery is also of great opportunities for mid-sized players in also abundant in Argentina. importance as it is the destination of most Conventional Oil & Gas fields, with most big of Argentina’s agricultural exports. Pork companies focusing their resources on Shale is another segment with massive growth Oil & Gas, abandoning their conventional potential, especially since the opening of the operations at lower prices. Source: EMIS LATAM Mining and Investing in Argentina 2021-2022 Chinese market for Argentine producers in April 2019.

Source: EMIS Argentina Agricultural Sector and Investing in Argentina 2020-2021

11 Tech Real Estate Tourism Fintech and E-commerce are some of the the main players are Ualá, Brubank and The real estate sector is underdeveloped Before the pandemic hit tourism worldwide industries whose activity spiked during the Mercado Pago. Nevertheless, there is a total in Argentina; therefore, it has a growing last year, Argentina was the most visited COVID-19 pandemic due to lockdowns of 268 companies, 135 of which created potential. There are also external drivers country in South America, with over 7 million and movement restrictions worldwide, after 2018, which provide evidence of the arising from a change in habits due to the visitors in 2019. The sector accounted for and Argentina was not the exception. sector’s expansion. A big percentage of COVID- 19 pandemic. The relocation from 7% of total exports. Argentina was also a E-commerce experienced a massive surge the Argentine population does not have a big cities, such as Buenos Aires to suburban leader in Corporate Tourism, with various last year, with most transactions performed bank account, and almost half of those who areas as a result of the surge in home office conventions and congresses mainly held in by LATAM’s biggest e-commerce platform, have one, do not use it in full because of will boost the sector’s activity. The massive Buenos Aires. With vaccine programs being the Argentine Mercado Libre. 2020 ended the failure to access to financing. One of the growth in e-commerce also intensifies the implemented worldwide and the tourism up with more than 1.2 million new buyers, main reasons for the unbanked economy needs for larger logistics buildings, and may industry slowly beginning to recover, the 6 out of 10 Argentine citizens made at least is the fact that a significant portion of its also be a driver for this growth. Besides, sector shows enormous growth potential in one e-commerce transaction per month. activity remains informal, with an excessive the recent local currency and the months to follow. The peso devaluation in Revenue more than doubled in that same use of cash. These conditions represent a its negative impact on real estate prices the last years can also attract those arriving period. The Fintech sector also experienced golden opportunity for growth in this sector. may be seen by investors as a tremendous with hard currencies. significant growth in the last year. With banks Moreover, the Law on the promotion of the opportunity with potential. branches closed or opened with restrictions, Knowledge-based Economy aims at boosting digital wallets gained a popularity that activity in this sector by providing significant Source:Investments and International will be hard to lose in the future. Some of fiscal cuts and benefits. Source: EMIS Argentina Trade Agency and Ministry of Foreign Agricultural Sector and Investing Affairs, International Trade and in Argentina 2020-2021 Worship, October 2020

Sources: IDB - Fintech Study 2020 and Argentine Chamber of Electronic Commerce (CACE) - Annual Study on Electronic Commerce 2020

12 Private Equity (P/E) Venture Capital (VC) Throughout the last decade, Private Equity Given the current situation and the changing With the passing of Law No. 27349 on Some of the main VC Funds investing activity in Argentina showed ups and economic outlook in Argentina, various Entrepreneurship (April 2017) aimed at in Argentina are NXTP Ventures, Kaszek downs, with some growth in 2017 due to an multinational companies are leaving the empowering Argentina to dominate the Ventures, Draper Cygnus, Oikos and improvement in economic prospects under country, selling their operations to local regional startup scene, VC investments Patagonia Ventures. From the Corporate Macri’s administration, but with a setback in investors, and local companies with more than doubled in terms of value in 2019 Venture side, Mercadolibre, Globant, Grupo 2018 as a result of the economic crisis. financial distress looking for additional compared to 2017. In the last years, the VC Supervielle and Wayra are some of the key capital injections. This offers an interesting financed around 300 players. There are also some government-led Those sectors showing the highest P/E opportunity for local P/E Funds or groups startups for a total of approximately USD programs aimed at promoting VC and Private activity in Argentina are Agro and Digital to acquire solid operations at discounted 800 million, hitting records in 2019 with Investments that are worth mentioning, such Services, mostly denominated in hard values, as is the case of Walmart being transactions such as UALA Series C (USD as ARCAP (Argentine Association of Private currency. acquired by De Narvaez group, and 150 million), and Auth0 Series E (USD 103 Equity, Venture and Seed Capital), FONDCE Private Equity industry in Argentina and companies such as Garbarino, Araucaria million) and F in 2020 (USD 120 million). (Fiduciary Fund for the Development of LATAM is still underdeveloped. This means Energy, and EDENOR being acquired Venture Capital) and a Seed Fund from Despite the worldwide context with the that there is a great potential for growth and by local private investors. As economic the Argentine Ministry of Productive COVID-19 pandemic curbing economic the opportunity for P/E funds to play a key uncertainty hinders the possibility of Development. activity, Seed and Early Stage financing in role in the economic development of the making a deal in view of different value Argentina showed a considerable volume in Venture Capital activity in Argentina is region. expectations from buyers and sellers, 2020, with the acceleration of many trends in expected to grow in the upcoming years, transaction structure negotiations are E-commerce, Edtech and Biotech. Over the following global trends in technological including alternatives like Success schemes last four years, most of the investments have advances, new consumer habits, and in order to share risks and align interests been made in the Fintech, Biotech, Edtech growing needs from traditional corporations from both sides based on businesses’ future and Agtech sectors and led by traditional to diversify and rethink their business performance. VC Funds, but there is an upward trend for models. Corporate Ventures to lead investments due to various advantages, including synergies Sources: Apertura Magazine/El Cronista between the corporations and startups Souces: Blog Startupeable (2020 article); newspaper 2020 Techcrunch (Uala and Auth0 2019); Apertura involved. Magazine 2020

13 3 Type of Foreign Investment / Structuring the Deal

14 Joint Venture, Wholly No. 27349 was amended through IGJ Regulatory Environment Owned Company, Branch, Resolution No. 20/2020, establishing that SAS (Sociedades por Acciones Simplificadas General commercial laws and regulations Representative Office, – Simplified Stock Companies) cannot Partnership delegate administration powers to foreign Area Regulations shareholders. According to the new scheme, Foreign investors may make use of any of the management powers may only be granted to Foreign Investment Law No. 21382/ 1993 and Regulatory Decree No. legal types of business organization allowed Foreign investment Argentine residents. IGJ General Resolution 1853/ 1993. by domestic legislation. Local companies No. 9/2020 modified aspects relating to with foreign capital can access domestic Labor Contract Law No. 20744, Labor Law No. 25877, Argentine capital, which from now on, should be Integrated Pension Fund System Law No. 24241, Workers’ financing with the same rights and under the Labor Law considered in accordance with Articles 67 Compensation Insurance Law No. 24557 and Collective Bargaining same conditions as local companies with and 68 of IGJ General Resolution No. 7/2015. Agreements domestic capital Additionally, questions regarding legality General Companies Law No. 19550, Insolvency Proceedings and control and requirements for digital financial Commercial Companies Bankruptcy Law No. 24522 statements presentation were modified. Formation Procedure Finally, IGJ Resolution No. 17/2020 granted a Immigration Policy Law No. 25871 Foreign companies seeking to be period of 90 days to correct the lack of digital signature, while the remote shareholders’/ shareholders or members of an Argentine Trade Code of Commerce, Law No. 26994 subsidiary, or to operate in Argentina through members’ meeting modality was regulated Capital Markets Law No. 26831 a branch, must first be registered as foreign through IGJ Resolution No. 11/2020. shareholders, members, or branches with the Legal Entities Regulator (“IGJ”). In all cases, foreign companies operating in Restrictions on Foreign Argentina must appoint individuals who Investment will be legally responsible for them, and • No restrictions on any industrial sectors. separate accounting records must be kept for the companies’ operations in Argentina. • No restrictions on the percentage of The main types of investment vehicles foreign ownership interests in a local used by nonresident individuals and foreign entity. This does not apply to ownership corporations include a branch (Sucursal), of rural lands and/or locations under the a corporation (Sociedad Anónima), and Border Zones Authority. In these cases, a limited liability company (Sociedad de refer to Law No. 26737. Responsabilidad Limitada). Recently, Law

15 4 Foreign Trade and Customs Regulations

16 New Regulations for all • the Client undertakes to settle in the Outflows of Funds through MLC, within 5 (five) business days of its the MLC availability, those funds received abroad Introduction originating in the collection of loans Financial institutions may give access to granted to third parties, the collection of Since the restoration of the Foreign Exchange the MLC to individuals or legal entities, a term deposit, or the proceeds from the Control System in 2019, the Argentine Central hereinafter the “Client”, when they verify sale of any type of asset. This requirement Bank (BCRA) has continued to regulate all compliance with the general and specific is applicable as long as the asset has transactions carried out through the Foreign provisions established for the type of been acquired, the deposit created, or the Exchange Market (“MLC” for its Spanish transaction to be performed. loan granted after May 28, 2020. acronym), with the regulations in force placing Regarding the controls performed over a special focus on those transactions that outflows of funds through the MLC, in In addition, many regulations regarding imply an outflow of foreign currency. In this addition to complying with the requirements security transactions were issued throughout sense, as from October 16, 2020, financial in force for each specific transaction, prior the year. One of the most important is the institutions must inform the BCRA the details formal approval from the BCRA will be restriction on “Dolar MEP” and “Contado con regarding any transaction involving an outflow required, unless the Client/ individual/legal liquidación” transactions, applicable as of of foreign currency exceeding USD 50,000 entity submits a sworn declaration evidencing May 1, 2020 to residents who seek to access per day prior to performing the transaction. that at the time of access to the MLC: the MLC to send funds abroad. Under this It is noteworthy that those transactions that restriction, access to the MLC is not imply an outflow of foreign currency and need • all of the Client´s foreign currency allowed 90 days prior and 90 days prior formal approval from the BCRA are holdings in the country are deposited after the performance of these type generally not authorized. in accounts opened with financial of transactions. This requirement institutions; will not apply to the repayment of From a Customs point of view, import • the Client does not have available loans in foreign currency granted by licenses are still required for the import of all liquid assets abroad in excess of USD local financial institutions, including goods, and duties are applicable to the export 100,000 (this includes demand deposits payments for consumptions in of goods and services. in foreign financial institutions and other foreign currency made with investments, such as investments in credit or purchase cards. external public securities, crypto assets, etc.);

17 such loans with related companies at (forest, mining, hydrocarbon, manufacturing, maturity is allowed if the loan amount and agro-industrial activities), which received has been settled through the MLC represents a direct investment in foreign Financial Debts after October 2, 2020, and as long as the currency for a minimum amount equivalent to Payment of Dividends debt has an average life of not less than USD 100,000,000. Foreign currency derived from financial loans two years. Financial institutions may allow access to the granted by nonresidents does not have to be In this regard, according to foreign exchange MLC for the payment of profits and dividends brought into the country and settled through regulations in line with the above-mentioned to nonresident shareholders/members to the MLC, unless the Argentine resident Decree, foreign currency from exports of the extent that the conditions set out in intends to access the MLC in the future to goods under the projects referred to above exchange regulations are met. Some of those repay principal and/or interest. However, may be used, in turn, for the following conditions include the following: the regulations applicable to financial loans operations: granted by nonresidents have been changed Direct Investment System a. There must be an inflow and settlement considerably during the year. There is no obligation for direct investment - Pay upon maturity principal and interest on of foreign currency derived from a capital funds to be brought into the country and debts for the import of goods and services. contribution. In brief, in order to pay financial debts settled through the MLC. - Pay upon maturity principal and interest on b. The total amount transferred through registered with unrelated parties, with financial debts held abroad. the MLC for the payment of profits principal maturities between October 15, Moreover, repatriations of capital - Pay profits and dividends from closed and and dividends since January 17, 2020 2020 and December 31, 2021, a refinancing contributions through the MLC by audited balance sheets. must not exceed thirty percent (30%) plan of 60% of the amount owed must nonresident Clients need to be previously - Repatriate nonresidents’ direct investments of the amount of such new capital be filed, thereby having access to pay the brought into the country and settled as of in companies other than parent companies of contributions brought into the country remaining 40% through the MLC. October 2, 2020, with the capital contribution local financial institutions. and settled through the MLC as of the being maintained for a minimum period of aforementioned date. Some exceptions are applicable, for instance, two years. If these conditions are not met, To perform the above-mentioned operations, c. The Client must submit documentation when the funds originated in the foreign prior formal approval from the BCRA will be certain requirements should be met, as laid that guarantees the final capitalization of indebtedness were used in certain specific required. down in the regulation. the contribution. projects, such as gas production promotion d. Profits and dividends arise from closed plans. The Investment Promotion Regime for The projects approved will benefit from and audited financial statements. Exports, created by Decree No. 234/21, regulatory stability as to foreign exchange The restrictions on the settlement of new allows for the possibility that residents and matters for a term of 15 years from the date If the conditions set in the foreign exchange indebtedness with foreign related companies, nonresidents submit an ‘Investment Project of approval of the project submitted, meaning regulations are not met, prior formal approval in effect since May 2020, have been relaxed. for Exports’ for certain productive sectors that future foreign exchange regulations will from the BCRA will be required to access the Accordingly, the payment of principal on not affect the benefits granted under the MLC for payments of profits and dividends. regime herein analyzed.

18 Import of Goods Import of Services

Current foreign exchange regulations set will be applicable. In each case, a specific the Customs certificate validating the entry Debts originated in the import of services out the guidelines and requirements that calculation should be made in order to of capital goods must be submitted to the can only be paid at maturity. Payment in must be met to access the MLC and be determine whether the company may access financial institution within 270 (two hundred advance will be subject to prior formal able to make payments for the import of the free exchange market or not. and seventy) calendar days from the date of approval from the BCRA. Payments to goods. In principle, current foreign exchange The specific quota allocated to any company access to the MLC. For the rest of the goods, foreign related companies originated in the regulations set forth that debts arising from may be increased if the latter complies the term will be 90 (ninety) calendar days from import of services will also be subject to prior the import of goods can only be paid upon with certain requirements, such as making the date of access to the MLC. formal approval from the BCRA, with some expiration, and in the event advance payment advance payments from the collection of exceptions. is required, prior formal approval from the funds originated in the export of goods, From a Customs point of view, as a rule BCRA must be requested. among others. applicable to all transactions involving final imports of goods, importers must register Before giving the importer access to the MLC Restrictions are less severe in the case of the information relating to the goods to be to pay debts arising from the import of goods, health-related imports, such as medicines, imported through the Integral Monitoring the financial institution must verify that the goods for production, and medical care System for Imports (“SIMI”) for every import importer has the Customs certificate for the supplies. for consumption (or final import). The SIMI goods to be paid, and that this information must also be used for processing import is consistent with the related commercial In order to access the MLC for the advance licenses: Automatic Import Licenses (“AL”) invoice and the shipping document, among payment of imports, it is necessary to provide must be obtained for all goods included other requirements. the financial institution with documentation under the tariff positions of the Mercosur including a detail of the goods to be Common Nomenclature (“MCN”) for final In addition, as from July 2020, a “quota imported, the agreed purchase conditions, imports, with the exception of the tariff codes system” has been devised for accessing the and the delivery and payment terms and specifically listed, for which a Non-Automatic MLC for the payment of imports of goods. conditions. If the foreign supplier is a related Import License (“NAL”) must be obtained. Accordingly, depending on the import company, then, prior formal approval from It is worth highlighting that the list of NAL is payment to be made through the foreign the BCRA will be required to access the MLC dynamic and may be modified based on the exchange market (e.g. shipments until July 1, to make the advanced payment of imports. needs of each sector involved. 2020 or advanced payments), a quota system Whenever an advanced payment is made,

19 Export of Goods Export of Services Formation of External Consumptions made abroad with debit Assets cards in pesos and consumptions in foreign Amounts in foreign currency relating to Amounts in foreign currency relating to the currency with credit cards as of September exports performed from September 2, 2019 export of services must be brought into Legal entities, local governments, mutual 2020 will be deducted from the individual’s onwards must be brought into the country the country and settled through the MLC funds, and trusts established in the country quota of USD 200. In the event that the and settled through the MLC within the term within 5 (five) business days from the date must obtain prior formal approval from the amount of these transactions is higher of 15, 30, 60 or 180 (fifteen, thirty, sixty or of collection abroad or in the country, or BCRA to access the MLC for the formation than the monthly limit of USD 200, the one hundred and eighty) business days from the date of crediting to foreign bank of external assets, as well as to provide deduction will be transferred to the quotas of from the date stated in the shipping permit, accounts. all types of guarantees relating to the subsequent months until the amount spent is depending on the tariff code of the exported coordination of derivative transactions. reached (it is clarified that there are no limits good. In addition, through Decree No. 99/2019, as regards consumption abroad with debit the Executive Branch imposed a 5% (five Resident individuals may access the MLC card from an account in pesos or credit card). Foreign currency from exports to related percent) duty for the export of services to form external assets, send remittances companies must be brought into the country rendered in the country, whose effective use abroad for family assistance, and provide This monthly quota is not allowed for and settled through the MLC within 60 or exploitation is carried out abroad. guarantees relating to the coordination of individuals who are beneficiaries of special (sixty) business days from the date of issue derivative transactions for an amount of financing of credit cards and/or have had a of the shipping permit. In addition, a 365- up to USD 200 (two hundred US dollars) freezing of mortgage loan installments while day period from said shipping permit date per month, through all financial institutions the financing or the benefit remains. These is set for transactions by courier under the authorized to operate in the foreign individuals are also prevented from selling “Simplified Export” system. exchange market. To access the MLC for securities in the country with settlement in higher amounts, prior formal approval from foreign currency (MEP dollar) or transferring Notwithstanding the foregoing, amounts the BCRA is required. them abroad (contado con liquidación). in foreign currency relating to the export of goods should be brought into the country Additionally, the 30% (thirty percent) Tax and settled through the MLC within 5 (five) for an Inclusive and Supportive Argentina business days from the date of collection. (PAIS tax) established by the Federal Public Export duties can vary from 0% to 33%, with Revenue Agency (AFIP) is maintained, which a significant temporal reduction applicable to applies to this type of transactions. certain commodities.

20 Travel and tourism Report of Foreign Assets The 30% PAIS Tax will be also applied to the and Liabilities following operations relating to travel and For financial institutions to give access to equivalent of USD 50 million, must submit, tourism: the MLC to settle all commercial or financial in addition to the quarterly filings, an annual debts, they shall first verify that the operation statement (which will complement, ratify and/ 1. When the financial institutions must access has been declared, if applicable, in the latest or rectify the quarterly presentations made), the MLC to pay with foreign currency the “Report of Foreign Assets and Liabilities” to and which may be optionally submitted following operations provided that their be filed with the BCRA. by any legal entity or individual below the resident clients, as end users, used their aforementioned threshold. The due date to credit, purchase and/or debit cards for In the year 2020, the report was filed on a file this annual statement is 180 calendar these transactions: quarterly basis and had to be completed by days after the end of the calendar year. a. purchases of goods or services all legal entities or individuals with external Although the certificate stating that the rendered abroad; liabilities at the end of any calendar quarter, Report has been updated is a requirement b. withdrawals or cash advances made or by those who have settled them during that must be met by all those who want to abroad; that quarter. The due date to file the quarterly pay a commercial or financial debt, such c. purchases made through portals or report is 45 calendar days after the end of the updated certificate is mandatory for all virtual sites (remote purchases) made calendar quarter. entities with external liabilities, regardless of in foreign currency. whether they intend to access the MLC. 2. Purchase of services abroad contracted Those individuals/legal entities for whom the through travel and tourism agencies of the balance of external assets and liabilities at country –wholesalers and/or retailers –. the end of each year reaches or exceeds the 3. Acquisition of land, air and water transport services for passengers destined outside the country.

Individuals or legal entities residing in the country, as end users of the above-mentioned goods or services, are liable for the payment of the PAIS Tax.

21 5 Tax System

22 12-month period. on Corporate Income — Other Taxes Corporate Income Tax — — The Corporate Income Tax rate applicable to Corporate Residence Value Added Tax (VAT) net taxable business profits is 25% for fiscal Corporate residence is determined on the The current general rate of 21% is applied years starting on or after January 1, 2021. basis of centers of activity and not by the to the sales value of products and services By the end of April, a bill was under analysis place of incorporation or management. (including professional services), with a few whereby a scale of rates ranging from 25% Centers of activity in Argentina of non- specific exceptions. This tax is applicable to to 35% is to be introduced. Legal entities Argentine corporations are treated as the import of goods and services. residing in Argentina are subject to tax on permanent establishments (PE). Argentine and foreign-source income and are Certain goods are taxed at a reduced rate of able to claim any similar taxes actually paid As part of the 2017 tax reform, a PE 10.5%, while some services, at a rate of 27%. abroad on foreign-source income as a tax definition has been introduced into the The export of goods and services is taxed at credit. Income Tax Law. Such a definition is a rate of 0%. Nevertheless, input VAT relating generally aligned with the one included in to exports may either be used as a credit The same rate applies to net taxable the OECD Model Tax Convention for the against output VAT or refunded pursuant to Argentine-source business profits and to Elimination of Double Taxation, although it a special procedure. VAT paid on purchases, profits from business activities performed is broader, as it includes the performance final imports and rental of automobiles, not abroad by branches of foreign entities. See of services by a nonresident provider, considered inventory, may not be computed additional comments below. including services rendered by consultants by the purchaser as a credit. The same tax within the National Territory for a total treatment applies to other services, such as period greater than six (months) within any those provided by restaurants, hotels and garages. The above-mentioned restrictions do not apply when these services are hired for a conference, congress, convention or any other similar event directly associated with the specific activity of the contracting party.

23 As a result of the 2017 tax reform, VAT — — — legislation currently includes as a taxable Wealth Tax Excise Taxes Stamp Duty event ”digital transactions” (e.g. digital Wealth Tax is payable by Argentine A wide variety of items, such as automotive This local tax is levied on documents services, hosting, on-line technical support, companies on all shares/units issued by them and diesel motors, tobacco, alcoholic or agreements that evidence acts or software services, Internet services) provided and owned either by individuals, regardless beverages (including wine, champagne transactions for valuable consideration from abroad. Hence, these types of services of residence, or by companies residing and beer), insurance, cellular and satellite (usually referred to as taxable documents). are now subject to VAT at a 21% rate if they abroad. It shall be assessed and paid telephone services, recreational or sport The average tax rate is 1% and is applicable are provided by a nonresident entity to an directly by the local company as a full and boats, aircraft, luxury goods, and non- to the economic value of the agreement. Argentine customer, on condition that they final payment on behalf of the shareholders/ alcoholic beverages with caffeine and are actually used in Argentina. members (the issuing company has the right taurine, among others, are taxed at varying — to recover the tax paid from the shareholder/ rates. Import & Export duties — member). Turnover Tax Import duties currently range from 0% to — 35%, except in cases where a specific Each of the 24 jurisdictions into which The applicable tax rate is currently 0.50% Tax on Financial Transactions minimum duty is applied, or which involve Argentina is divided imposes a tax on of the value of the ownership interest, which This tax is levied at a rate of 0.6% on the goods subject to a specific treatment. In gross revenues from the sale of goods and is generally calculated as the difference amounts credited to or debited from the general, goods from LAIA and MERCOSUR services. The export of goods is exempt between assets and liabilities arising from the taxpayer’s bank accounts. countries are entitled to a preferential duty from this tax. Rates, rules and assessment financial statements at December 31 of each treatment. procedures are determined locally. On year, or during the fiscal year at issue. Transactions made in banks without using a average, rates for trade and services According to case law issued by the bank account and any disposition of one’s Export duties rates can vary from 0% to range from 3% to 5%. In case of industrial Argentine Supreme Court of Justice, own funds or the funds of a third party are 33%, with a significant temporal reduction activities, rates are generally lower (ranging branches of foreign entities may claim an subject to a tax rate of 1.2%. applicable to certain commodities as well as from 0% to 2%). exemption from this tax. to the mining industry. One third (33%) of the Tax on Financial Transactions actually paid on bank account The 5% (five percent) duty that was transactions (0.6%) and movements of funds established for the export of services (1.2%) is creditable against Income Tax and/ rendered in the country, whose effective or the related tax prepayments. use or exploitation is carried out abroad, continues to be in force.

24 — Social Security Taxes Significant Developments Social Security Taxes Law No. 24241 The employee social security withholdings, (Argentine Integrated Pension Fund System which include pension fund, health care — Law) establishes the territoriality principle, and social services, are payable on the New Tax Promotional System for under which Argentina’s Social Security monthly salary, up to a monthly cap of ARS Knowledge-Based Activities System covers all persons providing services 225.171,69 (as from March 2021), except On October 26, 2020, the Government under a permanent or temporary employment for June and December, where the cap is created new tax incentives intended contract within the national territory. increased by 50% due to the 13th month to promote certain knowledge-based salary. This salary cap is index-adjusted in activities through the end of 2029. Each month, local employers must pay March, June, September and December of employer contributions jointly with employee each year. Incentives under the new system include withholdings to the National Social Security a reduction by a certain percentage of the System and the National Health Care The total employee Social Security Tax rate is statutory CIT rate (currently 25% subject System. 17%, which consists of contributions of 11% to potential modifications), a reduction to the pension fund, 3% to health care and of export duties applicable to the export The employer Social Security Tax is 3% to social services. of services to 0%, a non-transferable payable on the employee’s total monthly tax credit certificate of up to 70% of compensation and is not subject to any cap Should any employee serve as Director social security contributions paid by the amount. The total employer contribution is of the same company, the social security employer, and tax stability with respect to 26.4% for companies mainly engaged in the liability shall be limited to the contributions the new system’s benefits (available until provision of services or trade, provided their made as a self-employed individual for December 31, 2029). annual sales exceed ARS 48,000,000, and the management duties performed. The 24% for all other companies. employee’s enrollment in the Social Security A similar system promoting knowledge- System will be voluntary regarding his/her based activities was created on June Argentine employers are exempt from paying salary as an employee. Thus, if the Director 10, 2019, with the enactment of Law No. social security contributions for the first opts not to pay these contributions, the 27506. The previous system, together with ARS 7,003.68 per month per employee – for company is under no obligation to pay any its regulations, was suspended by the new some activities, the non-taxable amount is employer contributions. administration on January 20, 2020 and increased to AR 17,509.20. replaced with this newly shaped system.

25 — • when the planning involves non- Income Determination — New Informative System Requiring cooperative jurisdictions or jurisdictions Foreign Income — Domestic and International Tax that are considered to be low or zero- Inventory Valuation Foreign income earned by resident entities Planning Disclosures tax; is subject to tax. Note that an Argentine Inventory valuation is based on the latest The Argentine Tax Authorities (AFIP) issued • taking advantage of tax asymmetries or taxpayer is immediately taxed onpassive purchase. Thus, LIFO may not be chosen for Resolution No. 4838/2020 on October utilizing hybrid instruments; and income generated by a ”Controlled Foreign tax purposes. Conformity between book and 19, 2020, which follows BEPS Action 12 • pursuing a tax-planning strategy Corporation” (CFC) that is directly or tax reporting is not required. (Mandatory Disclosure Rules). The resolution, specifically listed on the tax authorities’ indirectly held by the Argentine taxpayer, to effective as of October 20, creates an website (not yet published). the extent that more than 50% of that CFC’s — informative system with respect to domestic income is passive and is actually subject to and international tax planning strategies (the The reporting obligation is currently on the Capital Gains tax at a rate that is lower than 75% of the System). The new reporting requirements may Argentine taxpayers participating in a tax- Capital gains and losses attract normal profit applicable Argentine income tax rate. apply retrospectively. planning process, agreement, scheme, etc., tax treatment, except for those losses from Tax losses from a foreign source may only be The System requires taxpayers to report any as provided by the Resolution. Tax advisors the sale of shares, units, bonds and other offset against income from a foreign source. agreement, scheme, plan, or other action (individuals and any entities that help, securities that may be offset only against resulting in a tax advantage or any other assist, advise, or perform any tax-planning the same type of income. — benefit with respect to any Argentine Federal implementation activity in the course of their Transfer Pricing Rules business) participating in tax planning either — Tax (not only Income Tax), or any informative The transfer pricing regulations governing system in place in Argentina, either in a directly or through third parties are also Intercompany Dividends compelled to comply with this system. intercompany transactions, which were domestic or cross-border context. These dividends are not included in the tax For new domestic tax planning, the introduced to the Income Tax Law by Law Examples of cross-border tax planning base of an Argentine entity (the recipient) if due date for reporting is the last day of No. 25063, as amended by Laws Nos. strategies subject to the System include: distributed by another Argentine company. the fiscal period in which the planning 25239 and 25784, adopt principles similar However, tax is levied if the dividends was implemented. For new cross-border to those of the Organization for Economic • using legal entity vehicles to take are distributed by a foreign company. Cooperation and Development (OECD), advantage of tax treaty benefits; planning, reporting must be made within 10 days of implementation. The Resolution pursuant to which companies must comply • adopting strategies that prevent the with the arm’s length principle to determine creation of a permanent establishment in provides for a special deadline for tax planning implemented between January 1, the value of goods and services in their Argentina; transactions with foreign-related companies. • when a strategy results in stateless 2019 and October 20, 2020, as well as tax income (“supuesto de doble no plans implemented prior to January 1, 2019 imposición”), taxable income is allocated that were still in place on October 20, 2020. to other jurisdictions, or results in the In those cases, the tax planning must be avoidance of disclosure requirements reported by January 29, 2021. through any Argentine informative system;

26 Deductions — Other Significant Items 4. Thin capitalization: except for financial Net Operating Losses institutions governed by Law No. 21526 — 1. Donations: when made to companies and leasing companies, interest and The term for the deduction of Income Tax Depreciation and Depletion and associations expressly exempt foreign exchange losses incurred by losses is five years. Depreciation is generally computed on from assessment of Income Tax, an Argentine resident on loans granted a straight-line basis over the technically donations up to a maximum of 5% by a related party – whether local or — of the donor’s net taxable income are estimated useful life of the assets or, Payments to Foreign Affiliates foreign – would be deductible up to a alternatively, over their standard useful lives admissible deductions, provided certain limit equivalent to 30% of the taxpayer’s (e.g., machinery and equipment, ten years; Transactions between related parties should requirements are met. taxable income before deducting furniture, ten years). Depreciation of buildings comply with the arm’s length principle. This 2. Representation expenses: if adequately interest, foreign exchange losses and and other construction on real estate is 2% principle was included in the transfer pricing documented, representation expenses depreciation. The portion of non- per annum on cost (on a straight-line basis), rules and was extended to transactions are admissible deductions up to 1.5% of deductible interest will be carried forward unless it can be proven that useful life is less with companies located in non-cooperative the amount of salaries accrued during the for up to five years. Any deductibility than 50 years. jurisdictions or low or zero tax jurisdictions. fiscal year. capacity can also be carried forward for The tax authorities will determine income by 3. Directors’ fees: Amounts equivalent to up to three years. Depreciation of automobiles with an applying one of six methodologies: 25% of after-tax income or ARS 12,500 original cost in excess of ARS 20,000 is comparable uncontrolled price, resale price, per individual, whichever is higher, are Certain exemptions to thin capitalization rules not deductible. Related expenses (gasoline cost plus, profit split,residual profit split, and deductible in the fiscal year to which may be available (i.e interest that was subject vouchers, insurance, rentals, repairs and transactional net margin. Payments to foreign they apply, provided they are approved to tax - WHT - at the recipient’s hands or FX maintenance, etc.) are deductible for up affiliates or related parties and companies and available for the director before the losses in years where, following tax rules, to an amount of ARS 7,200 per car per located in low or zero tax jurisdictions that tax return is due, or in a later year of inflation recognition is allowed may not be year. Conformity between book and tax represent Argentine-source income are tax payment. subject to this limitation). depreciation is not required. deductible, provided they are paid before the due date for filing the tax return and Percentage depletion is available for natural the related withholding is paid to the tax resources (mines, quarries, forests). authorities.

27 Tax Incentives — — Knowledge-Based Activities for micro and small businesses is 60% and Tierra del Fuego — for medium-sized enterprises, 40%. This Although subject to certain limitations By virtue of Law No. 27506 (as amended by reduction would apply to both Argentine- Mining Activity in the case of new projects, companies Law No. 27570), the Government created and foreign-source income. Reduction Law No. 24196 created an investment established in this province enjoy a new tax incentives intended to promote of export duty applicable to exports of scheme for the mining activity and is general tax exemption as well as important certain knowledge-based activities through promoted services to 0% Non-transferable applicable to individuals and legal entities. customs-related benefits, based on the the end of 2029. Taxpayers that comply with tax credit certificate of up to 70% of social all requirements must apply and register in system established by Law No. 19640 and Mining ventures included within this scheme security contributions paid by the employer order to benefit from the new law. supplementary regulations. enjoy fiscal stability (i.e., tax rates will with respect to employees engaged in

remain basically the same) for a term of Promotional Activities, which can be applied The new system aims at encouraging — 30 years, except for VAT, which will adjust to the payment of certain taxes, such as VAT the creation, design, production, and Renewable Energy to the general scheme. Furthermore, the (excluding CIT). This bonus certificate will implementation or adaptation of products Companies engaged in the production scheme grants incentives for Income Tax, increase to up to 80% of the social security and services (and the associated technical of energy through renewable sources are Tax on Assets, Import Duties, and any other contributions of new hires considered documentation) relating to, among others, entitled to certain tax benefits, such as early tax on the introduction of certain assets. included in special interest groups (including the following ‘Promotional Activities’: refund of VAT or accelerated depreciation Additionally, among others benefits, the women, LGBT, people with disabilities, and of capital goods for Income Tax purposes, possibility to obtain a VAT reimbursement residents in unfavorable areas). Exporters • software among others. during the exploration stage, as indicated may request the use of the certificate to • computing and digital services in Law No. 24196, has been regulated by offset CIT liabilities. • audio-visual production and post- General Resolution No. 1641/2004. production activities Tax stability with respect to the new system’s • certain scientific and engineering — benefits (available until December 31, 2029). activities Forestry The incentives will become effective for • geological and prospecting services income tax purposes starting in the fiscal Law No. 25080 established an investment • activities related to the industrial sector year following that in which taxpayers receive scheme for plantation, protection and using ‘4.0 technologies,’ and approval. However, they become effective maintenance of forests, and contains rules • the export of professional services. for all other tax purposes as of the date the similar to tax incentives for mining. relevant governmental institution approves Incentives under the new system include the registration. Furthermore, incentives Reduction by a certain percentage of the apply retrospectively to January 1, 2020 statutory CIT rate. The reduction depends on for taxpayers that benefited under the the taxpayer’s size. Large taxpayers would software incentive system, which expired on benefit from a 20% reduction. Reduction December 31, 2019.

28 — • Income Tax credit for an amount 13% from fiscal year 2021 onwards-it may Similar rates would apply in the case of Biotechnology equivalent to 10% of the amounts remain at the 7% level if the bill aimed at transfers of bonds, digital currency and other invested in infrastructure projects and increasing the Corporate Income Tax rate to Argentine securities denominated in foreign Law No. 26270 established a promotion capital goods. a marginal 35% is finally passed-. Although currency. For securities denominated in system for the development and production • Tax bond (creditable against federal the Equalization Tax is no longer in force due pesos, the rates would be reduced to 4.5% of biotechnology, and grants 29 benefits for taxes) for the Input VAT credit balances to the amendment introduced by Law No. on gross profits, or 5% on net gain. tax and social security contributions that may resulting from infrastructure investments. 27430, it still remains applicable to dividend be claimed if specific requirements are met. and branch profit distributions made out of The regulatory authority would be in charge profits accumulated in FYs starting prior to — Small and Medium-sized Enterprises of keeping a registry of companies that are January 1, 2018, and which were in excess (Law No. 27264) considered SMEs and are, therefore, entitled of tax profits as of the year-endprior to the to the benefit. relevant distribution. Law No. 27264 (passed in August 2016) established a special tax system for small — Furthermore, in the case of and medium-sized enterprises (SMEs) and Export Incentives nonresidents, gains on the for infrastructure investments conducted by The export of goods and services is exempt sale of non-listed shares, SMEs. The most relevant benefits include the from Value Added and Excise Taxes. The share certificates and units of following: temporary import of raw materials and Argentine entities would be intermediate and packaging goods for the subject to a 13.5% tax • Full exemption from Minimum Notional manufacturing of products for export is free on gross profits or, Income Tax starting January 2017 (this of duty, with the obligation to offer sufficient alternatively, 15% on tax was abolished for fiscal years starting guarantees for the import. A reimbursement actual profits (duly on or after January 1, 2019). system is in place for VAT credits paid to supported). • Full credit (against Income Tax and suppliers in relation to export activity. its prepayments) on Tax on Financial Transactions paid by micro- and small- — sized enterprises. A 50% credit on the tax paid by medium-sized manufacturing Withholding Taxes entities. Dividend distributions and branch profit • Deferral of due date for VAT balance remittances paid out of profits generated in payable. fiscal years beginning on or after January 1, • Fiscal stability (from July 2016 to 2018 are subject to a 7% Withholding Tax in December 2018) for SMEs that invest Argentina. The rate would be increased to in infrastructure projects and/or capital goods.

29 Other Payments to Notes Several other concepts of ‘royalties’ are subject 4. Resident corporations and individuals who are to rates that, in turn, may be limited by treaty. A registered for tax purposes are subject to 6% 1. Withholding from payments of interest and Residents and Nonresidents broad sample of these concepts and the non- withholding (28% if not registered). royalties to non-residents is based on a flat rate treaty effective rates are set forth in Note 2. of 35% applied to an assumed percentage gross WHT (%) 5. Interest is exempt if paid on credit sales of profit margin. This margin is not contestable, but Recipient 2. Payments to non-residents (only) for ‘royalties’, machinery or other equipment, specific bank Interest Royalties the resultant rate may be limited by bilateral treaty. (1) (1, 2) rentals, fees, commissions, and so on, in respect loans at preferential rate or loans by public Under the 1998 tax reform, the general margin of the following, are subject to withholding at the entities. Resident legal entities 6/28 (3) 6 (4) for interest paid for credits obtained abroad is rates given below on the basis of assumed gross Resident individuals 6/28 (3) 6 (4) 100%. However, a margin of 43% is applicable profit margins (Note 1) unless limited by treaty. 6. The treaty limits taxation of interest to 20% Nonresident legal entities and individuals: (i) if the debtor is a local bank; (ii) if the creditor is The treaty concerned should be consulted to (registered). Non-treaty: 15.05/35 21/28 a foreign financial institution located in a country determine any limitation in each case. not considered as a low or no tax jurisdiction, Treaty: 7. The 10% rate is applicable to interest on credit or in countries that have signed an agreement Austria (10) 12 3/5/10/15 sales of capital equipment, any bank loan, or any with Argentina for exchange of information and Payment WHT (%) Australia 12 10/15 financing of public works; otherwise, 15%. have no bank secrecy laws, which are under Freight and passenger bookings (other Belgium 0/12 (5) 3/5/10/15 than those covered by special treaties), the supervision of the respective ; 3.50 news and feature services, insurance 8. Interest paid on loans with guarantee of the Bolivia 15.05/35 21/28 (iii) if the interest is paid on a loan dedicated to underwriting Norwegian Institute for Credit Guarantees or paid Brazil 15 10/15 the purchase of tangible assets other than cars; Containers 7.00 in relation to imports of industrial equipment is tax Canada 12.5 3/5/10/15 (iv) if the interest is paid on debt certificates Copyright 12.25 exempt. Chile 4/12/15 3/10/15 (private bonds) issued by local companies and registered in certain countries that have signed Rental of movable assets 14.00 China 12 3/5/7/10 9. Treaty signed in April 2018. Still pending an agreement with Argentina for the protection Motion picture, video, and sound tape Denmark 12 (5) 3/5/10/15 rentals and royalties; radio, television, ratification by both countries. of investments; and (v) on interest paid on time telex and telefax transmissions; any Finland 15 3/5/10/15 deposits with local banks. other means for projection, reproduction, 17.50 10. Treaty signed in December 2019. Still pending France (13) 15.05/20 (6) 18 transmission, or diffusion of image or ratification by both countries. Germany 10/15 (7) 15 Royalties’ covers a variety of concepts. The rates sound; sale of assets located in Argentina Italy 15.05/20 (5) 10/18 given in this column relate specifically to services 11. Treaty signed in June 2019. Still pending derived from agreements ruled by the Foreign Rental of real estate 21.00 Japan (11) 12 3/5/10 ratification by both countries. Technology Law, as follows: Any other Argentine-source income Luxembourg (12) 12 3/5/10 (unless the nonresident is or was 31.50 Mexico 12 10/15 temporarily resident) 12. Treaty signed in April 2019. Still pending • Technical assistance, technology, and ratification by both countries. Netherlands 12 3/5/10/15 engineering not obtainable in Argentina: 21% Norway 12.5 (8) 3/5/10/15 (35% on assumed profit of 60%). 3. The higher tax rate is applicable on non- 13. An amending Protocol has been signed in Qatar 12 10 • Cessation of rights or licences for invention registered taxpayers. On interest paid to December 2019 that is still pending of ratification. Russia 15 15 patents exploitation and technical assistance corporations by financial entities or stock Once in force it will introduce a reduction obtainable in Argentina: 28% (35% on Spain 12 3/5/10/15 exchange/open market brokers, income tax on interest WHT (12%) and on royalty WHT assumed profit of 80%). On non-registered Sweden 12.5 3/5/10/15 must be withheld at 3% (10% if not registered); (3/5/10%). agreements, the rate is 31.5% (profit of Switzerland 12 3/5/10/15 individuals are tax exempt. 90% is assumed) or 35% (profit of 100% is Turkey (9)) 12 3/5/10 assumed), depending on the case. United Arab Emirates 12 10 United Kingdom 12 (5) 3/5/10/15

30 6 Reference Information

31 Reference Information

General statistics on cost/expense, i.e. average labor costs, office rental and utilities necessary for doing business locally Normal Business Hours • Ministerio de Economía: • Banks and exchange houses: • Climate: www.argentina.gob.ar/economia Monday to Friday, from 10 a.m. to 3 p.m. Argentina enjoys a wide range of climates: • Insituto Nacional de Estadística y Censos: • Business offices: temperate and humid on the plains of the www.indec.gob.ar Pampas; cold and humid in the extreme west Generally, from 9 a.m. to 6 p.m. Local government agencies of Patagonia; subtropical in the north of • Stores: Mesopotamia; and warm in the north east of • Ministerio de Trabajo, Empleo y Seguridad the country. From November to March, the Social: In large cities, from 9 a.m. to 8 p.m., average temperature is 23° C, and from June to www.argentina.gob.ar/trabajo although in the interior, they tend to close at September, 12° C. mid-day. On Saturday, many stores are • Ministerio de Ambiente y Desarrollo open only from 9 a.m. to 1 p.m. • Weights and measures: Sostenible: • Cafés, bars and pizza parlors: Weight: kilo (k); Measurement: meters (m) www.argentina.gob.ar/ambiente Open almost around the clock, some • Format of dates: • Administración Federal de Ingresos Públicos: closing between 2 a.m. and 6 a.m. DD/MM/YY (date/month/year) www.afip.gob.ar • Restaurants: • Numbers: • Administración Nacional de la Seguridad Lunch is served from 12.30 p.m. and dinner Thousands are separated by a point, decimals, Social: from 8.30 p.m. Many establishments offer by a comma. www.anses.gob.ar fast food at all times. Important Notice: The COVID-19 pandemic • Cancillería • Trading currency in the country: continues to strike Argentina; the information https://www.argentina.gob.ar/cancilleria Argentina’s legal tender is the peso. detailed above is subject to the health situation. • Ministerio de Obras Públicas: Although the US dollar and the are Source: https://www.argentina.tur.ar/#!/ar/ www.argentina.gob.ar/obras-publicas widely accepted, exchange for local information currency is performed at banks and • Ministerio de Turismo y Deportes: authorized exchange houses. The most www.argentina.gob.ar/turismoydeportes commonly accepted credit cards are American Express, VISA, Diners and Tips for Business Visitors MasterCard. It may be difficult to exchange • Requirements for visitors’ visas travelers’ checks outside of Buenos Aires.

• Argentine time zone is GMT -03

Source: https://www.argentina.gob.ar/organismos

32 Contacts

Santiago Mignone Partner in charge of PwC Argentina [email protected]

Norberto Montero Eduardo Gil Roca Miguel Urus Martín Barbafina Advisory Leader Tax Leader Assurance Leader Marketing & Communications [email protected] [email protected] [email protected] Leader [email protected]

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, Price Waterhouse & Co. Asesores de Empresas S.R.L., its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

© 2021 In Argentina, the member firms of the global network of PricewaterhouseCoopers International Limited are Price Waterhouse & Co. S.R.L, Price Waterhouse & Co. Asesores de Empresas S.R.L. and PwC Legal S.R.L, each of which, either separately or jointly, are identified as PwC Argentina.

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