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Doing business in Contents

Executive summary 4 Disclaimer

Foreword 6 This document is issued by HSBC Bank (Argentina) Company Limited Introduction – Doing business in Argentina 8 (the ‘Bank’) in Argentina. It is not intended as an offer or solicitation for business to anyone in any Conducting business in Argentina 13 jurisdiction. It is not intended for distribution to anyone located in or 18 resident in jurisdictions which restrict the distribution of this document. Audit and accountancy 29 It shall not be copied, reproduced, transmitted or further distributed Human Resources and Employment Law 34 by any recipient.

Trade 37 The information contained in this document is of a general nature 40 only. It is not meant to be comprehensive and does not HSBC in Argentina 43 constitute financial, legal, or other professional advice. You Country overview 44 should not act upon the information contained in this publication without Contacts and further information 46 obtaining specific professional advice. This document is produced by the Bank together with PricewaterhouseCoopers (‘PwC’). Whilst every care has been taken in preparing this document, neither the Bank nor PwC makes any guarantee, representation or warranty (express or implied) as to its accuracy or completeness, and under no circumstances will the Bank or PwC be liable for any loss caused by reliance on any opinion or statement made in this document. Except as specifically indicated, the expressions of opinion are those of the Bank and/or PwC only and are subject to change without notice.

The materials contained in this publication were assembled in May 2012 and were based on the law enforceable and information available at that time. Executive summary

Located in South America • Foreign enterprises prefer a • Although Argentina can be • Strong labour unions have • As an exception to the above and bordering , , corporation, a limited liability considered a high-tax country, been in existence for many rule, foreign nationals assigned , and , partnership (‘S.R.L’), or a branch certain tax incentives are granted years but, with rare exceptions, to Argentina for working the Argentine economy covers as the local form of entity. in several fields such as the unions and individual workers reasons and for a period not a wide spectrum of industrial mining industry, biotechnology, have a generally favourable exceeding five years are and commercial activities. • It is relatively straightforward software and oil & gas industries, attitude toward foreign considered as non-residents It presents opportunities for to setup and close a business among others. investment and management. for tax purposes. Non-residents foreign investors across these in Argentina, however it are taxed only on their activities, with access to a should be noted that certain • Furthermore, Argentina has • Social security costs constitute Argentine-source income. highly qualified labour force. administrative procedures signed Double Tax Treaties, a very sizable part of the cost of should be followed and these following in general terms, doing business. Fringe benefit Key operating points: can be time consuming. the Organisation for Economic remuneration is significant only Co-operation and Development at the managerial level. • Business may be conducted • As a result of the devaluation (‘OECD’) and/or UN Model in Argentina by incorporated of the at the Tax Convention, with several • Argentine nationals living in companies, partnerships, beginning of 2002, several territories, outlined on page Argentina are considered as individuals, and branches foreign exchange regulations 18 in Taxation. tax residents. In general, of foreign businesses. In all were issued to limit the foreign nationals acquire cases, key information must be transfer of money abroad but residence for tax purposes registered in the Public Registry they have been somehow when they have been in the of Commerce, and the conduct relaxed up to date, although country for 12 months of a and dealings of the enterprise some formalities have still to particular taxable year, or are governed by the commercial be observed. when they have obtained a code and supplementary laws permanent residence visa and regulations. In the case from the national immigration of a general partnership of authority. Tax residents are a non-commercial nature or taxable on world-wide where the commercial code income, and a foreign tax is silent, the civil code applies. credit is available limited to the rise of the liability due to the inclusion of the foreign source income in the income tax computation.

4 Foreword

The World is changing, HSBC Argentina is the fifth The agricultural sector is Gabriel Martino globalising and becoming more largest Private Bank in thriving, producing both seeds President and Chief complex. Emerging markets are Argentina. We have a customer and manufactured products Executive Officer growing faster than developing base of more than 1.5 million that are exported world-wide. HSBC Argentina ones. World is growing individual clients, and over Manufactured goods are also at a faster pace than countries, 85,000 business clients. We growing, led by cars, consumer and commodity prices have have significant presence in all electronics and steel. Services risen to new levels. segments (Personal Financial such as tourism, Services, Commercial Banking, and off-shore activities (e.g., call Competitive intensity amongst Global Banking and Markets), centres, software development) companies is increasing, and and leading positions in Foreign are also on the rise. customers are more demanding Exchange, Trade, Leasing, than ever. Technology is Commercial Loans, Car Loans, Argentina’s culture is also fundamentally changing the and Credit Cards. We are also fascinating. Dancing Tango has way we live and do business. leaders in meeting the needs of become one of the most popular our customers in Life Insurance. activities for locals and visitors, In this context, HSBC establishes watching a football match trusted relationships with our We are present in 22 provinces between River and Boca can corporate clients to help them through a network of 135 branches, be a thrilling experience, and win and stay ahead of their and more than 880 ATM´s and having our delicious beef during competition. Our ability to connect Self-Service Terminals. We are an ‘Asado’ in a typical ‘Estancia’ customers around the world focused in building long-term can be an amazing treat. is unparalleled, partnering with relationships, helping our clients companies to grow their manage their finances through For all these reasons, Argentina businesses whilst meeting their a broad range of services. is an attractive business market whole range of financial services and destination nowadays. needs. Our financial strength Argentina is a vibrant economy This guide, in partnership and brand sets us apart from today. Global trends are favouring with PricewaterhouseCoopers, our competition globally. Argentina, as commodity prices helps corporate clients to better increase and main trading partners understand Argentina and explore (i.e., , Brazil) grow at new business opportunities. a fast pace. Local economic fundamentals have also improved. The economy has grown at 6-7% rates since 2003, foreign reserves are significant, fiscal and current accounts are healthier, and the debt burden has significantly declined after the restructuring.

6 Introduction Doing business in Argentina

Economic environment The year 2011 showed recovery consolidation of economic After registering in 2009 the activity, after the 2009 first contraction since the slowdown and the 2010 Second World War, the world recovery. However, several economy experienced what internal imbalances such as seemed to be a strong recovery inflation, an increase in the in 2010. However, in 2011 the energy sector external deficit, area went through an long-term funding have yet to acute crisis, whilst attempting be resolved. to recover. The market worries about fiscal sustainability in Location and access , and led to a to other markets sharp increase in sovereign yields. Strong Argentina is located responses and some good approximately between news about the US economy latitudes 23°S (Tropic of turned things around. Capricorn) and 55°S (Cape Accordingly, weak recovery Horn). The Andes separates the resumed in the major advanced country from Chile in the west; economies, and activity and it borders Bolivia and remained relatively solid in most Paraguay in the north; and emerging and developing Brazil, Uruguay and the South economies. Under this situation, Atlantic Ocean to the east. the Argentine economy continued with its recovery Establishing a new business from the sharp slowdown of 2009. GDP at constant prices The Argentine economy covers increased almost 9% year-on- a wide spectrum of industrial year. Private consumption, a and commercial activities component of aggregate owned by closely held private demand, which has been the corporations and holdings principal engine of Argentina’s (foreign or locally owned), family economic growth (according to concerns and a large number official statistics), recorded of small business entities. positive growth rates in the four Stock markets exist in major quarters of 2011, growing over cities, and share ownership 10% at constant prices of public corporations is now compared to the previous year. widespread, enhanced partially Fixed gross domestic by privatised pension funds. investment increased more than 16% year-on-year. The primary Argentina presents a wide fiscal result was 80% lower spectrum of living standards and than the recorded in 2010, and management-level persons enjoy the financial fiscal result was a comfortable standard of living. negative, after the surplus of 8 the previous year. They and their foreign counterparts Incentives (MIGA), the Overseas Private Climate for foreign investors Argentina is a member of the Foreign exchange live in good residential areas and, Investment Corporation, and Latin American Integration control regime in the major cities, have access Through its International Trade the International Centre for the Argentina has formalised its Association (LAIA; in Spanish, to a variety of commercial, Under-secretariat, the Argentine Settlement of Investment acceptance of the 1883 Paris ALADI, for Asociación With respect to Foreign educational and cultural facilities. government promotes and Disputes (ICSID). Agreement for the Protection Latinoamericana de Integración), exchange controls, currently, Argentina’s labour force is coordinates foreign investment of Industrial Property, as which was created by the there is a Single Free by and large intelligent and opportunities in Argentina. With respect to the local successively amended. Montevideo Treaty of 1980. Exchange Market, on which capable, and there is no shortage This Under-secretariat identifies competitor attitude toward foreign This association includes all transactions are negotiated. of semi-skilled, skilled and and assists potential foreign investment, the main aspects to The trademark legislation and all the Latin American Hardly any areas are closed to managerial (supervisory and investors interested in the the existing legal framework in (Law No. 22,362 and Law countries in South America. foreign investment, and there technical) personnel. development of new productive relation to FDI concern: No. 24,481 and its amendments) Its long-term objective is to are no restrictions on foreign activities in Argentina or the provides for the protection of establish a common market investment in the capital of Strong labour unions have been expansion and improvement a) Domestic treatment for trademarks that have been in a gradual and progressive local corporations. in existence for many years but, of existing activities. foreign investors; duly registered with the manner. concessions have with rare exceptions, unions and b) Lack of prior approval National Industrial Property been extended to many products With the re-establishment of individual workers have a generally To do so, the country is able to requirements or registration Institute (INPI). shipped by other LAIA countries. the exchange control regime in favourable attitude toward foreign count on a series of regulations of investment; In March 1991 the Presidents Argentina, the foreign currency investment and management. designed to promote investment, c) Access to all sectors of Under case law, protection is of Argentina, Brazil, Paraguay, accounts with banks were Social security costs constitute available to both domestic and the economy; also granted to de facto brands, and Uruguay signed a treaty limited. However, at present, a very sizable part of the cost foreign investors. d) Access to domestic incentive provided they have been used aimed at creating a regional certain kinds of banking accounts of doing business. Fringe benefit schemes; and to such an extent that they have common market (Mercosur) in US dollars are allowed. remuneration is significant only • Horizontal incentives: Instruments e) Possibility of transferring built up a degree of customer that became fully effective in at the managerial level. and measures to encourage profits and repatriating capital. allegiance. This registration is January 1995, when barriers As a result of the devaluation investment applicable to all regions subject to payment of a fee. between the four countries in of the Argentine peso at the The language of Argentina is and areas of economic activity. The sectoral distribution of the Protection is granted for a the way of exchanges of beginning of 2002, several Spanish. English is the foreign inward FDI stock of Argentina maximum of 10 years each time assets, services and factors regulations were issued to limit language most readily understood • Sectoral incentives: Incentive has been relatively stable since a trademark is registered, but were eliminated. The the transfer of money abroad. by the business community. regimes targeting specific 2004. Manufacturing, natural registration may be renewed integration of these economies They have been made more sectors of the economy. resources and services indefinitely, provided the is helping to overcome many flexible up to date. With respect to the ease of (including financial services) trademark has been used in of the limitations that each setting up and closing a business • Regional incentives: Provincial each accounted for approximately the last five years. Argentina country faces individually with Nevertheless, owing to the in Argentina, as opposed to more promotion regimes and support one third of the total stock on has adopted the international regard to international trade. sharp decrease in the current developed countries where the infrastructure for investment. average during this phase. classification of goods and This association is eliminating account surplus, in an attempt processes may be straightforward In terms of the geographical services used by the the disadvantages of small to control the increasingly local and affordable, the procedures Local legislation provides foreign distribution of the inward FDI International Intellectual domestic markets and strong demand of foreign exchange are not necessarily complex investment with protection and stock, Europe remained the Property Organization. protective barriers and (in particular US Dollars), but burdensome and involve an arbitration process for disputes main source for FDI in Argentina, economies of scale and the Government established a several steps. with Argentina. In addition, followed by North America and Barriers preventing access by increased competition should monthly limit per person for the Argentina has signed Bilateral South America. The increasing foreign investors to certain ensure a supply of better- purchase of foreign currency. Investment Treaties (BITs) and importance of Brazil as a home sectors of the economy have quality goods at lower prices. is a member of the Multilateral country for FDI in Argentina is been removed in Argentina. Investment Guarantee Agency a relatively new phenomenon.

10 Conducting business in Argentina Forms of business

Regulations referring to the borrowed for the acquisition of Business Etiquette Business may be conducted Companies Law sets rules therefore, the foreign company entrance of funds to the country, fixed assets and/or inventories in Argentina by incorporated for general partnerships will guarantee the debts of the obligation of liquidation of and the repayment term is Business is generally conducted companies, partnerships, (sociedades colectivas), in the branch with its own assets, foreign currency in the Exchange longer than two years. The in a relatively formal manner, individuals, and branches which there is joint and several notwithstanding the amount Market of payments of basic principle of the Foreign although forms of address have of foreign businesses. In all liability of all partners. Argentine of capital of the branch. of goods and services, remain in Investment Law is that foreign become more relaxed and use of cases, key information must be corporations are not allowed force. The terms to comply with and local investors are first names is a spreading practice. registered in the Public Registry to be partners. The Argentine Commercial the liquidation obligation vary guaranteed equal treatment. Business entertainment often of Commerce, and the conduct Companies’ Law does not between 60 and 360 days. involves formal social events and dealings of the enterprise 4. Limited partnership (sociedad accept the incorporation of Key Markets and Trade such as cocktail parties, are governed by the commercial en comandita, or S.C.A. or companies with only one Regarding the payment abroad presentations of products code and supplementary laws S.C.S.): This has two categories partner, consequently there of services, the tax authority Argentine exports are mainly and press conferences. and regulations. In the case of of partners, inactive or silent must be at least two partners; (AFIP) issued new rules of agricultural origin, and a general partnership of a partners, with liability limited according to an opinion issued disposing that any payment over industrial manufactures. Brazil non-commercial nature or to capital subscribed, and active by the Corporate Authorities a specific amount must be has, since the creation of the where the commercial code is or general partners, who do not In the City of , previously approved by them (or Mercosur common market, silent, the civil code applies. enjoy limitation of liability. where the vast majority of other government agencies). been Argentina’s largest companies are registered The transactions contemplated trading partner. Key trade The principal organisations 5. Registered branch of a foreign this requirement would be by this resolution must also be markets also exist with the are as follows: corporation: A registered complied with if at least 5% of approved by Argentinean US, the European Union and branch of a non-resident the corporate capital is held by (BCRA). Payment Asian nations, especially with 1. Corporation (sociedad anónima, corporation may perform a second partner. In the case abroad for other concepts may China, which has lately been or S.A.): An Argentine through a legal representative of a branch, this requirement be subject to further filing the second largest recipient of corporation is equivalent all the acts its head office is does not apply as the branch requirements. In addition, it exports and source of imports and, generally, similar to an authorised to perform. is only a representation of the should be particularly after Brazil. The trade balance incorporated ‘limited liability foreign company. From a foreign highlighted that a rule issued by showed a surplus in 2011, company’ in the United States, Foreign enterprises tend to exchange regulations point of the central bank in mid-2005 despite falling more than 11% the United Kingdom and prefer a corporation, an S.R.L., view, it could be convenient that requires that any transfer of against 2010. This was mainly elsewhere. The operation of or a branch as the local form the minority stockholding is not funds into Argentina as a result due to a significant growth of S.A.s is governed by statutes of entity. less than 10%. of a financial debt is subject to imports, boosted by the under which the name, object, a compulsory one-year economic recovery, which duration, capital, election, and Regarding these legal A branch does not require temporary and non-bearing exceeded the increase of the powers of the , structures, it is important to capital contributions unless interest deposit equivalent to exports. The trade surplus and all other rules and bylaws, consider that the responsibility it is engaged in certain specific 30% of funds brought to accumulated in 2011 was are established. of the foreign company in each activities (e.g. banking and Argentina, which must be kept US$10.3 billions. Exports case will be different. financing). All activities carried in a reserve (‘encaje’) for the reached US$84.3 billions, 2. Limited liability partnership out by the branch will be term of one year. an increase of 24% over the (sociedad de responsabilidad In this order, SRLs and attributable to the foreign previous year. Imports for the limitada, or S.R.L.): corporations are legal entities company and consequently, There are, however, some twelve months of 2011 were Similar to corporations except that are separate from their the foreign company will exceptions. For example, direct US$73.9 billions, an increase for a number of features such partners. In both cases, the be liable ‘in solidum’ for the investments in Argentine of 31%. Prices for exported as limited number of partners, responsibility of the partners obligations of the branch. companies (minimum products increased 17% and and the fact that Argentine is limited to the amount of the The local manager of the shareholding 10%) or real estate amounts 6%, while in the corporations are prevented from capital they subscribe. branch may also be held liable which are not subject to this case of imports, prices rose being partners, etc. Regarding the branch, the on a personal basis for such rule, or if the funds were 10% and quantities 19%. responsibility of the foreign obligations if the branch 3. General partnership (sociedad company for the acts of is improperly conducted. 12 colectiva): The Commercial the branch is unlimited and Setting up a business

Corporation The capital of a corporation must Corporations are required to be divided into nominative shares set aside at least 5% of their The procedure required for the of equal par value expressed in annual profits to a legal reserve, formation of a corporation Argentine pesos (AR$). The legal until 20% of capital has been consists of an inaugural meeting minimum capital is AR$12,000. accumulated in the reserve. The of shareholders at which draft At least 25% of the subscribed legal reserve may be used to statutes are approved, a board of capital must be paid up at the absorb accumulated losses, but directors and a syndic are elected, inaugural meeting, and the in this event no distribution of and capital is subscribed and paid. rest must be paid in during the subsequent profits may be A summary of these statutes following two years. made until the reserve has been must be published in the Boletín restored to its previous level. Oficial (Official Gazette), and the The minimum number of deed of the inaugural meeting, shareholders is two, and at least There is no restriction as to together with a copy of the this number must attend the the nationality of directors, publication, must be submitted to inaugural meeting to form the but a majority must be resident the Public Registry of Commerce corporation and to subscribe in Argentina, and all of them for registration purposes. the capital. There is no maximum must establish a special limit on the number of domicile in Argentina. Shareholders are entitled to shareholders. The liability of receive a copy of the annual shareholders is limited to the There is no restriction on the directors’ report and financial amounts they have subscribed repatriation of the capital and statements, which must also as capital. annual profits. be filed with the appropriate regulatory control body, the A capital reduction is required Members of the board are National Securities Commission when the accumulated loss has personally responsible to the (Comisión Nacional de Valores) eroded all free reserves and shareholders and third parties for listed corporations, Argentine 50% of the corporate capital. for the following: Central Bank (Banco Central If such a capital reduction is de la República Argentina) for not made, the law requires the 1. Failure to act loyally and banks and financial institutions, liquidation of the business. with the diligence of a good Superintendency of Insurance businessman; (Superintendencia de Seguros) Before acquiring shares or 2. Failure to perform their for insurance businesses, forming a corporation, non- legal duties; and the Superintendency of resident entities must file their 3. Malfeasance and acts that Corporations (Inspección General statutes with the Public are ultra vires. de Justicia) for all other entities. Registry of Commerce. Quarterly financial statements and information are also required by the (Bolsa de Comercio) for listed corporations and by the relevant regulatory control authorities for banks, financial institutions and insurance businesses.

14 Relations with controlling Contributions consisting of Until this formality has been There is no restriction on the If the documentation referred The ownership of corporate corporations (those which hold non-monetary assets must be completed, the limited liability repatriation of capital and annual to is not sufficiently explicit for interests, their equity value and sufficient participation, either fully transferred to the partnership of silent partners is not effective profits. A branch is taxed in full as the purpose, it should be the percentage they represent directly or through another at the time of formation. against third parties. It is essential an entity. The parent is liable in the complemented with the texts in the capital of the company in controlled corporation, to entitle that provision be made in the extent of its subscribed capital. of the foreign legal regulations which the interest is held, as them to the voting rights The quotas must be of equal value partnership deed for the division applicable to the company, and well as that of the fixed assets necessary for taking decisions and equal voting right. Partners of profits and losses between During the last years the if this were not to be conclusive referred to in sub-clause c) in the corporation involved). may hold more than one quota. individual active partners and Superintendency of Corporations it should be accompanied by a and their equity value should Controlled corporations (those Transfers of quotas are not silent partners. (IGJ), the Corporate Authorities certificate from a foreign attorney be evidenced by means of the controlled by the one involved on restricted by law, but may be in the City of Buenos Aires or notary public in the company’s financial statements the basis of the same guidelines) restricted under the partnership Branch of a jurisdiction in which the vast corresponding foreign jurisdiction and/or certification signed by an and related corporations agreement. The remaining foreign corporation majority of companies are with a certification of the validity officer of the company, whose (in which one holds more than partners have the right of registered, issued several of their matriculation or registration. powers to represent the 10% of the capital of the other) preference to purchase any The legal representative should resolutions affecting the activity company should also be must be shown separately in quotas up for transfer. submit an application for of foreign companies in Argentina. 2. Evidence that at the date of evidenced, extracted from the the annual financial statements registration of the branch, These regulations set forth application for registration they accounting records transcribed and notes thereto, insofar as The cost of formation is similar together with the following new requisites for foreign comply outside the Republic of in the corresponding corporate concerns receivables, to that for a corporation. documents: companies which participate Argentina with at least one of records. If laws applicable to the investments, liabilities, interest in local companies or for those the following conditions: company were not to require it charges and results of operations. Limited partnership 1. A copy of the deeds and rules which establish agencies, to prepare financial statements, Controlling corporations are that created and govern the branches or representative a) Existence of one or more other documentation may be required to file consolidated There are two classes of limited corporation (i.e., charter, bylaws). offices in our country. agencies, branches or permanent attached and the Superintendency annual financial statements as partnership. These are sociedad 2. Pertinent sections of the minutes representations, accompanying of Corporations will determine supplementary information. en comandita por acciones, of the appropriate parent Companies established abroad for the purpose certifications whether it is satisfactory proof. where the capital subscribed company group (such as board that request registration with the of their current validity issued Limited liability by the silent partners is divided of directors) resolving the Public Registry of Commerce for by a competent administrative In the case of ‘Vehicle companies’, partnership (SRLs) into shares of equal par value, establishment of the branch, which this Superintendency of or legal authority in the country which are companies whose sole and sociedad en comandita its assigned capital (if any) and Corporations is responsible, shall: in which located. purpose is to be a vehicle of Formation formalities and simple, where the capital is the appointment of its legal investment of other companies procedures consist only of the proportionately divided, but representative. 1. Inform if they are covered by b) Holding of participation in other in Argentina, the requirements preparation and execution of shares as such may not be issued. 3. A certificate of good standing prohibitions or legal restrictions companies in the form of pointed out under 2 above may a partnership contract deed, issued by the corporation on the development, in their non-current assets according be avoided, should the directly publication of a summary Formation is by means of a control authority in the country place of origin, of all their to the definitions arising from controlling company be able to thereof in the Boletín Oficial partnership deed. A sociedad of origin of the head office. activities or the principal part or the regulations or generally fulfil them. and its registration in the Public en comandita por acciones must 4. A power of attorney authorising parts of them. This information accepted accounting principles. Registry of Commerce. execute its deed publicly before the applicant to represent the will be evidenced by means of Finally, any foreign company a notary public who witnesses corporation. the bylaws or articles of c) Ownership of fixed assets in their requesting registration shall The capital must be stated in the agreement. For a sociedad incorporation of the company or place of origin, the existence and identify its shareholders. Argentine currency. It must be en comandita simple, the deed Formation costs are relatively their subsequent amendments, equity value of which should be fully sub-scribed, and 25% may be executed privately. low, as in the case of corporations. if any. evidenced with the elements thereof paid up by the partners In both cases, the deed and any Management is vested in a fully indicated in the previous clause. at the time the partnership is subsequent amendments must empowered representative, formed. The balance must be be published in summarised who may be of any nationality paid up within two years. form in the Boletín Oficial and but who should, for practical registered in the Public Registry reasons, be resident in Argentina. of Commerce. 16 Taxation in Argentina Corporation Income Tax

Net taxable business profits world-wide profits, less losses Income determination are subject to income tax and expenses incurred in at 35% rate. Legal entities obtaining and preserving Inventory valuation resident in Argentina are such profits. Self-assessment Inventory valuation is based subject to tax on worldwide procedures are established on the latest purchase. Thus, income (Argentine and foreign by rules and regulations. LIFO may not be elected source income). Legal entities Only in special circumstances for tax purposes. Conformity resident are able to claim or when difficulties arise in between book and tax any similar actually following normal procedures reporting is not required. paid abroad on foreign source are assessments estimated or income as a limited arbitrarily decided by the AFIP Capital gains by the rise of the income (Argentine Tax Authority). Capital gains and losses are tax liability due by this foreign taxed as ordinary income. income. Financial trusts Incorporated entities are Losses from the sale of shares organised in Argentina, required to file an income tax and other equity interests may non-financial trusts (other return by using the software be offset only against the than those in which the settler provided by the AFIP by the same type of income. is an individual or juridical second week of the fifth month person resident in Argentina following the financial year- Foreign income but is also the beneficiary of end. At this time, they are also Foreign income received or the trust), and closed mutual required to pay the balance of held undistributed (in case funds organised in Argentina, tax, i.e., the gross total liability of investments in non-stock are subject to a similar income less payments on account and companies) abroad by resident tax treatment. tax previously withheld. Late corporations is subject to filing is subject to penalties. tax. Residents who have Also Corporations, limited investments in companies liability partnerships, branches The tax authorities require located in a , and as well as other entities are separate financial information are obtaining mainly passive required to make a flat and final to determine income tax. income, are subject to income of 35% Such information must be Argentine taxation on from dividend payments or certified by independent the profits obtained by these profit distributions to resident public accountants. entities on an accrual basis, or non-residents beneficiaries, in the calendar year to the extent that the amount Advance payments on corresponding to the entity’s of such dividends exceeds account, computed in financial year-end regardless the net accordance with instructions of the distribution date. Tax determined at a corporate issued from time to time losses from foreign source level in accordance with the by the AFIP, must be made can only be offset against general tax rules. during the year. For income income of foreign source. tax, these payments represent Business income is assessable a percentage (currently for income tax for any particular 99.97%) of the tax assessed calendar year on the basis of for the previous year.

18 rules Taxes Directors’ fees Tax incentives Oil and gas industry development and production The transfer pricing All taxes levied on goods or Amounts up to the higher Through Law No. 26,154 of biotechnology and grants regulations governing activities that generate taxable of 25% of after-tax profit or Mining activity attractive benefits are granted benefits for tax and social inter-company transactions, income are deductible for AR$12,500 per individual are Law No. 24,196/93 established to the oil and gas sector to security contributions which adopt principles similar to income tax purposes. deductible in the financial year an investment regime for mining encourage the exploration can be claimed if specific those of the Organization to which they refer, provided activity and is applicable to of the nation’s hydrocarbons requirements are met. for Economic Cooperation Depreciation and depletion they are approved and available individuals and legal persons. reserves. This legislation and Development (‘OECD’) Depreciation is generally for the director before the Mining ventures included within grants special incentives to zones pursuant to which companies computed on a straight-line due date of the tax return, this regime enjoy fiscal stability investments in underdeveloped The free trade zones offer must comply with the arm’s basis over the technically or in a later year of payment. (i.e., tax rates will remain regions, speeding exporters the possibility to length principle in order estimated useful life of the basically the same) for a term of reimbursement of VAT (after import free from to determine the value of assets or, alternatively, over Thin capitalisation 30 years, except for VAT, which a three-month period inputs duties, statistics rate and goods and services in their their standard useful lives Thin capitalisation rules will adjust to the general regime. will be credited against other VAT, all the necessary transactions with foreign (e.g., machinery and equipment apply as a restriction on Furthermore, the regime grants federal taxes or returned to equipment for construction related companies. – 10 years; furniture – 10 years). the deductibility of interest incentives for income tax, tax the taxpayer), exempting from of a ‘turn-key plant’ within the Depreciation of buildings and arising from debts of a on assets, import duties, and import duties, and offering zones. Furthermore, exporters Deductions other constructions on real financial nature, contracted any other tax for introduction an accelerated depreciation manufacturing within the zones estate is 2% per annum on by taxpayers with controlling of certain assets. – three years – for income enjoy the benefit of buying General rule cost (on a straight-line basis), non-resident entities and can tax purposes. In addition, a supplies and raw materials Expenses necessary to unless it can be proved that be summarised as follows: Forestry three-year relief from minimum from third-party countries, generate, maintain and useful life is less than 50 years. Law No. 25,080 established notional income tax, is provided without having to pay duties preserve taxable and • Interest subject to a 15.05% an investment regime for by the law. or taxes that lead to related to the company Other significant items withholding (i.e. paid on loans plantation, protection and increased prices. activity, income is usually granted by certain banking maintenance of forests. It There also exists a Promotion tax deductible, with a few Donations institutions), the portion contains rules similar to those Regime established by the Customs authority regulating exceptions, to the extent When made to societies of interest stemming from for mining activity tax incentives. Law No. 26,190, which these goods considers them they are fair and reasonable. and associations expressly financial liabilities exceeding grants similar benefits for the as stored in a third-party exempt from income tax, two times the shareholders’ incentives exploration of alternative source country; therefore, incoming Net operating losses donations are admissible equity are not deductible Exports of goods and services of energy (e.g., wind energy). products are subject to Net operating losses (NOLs) deductions up to a maximum for tax purposes and treated are exempt from value-added inspection with the sole purpose may be carried forward five of 5% of the donor’s net as dividends. and taxes. The temporary Software of classifying quantity and type. years. Loss carrybacks are taxable profits, provided importation of raw materials Law No. 25,865 and 25,922 In other words, goods enjoy a not permitted. Furthermore, certain requirements • Interest subject to a and intermediate and packaging establish that the development duty free status until they enter foreign source losses must are fulfilled. 35% withholding tax, goods for the manufacture of of software in the country is the Argentine customs territory. be offset by income from is fully deductible. products for export is free from considered an activity similar Goods may remain in the free similar sources. Losses Representation expenses import duties with the obligation to industrial activities and it zone for a maximum period on derivatives and hedging If adequately documented, • According to the Regulatory of offering sufficient guarantees grants benefits for tax, social of five years. transactions can be only representation expenses Decree of the Income , for the import. A reimbursement security, financing and other offset against income are permissible deductions the thin capitalisation rules regime is in place for VAT purposes which can be claimed Tierra del Fuego from the same transaction. up to 1.5% of the amount would also be applicable to any credits paid to suppliers in if the specific requirements are Certain companies that are of salaries accrued during case where a lower withholding relation to the export activity. met. This regime was recently set up in this province enjoy the fiscal year. rate of 35% is applicable (for extended up to 2019. a general and instance, interest payments to important benefits in customs a controlling company resident Biotechnology matters, based on a system of certain countries). Law No. 26,270 established established by Law No. 19,640 a promotion regime for the and supplementary regulations. 20

1. Withholding from payments of interest and royalties to non-residents is based on Tax exemption includes income fiscal year, immediately a flat rate of 35% applied to an assumed percentage gross profit margin. This margin is Minimum notional tax, tax on minimum notional preceding the date of not contestable, but the resultant rate may be limited by a double tax treaty. The general Income tax income, tax on personal wealth payment or distribution. margin for interest paid for credits obtained abroad is 100%. However, a margin of 43% is applicable (1) if the debtor is a local bank, (2) if the creditor is a foreign financial institution and excise tax. The VAT benefit located in a country not considered as a low or no tax jurisdiction or in countries that have This is a type of alternative is release from payment of the Other payments signed an agreement with Argentina for exchange of information and have no bank secret, minimum income tax, and technical balance of the tax Other payments to residents which are under the supervision of the respective central bank, (3) if the interest is paid is payable by companies, on a loan dedicated to the purchase of tangible assets other than cars, (4) if the interest is (tax debits less credits). Also and to non-residents are paid on debt certificates (private bonds) issued by local companies and registered in certain partnerships and other business contemplated is a reduction subject to withholding tax countries that have signed an agreement with Argentina for the protection of investments, entities organised or established of the prevailing rate for tax on rates as following: and (5) on interest paid on time deposits with local banks. ‘Royalties’ covers a variety in Argentina (including branches of concepts. The rates given in this column relate specifically to services derived from financial transactions and the agreements ruled by the Transfer of Technology Law, as follows: of foreign companies, certain exemption from taxation on the Interest Royalties1,2 a. Technical assistance, technology and engineering not obtainable in Argentina – 21% (35% trusts and closed mutual funds). transfer of fuels. In customs, on assumed profit of 60%). % % b. Cessation of rights or licenses for invention patents exploitation and technical assistance the benefits are very attractive. obtainable in Argentina – 28% (35% on assumed profit of 80%). The rate is 1% on the value of 3 4 Resident corporations 6 or 28 6 c. On non-registered agreements the rate is 31.5% (profit of 90% is assumed). fixed and current assets. 2. Payments to non-residents (only) for ‘royalties,’ rentals, fees, commissions, and To enjoy the benefits envisaged 3 4 Certain activities must consider Resident individuals 6 or 28 6 so on, in respect of the following are subject to withholding at the rates given below on the in Law No. 19,640, it is basis of assumed gross profit margins (Note 1) unless limited by as taxable a percentage of those necessary to demonstrate the Non-resident corporations and individuals: a double tax treaty. assets (i.e. banks and insurance origin of the goods produced. % companies: 20%). The income Non-treaty 15.05 or 35 21 or 28 Freight and passenger bookings (other than those covered by special treaties), news and feature services, insurance underwriting. 3.5 tax corresponding to the same In order to obtain these benefits, Treaty: Containers 7. 0 fiscal year may be recognised it is necessary to file a project Australia 12 10 or 15 Copyright 12.25 as a payment on account of with the competent authorities. Rental of movable assets 14.0 this tax up to an amount which 0 or 125 3,5,10 or 15 Motion picture, video and sound tape rentals and royalties; radio, television, telex and telefax transmissions; any other means for projection, reproduction, matches the latter. If a balance Withholding taxes transmission, or diffusion of image or sound; sale of assets located in Argentina9,10 1 7. 5 of minimum notional income Bolivia 15.05 or 35 21 or 28 9 Rental of real estate 21.0 tax remains and has to be paid Brazil 15.05 or 35 21 or 28 Any other Argentine source income (unless the non-resident is or was Equalisation temporarily resident) 31.5 after subtracting the income Corporations, limited liability Canada 12.5 3,5,10 or 15 3. The higher is applicable on non-registered taxpayers. On interest paid tax, this excess amount may partnerships, and certain to corporations by financial entities or stock exchange/open market brokers, income tax be carried forward and counted Chile 15.05 or 35 21 or 28 must be withheld at 3% (10% if not registered); individuals are tax exempt. other entities are required to 4. Resident corporations and individuals who are registered for tax purposes are subject to as a payment on account of the make a flat and final income Denmark 125 3,5,10 or 15 6% withholding (28% if not registered). income tax exceeding this tax tax withholding of 35% from 5. Interest is exempt if paid on credit sales of machinery or other equipment, specific bank liability for any of the following 15 3,5,10 or 15 loans at preferential rate or loans by public entities. dividend payments or profit 6. The treaty limits taxation of interest to 20%. 10 fiscal years. distributions to resident or 15.05 or 206 18 7. The 10% rate is applicable to interest on credit sales of capital equipment, any bank loan or any financing of public works; otherwise 15%. non-resident payees, to the 10 or 157 15 8. Interest paid on loans with guarantee of the Norwegian Institute for Credit Guarantees, or Corporate residence extent that the amount of such paid in relation to imports of industrial equipment is tax exempt. dividends or profit distributions Italy 15.05 or 205 10 or 18 9. Deduction of actual costs and expenses may be optionally exercised. Corporate residence is 10. Gains on the sale of shares obtained by foreign beneficiaries are generally exempted from exceeds the taxable income 12 3,5,10 or 15 income tax, except for those companies, permanent establishments, or other entities determined on the basis of the distributing company, residing abroad that according to their bylaws of centres of activity and determined by applying the Norway 12.5 8 3,5,10 or 15 or the legal regime applicable to them are prevented from developing activities within their is unaffected by place of country of incorporation. general tax rules (i.e., without Spain 12.511 3,5,10 or 15 11. By applying the ‘most-favoured-nation clause’ inserted in those Treaties, interest rate may incorporation or management. considering any exemptions, be limited at 12%. Centres of activity in 11 abatements and other Sweden 12.5 3,5,10 or 15 Argentina of non-Argentine It is important to mention that Argentina has terminated its tax treaty with : The 5 adjustments arising from United Kingdom 12 3,5,10 or 15 Argentine Government has formally notified the Swiss authorities that it has terminated corporations are treated as special promotional laws) the provisional application of the double tax treaty signed by both countries in 1997. permanent establishments. included in their retained Notes – the numbers in parentheses refer to the following notes: In June of 2012, the Argentine government has also terminated its tax treaties with Chile earnings at the end of the and Spain. 22 Personal Income Tax

Corporate taxpayers Interest and Penalties Argentine nationals living in Interest (except for interest may be deducted from purposes and so both the local Following, we briefly Argentina are considered as tax on savings accounts and time the related fringe benefits company and the employees Compliance summarise the applicable residents. In general, foreign deposits in local banks), rents, includable in taxable income. will be subject to the Self-assessment procedures interest and penalties for nationals acquire residence royalties, professional and other corresponding regulations. are established by rules and federal taxes: for tax purposes when they fees, pensions, annuities, and all Mortgage and other interest regulations. Only in special have been in the country for other income, except dividends are not deductible unless it All the compensation paid in circumstances or when • Interest is payable on all 12 months of a particular from local corporations are generated taxable income or, Argentina or abroad for work difficulties arise in following overdue amounts. Interest taxable year, or when they subject to income tax. in case of dwelling house, it performed for the local company normal procedures are for late payment is currently have obtained a permanent does not exceed AR$20,000 will be considered as local assessments estimated or due at a rate of 2% per month. residence visa from the national Income tax is assessable on annually. Other expenses, such compensation and should be arbitrarily decided by the AFIP. immigration authority. Tax individuals on a calendar-year as living, personal and family reported to the tax and social • Additionally, the following residents are taxable on world- basis. The related return must expenses, are not deductible, security authorities, as the case Tax returns and assessments penalties may be imposed: wide income, and a foreign tax be filed, when applicable, and with the following exceptions. may be, and included in the Incorporated entities are credit is available. the balance of tax paid, in salary slips and recorded in required to file an income - Tax omission, range from mid-April or mid-May of the 1. Pension and other social the local labour books. tax return by using the software 50% to 100% on the As an exception to the above following year. security contributions. provided by the AFIP by the unpaid tax (principal). rule, foreign nationals assigned 2. Donations to tax-exempt The local employer must second week of the fifth month to Argentina for working The following persons do charitable institutions up withhold income tax on an following the financial year- - Failing to act as a withholding reasons and for a period not need to file a return. to a maximum of 5% of actual and monthly basis end. At this time, they are also agent on payments abroad, not exceeding five years are net income. and make the corresponding required to pay the balance of range from 100% to 400% considered as non-residents for 1. Employed persons without 3. Life and private retirement payments to the tax authorities tax, i.e., the gross total liability on the unpaid tax (principal). tax purposes. Non-residents are sources of income other than insurance premiums and funeral through monthly withholding less payments on account and taxed only on their Argentine- compensation, provided tax expenses up to a maximum tax returns. Individual tax rates tax previously withheld. Late - A situation characterised as source income. has been appropriately withheld established from time to time range from 9% to 35%. Personal filing is subject to penalties. a tax fraud, range from 200% at source by their employers. by the tax authorities. deductions are available. to 1.000% on the unpaid Foreign nationals working 2. Persons whose total assessable 4. Contributions to third party The tax authorities require tax (principal). temporarily in Argentina who income does not reach taxable medical plans up to 5% of The local entity must issue separate financial information will not spend more than six limits after deduction of net income. salary slips every month for to determine income tax. Such - Not filing Transfer Pricing tax months in the country are personal and family allowances. 5. A total of 40% of other medical each employee included on its information must be certified return / study: AR$20,000 treated as foreign beneficiaries. 3. Foreign beneficiaries who expenses up to a maximum of payroll, considering the total by independent public per failure. They are taxable only on have had tax withheld from 5% of net income. compensation mentioned above. accountants. Accountants are Argentine source income at their Argentine-source profits usually employed to prepare - Not filing information a flat rate of 24.5% (i.e., 35% in full and final settlement. Tax Rates Employer social security returns or are at least consulted regimes tax returns: of a hypothetical net income contributions add up to 23% with regard to their preparation. AR$10,000 per failure. content of 70%). Deductions The tax rates are graduated, to 27% of payroll cost. There is ranging from 9% to 35%. a compulsory thirteenth month All income and gains of All losses and expenses salary. There is no restriction Argentine and foreign sources incurred in obtaining and Payroll Taxes regarding the employment of are subject to income tax, preserving taxable income foreigners, provided they hold except for certain capital are deductible. Where fringe Foreign and local nationals working visas. gains specifically excluded or benefits include lump-sum working for a local company exempted, and for lottery and allowances for car, travel, must be included on the local gambling winnings, which are entertainment, etc., only actual payroll and will be considered subject to a specific tax. expenses incurred, supported as a local employee for local by appropriate documentation, labour, tax and social security

24 VAT

VAT is assessable on the sales Expo rts of goods and services value of products (e.g., raw are taxed at 0%. Nevertheless, materials, produce, finished input VAT related to these or partly finished merchandise) transactions can either be with few exemptions, and used as a credit against output on most services (such VAT or refunded pursuant to as construction, utilities, a special procedure. professional and personal services not derived from Services rendered within the employment, rental, etc.) country shall be deemed to be and on import of goods and exports if they are effectively services. The general tax rate is applied or economically utilised 21%, although certain specific outside the country. items are subject to 10.5% and 27% rate. It is payable by filing VAT law also establishes that monthly tax returns. services rendered abroad but utilised in Argentina The increased rate of 27% (‘importation of services’) applies on ‘utilities services’ are subject to tax through a not rendered to final self-assessment mechanism. consumer in family (e.g., telecommunications, There is also a system of household gas, running standard VAT collections water, sewerage and energy). and withholdings under which liable parties (who A reduced rate of 10.5% will are registered as such), apply on certain transactions, custom and other entities such as (but not limited to): are required to act as a VAT collection or withholding agent • Construction of housing; with regard to sale, purchase • Inte rest and commissions on or import transactions. loans granted to registered taxpayers by financial institutions; VAT paid on purchases, • Sales and imports of living final imports, and rental bovine animals, supply of automobiles, not of publicity and advertising considered as inventory, in some specific cases; cannot be computed by • Any passenger transportation the purchaser as a VAT operating inside the country credit. The same tax treatment when the distance does not applies to other services, exceed 100km; such as those provided by • Medical assistance in restaurants, hotels and garages. some specific cases; and • Certain capital goods depending on Custom Code. 26 Audit and accountancy Other taxes

Excise Taxes capital of local companies a civil, financial or commercial Accounting principles Principle of correlation and consequently does not owned by individuals or nature of which there is written between income impact the annual accounts This tax is assessable on a wide undivided estates domiciled evidence or, in certain instances, 1. The accounting principles and expenditure and their true reflection of variety of items sold in Argentina in Argentina or abroad, and/or that are the subject of entries in applied should ensure that The result for the fiscal year the actual situation. (not on exports), principally on companies and/or any books of account. The average annual accounts are clearly is formed by the revenue for tobacco, wines, soft drinks, other type of legal person tax rate is 1% applicable on the stated and properly reflect the the period less expenditure in Statutory requirements spirits, petrol, lubricants, domiciled abroad. It shall be economic value of the contract. net worth, financial situation the same period incurred to insurance premiums, car tyres, assessed and paid directly and results of the company. obtain such revenue and profits Mechanical and other mobiles services, perfumes, by the local company, as Import & Export duties and losses not clearly linked posting means jewellery and precious stones. a full and final payment on 2. Company accounting should to the company’s activity. Compliance with the formal behalf of the shareholders The levels of import duty be performed in accordance requirements provided by Tax on financial transaction (the issuing company has currently range between 0% with the mandatory Non-offset principle the Code of Commerce for – on credits and debits on the right to recover from and 35%, except in cases where application of the following In general terms it is not the carrying of books may bank accounts the shareholder the tax paid). specific minimum duty is applied accounting principles: possible to offset asset be waived if the control or which involve merchandise and liability items on the authority or the Public Registry Bank account movements The applicable tax rate is 0.5% with a specific treatment. These Principle of prudence balance sheet, or income and of Commerce authorises their (deposits and withdrawals) on the value of the participation, percentages were established Only realised profits at the expenditure items making up replacement by computers, and other movements that which is generally calculated considering the individual end of the fiscal year shall the statement of income, as per mechanical, magnetic or other do not utilise them are subject on the difference between competitive conditions prevailing be booked. the annual financial statement means, except in the case to this national tax at the assets and liabilities arising from in different production sectors format unless they can be of the Register of Inventory following rates: the financial statements closed and the relative advantages of Going concern principle cancelled considering the net and Balance Sheets. at 31 December or during the contributing to the introduction The duration of the company amount. The various asset and The Journal may be • 0.6% of deposits and respective fiscal year. of equipment and technology is, in practice, considered liability items shall be valued posted with global withdrawals in bank for local industry. In general, unlimited. Therefore, the separately. amounts covering periods accounts opened in local merchandise originating from application of accounting of less than one month. financial entities; (gross income tax) LAIA ( Integration principles shall not be Principle of uniformity The accounting system • 1.2% of any transactions Association – ALADI) countries intended to determine net Once a criterion has been should enable identification made in bank without Each of the 24 jurisdictions is entitled to preferential duty. worth for purposes of full adopted in relation to the of transactions, the using a bank account. into which Argentina is divided or partial disposal, or to application of accounting corresponding debtor and imposes a tax on gross In the case of export establish proceeds in principles, in those cases creditor accounts, and their Exemptions and reduced rates revenues from the sale of transactions, goods are valued the event of liquidation. in which alternatives are subsequent verification. could be applied based on the goods and services. In most based on the FOB clause and permitted, such a criterion subject type and/or its activity. of them, exports of goods are the approach is based on their Principle of due registration should be maintained General principle exempt, and certain industries theoretical value, rather than Economic events should over time as long as the When amounts involved The 34% of tax paid on bank are subject to a reduced a positive basis as in the case be recorded when rights or assumptions leading to are of minor significance, account deposit transactions, tax rate. Rates, rules and of imports. obligations arising from them the choice of that criterion for purposes of appropriate or the 17% of the tax paid assessment procedures are have occurred. remain unaltered. interpretation, they shall on other movement of funds, determined locally. Since March 2002, definitive be included under the respectively, is creditable exports of all goods are subject Accrual principle Principle of heading Sundry. against income tax and Stamp tax to export duties.The rates The posting of income and relative importance minimum notional income tax vary from 5% to 45%, expenditure should be made It shall be possible to waive Restatement and/or respective tax advances. Levied by each of the 24 depending on the tariff code on the basis of the actual flow strict application of certain Financial statements jurisdictions, and applies of the merchandise (while 5% from the goods and services accounting principles as corresponding to full years principally to contracts and is the current typical applied they represent, regardless long as the relative or interim periods within agreements, deeds, mortgages, higher rates are considered for of the moment when the importance in quantitative the same fiscal year must This annual tax is levied on and other obligations, exports of agricultural products monetary or financial flow terms of the change from be prepared in constant 28 the shares or holding in the agreements and discharges of or hydrocarbons). derived from them takes place. such action is not material, units of currency. Balance sheet financial debt, debt with 4. On matters of The balance sheet parent, subsidiary and presentation in general: should contain the related companies, following information: debentures issued by a) Information should the company, dividends be grouped so that it 1. Under assets: payable and debt with social is possible to determine security and fiscal entities; separately and to total a) Cash in hand and in Banks, current and non-current other value items with similar Ib) Provisions for likely assets, and current and liquidity, certainty and effect, company contingencies; non-current liabilities. and foreign currency; Current assets and Ic) All other items that, by liabilities are those that b) Credits from their nature, represent are realised or become corporate activities; a liability to third parties; due within twelve months from the balance sheet c) Inventory, grouped according Id) Income collected in date, unless circumstances to the company’s activities; advance, and revenue recommend some other corresponding to future basis for definition; d) Investments in fiscal years; government securities, b) Rights and obligations shares and debentures; IIa) Company capital, identifying should be disclosed ordinary shares and other indicating whether e) Fixed assets, with an classes of shares and they are documented, indication of their the situations covered by secured by means accumulated depreciation; section 220 of Corporate of a pledge or otherwise; Commercial Law; f) Intangible assets, at cost, c) Foreign currency assets with an indication of IIb) Legal, contractual and and liabilities should accumulated amortisation; statutory reserves, free be disclosed separately reserves, and those under their corresponding g) Expenditure and charges arising from technical headings; to be accrued in future appraisals and years or allocated to them, issue premiums; d) The various items may not in the case of the latter be offset among themselves. deducting the corresponding IIc) Profits from previous accumulated amortisation; years, and if applicable Statement of Income losses pending deduction; The statement of income h) All other items that because or profit and loss account of their nature should IId) All other items that should disclose: be included as assets; because of their nature should be included as capital I. a) Proceeds of sales or services, 2. Under liabilities: liability accounts and results; grouped by type of activity. The cost of goods sold or Ia) Debt, segregated into 3. Assets in custody, guarantees, services provided should be commercial, bank and notes discounted and all subtracted from each total, to other memorandum accounts; determine the result; 30

b) Ordinary administration, The income statement Cop ies Other reserves Other comments sales, financing and other should be presented so Copies of the balance sheet, Reserves in addition to those The Argentine Securities expenditure to be charged that it discloses separately statement of income for the required by law may be set Exchange Commission (CNV) has to the year, with separate the gains and losses from year, the statement of changes up in the case of any type of established for listed entities – disclosure of amounts of: the company’s ordinary and in shareholders’ equity, notes, company, as long as they are either due to its shares or prívate extraordinary operations, complementary information reasonable and correspond bonds – the applicability of IFRS 1) Payments to administrators, establishing the net gain and attached exhibits should to a prudent administration. regulation as from January 1, directors and statutory auditors; or loss for the year to which be made available to partners 2012. Such a set of rules would those of the previous years or shareholders at the corporate Profits optionally be applied by non- 2) Other fees and compensation will be added or subtracted. headquarters not less than Previous years’ losses. Profits listed companies as well. paid for services; The statement of income fifteen days prior to their shall not be distributed until should be complemented formal consideration by them. losses from previous years 3) Salaries and wages and by a statement of changes have been made good. corresponding contributions in shareholders’ equity. This Divi dends to social security; should include the causes of Dividends will be unable to Res ponsibility of the changes during the year be declared or distributed to administrators and 4) Research and in each of the accounts making partners unless they represent statutory auditors (syndics) development expenditure; up the shareholders’ equity. realised, liquid profits arising Approval of the financial from a balance sheet prepared statements does not imply 5) Royalties and fees for Compl ementary notes according to law and company approval of the performance technical services and Should the corresponding bylaws that has been approved of directors, administrators, other similar items; information not be contained by the competent corporate managers, members of the in the financial statements authority. Profits distributed that surveillance council or syndics, 6) Advertising and or their footnotes, notes and contravene this rule are judged whether or not they have voted publicity costs; exhibits should be attached to be improper payment. on the statements, nor does it that will be considered an absolve them of responsibility. 7) Taxes, rates and contributions, integral part of the statements. Approval/Challenge with separate disclosure The right to approve or Minutes of interest, fines and surcharges; Annua l report challenge financial statements A special register must be The company’s administrators and the adoption of resolutions kept, for the minutes of 8) Interest paid or accrued, should make known details of of any kind in their regard is meetings of professional with separate disclosure the state of the company in inalienable, and any agreement organisations observing the of interest on debt to suppliers, the various businesses carried to the contrary is null and void. requirements of commercial banks and financial institutions, out, as well as their opinion on recordkeeping. Board meeting and subsidiaries, parent the outlook for operations and Lega l reserve minutes must be signed by and related companies; any other aspect considered Limited liability corporations those attending. Shareholders’ necessary to be made known and stock companies must set meeting minutes should be 9) Amortisation, depreciation to illustrate the current and up a reserve of not less than drawn up and signed within and provisions; future situation of the company. 5% of realised, liquid profits as five days of the meeting by the determined from the statement chairman and the shareholders c) Extraordinary income and of income for the year, until designated for that purpose. expense during the year; reaching an amount equivalent to 20% of the company’s capital. d) Adjustments from gains and losses in previous years.

32 Human Resources and Employment Law

The Argentine workforce is Wages and salaries Health and safety Work permits and They are not obliged to take highly qualified. Argentina The minimum wage is $2,300 Workers are provided with visa requirements up citizenship, nor make possesses labour laws that are per month. Each sector of access to a welfare fund and Local regulations on extraordinary forced contributions. aimed at safeguarding the rights activity uses its collective work accident insurance and immigration establish three They can obtain citizenship by of workers. In this connection, bargaining agreement to set the contribute towards their future types of residence: permanent, residing for a continuous period of and with the policy of bringing wage payable according to the pension. These social benefits temporary and transitory. To set two years in Argentina, although down unemployment levels, a job performed. are funded out of payments by up a business in Argentina it is the authorities may reduce this number of rules have been workers and employers to the necessary to have a permanent period upon request in the case issued for encouraging the Thirteenth Salary social security system totalling or temporary residence permit. of demonstrated service to the hiring of workers, and which Employees receive an extra 17% and 23% or 27% There are no restrictions as to Republic. reduce the related employer month’s salary by law (depending on the activity and the nationality of company contributions to social security (‘aguinaldo’), paid in two level of income) respectively of directors, but they must have Overtime. Staff Hierarchy funds. The labour laws also set half-yearly instalments in June the salary paid by the employer. a legal domicile in Argentina. By Law No. 26.597 only regulations for the employment and December each year Directors and Managers are of women and minors, govern equal to 50% of the highest The social security withholdings To be able to hire foreign workers, exempted from the maximum working conditions and hours, salary received during the (17%) are subject to a cap that the work contract must be in line working time, so all other job call for the payment of wages corresponding semester. is currently $19,070.55. This with labour legislation categories are subject to for sick time, set differential pay cap is increased in March and requirements in Argentina. payment of overtime. rates for overtime and relatively Hours worked September of each year. dangerous work, and establish The working day is a maximum Restrictions on employment Agricultural Work Scheme annual paid vacations, in of 8 hours, or 48 hours per week. Termination of employment Argentina does not establish Law No. 26.727 constitutes addition to requiring the Severance indemnity is restrictions or quotas for a new regime for rural staff. payment of indemnities in the Paid holidays and vacations equivalent to one month of the foreign workers, as long as they It introduces various regulations event of dismissal. Under a The minimum vacation highest monthly wage received comply with immigration and provides for a reduction in 1996 law, employers are entitlement is 14 calendar by the employee during the regulations, in other words, age and years of service for the required to insure labour days, and the maximum is 35. previous year, or during the as long as they have a valid purpose of obtaining ordinary accident risks. Employers must period worked if less, for each residence permit. Foreigners retirement, employers must also take out compulsory life Equal opportunities year of work or fraction thereof hired to work in Argentina must pay an additional employer insurance for all employees. Employers are required to greater than 3 months. The have a work permit and legal contribution of 2%. treat all employees in the same highest remuneration taken as a residence in Argentina. Labour law requirements manner in identical situations. base cannot be greater than Unequal treatment will be three times the monthly average Living conditions Working conditions deemed to exist when there is of all the salaries considered in Foreigners in Argentina enjoy Working conditions are laid arbitrary discrimination on the the collective bargaining the civil rights common to all down in Law No. 20,744, basis of sex, religion or race, agreement applicable to the citizens: they may carry out as well as collective bargaining but not when the difference worker in question. The minimum their industry, trade or agreements, and depend on in treatment is based on the severance compensation cannot profession, own, purchase and the kind of activity carried out. common good, such as in cases be less than one month of the sell real estate, navigate rivers In general, hygiene and work based on greater efficacy, highest basic monthly wage and coastal waters, freely safety conditions have industriousness or dedication earned by the employee during practice their religion, and make been established. to work by the employee. the last year of service. wills and marry in accordance with the law.

34 Trade

Argentina is a member of the Argentina and Brazil had already • Harmonisation of foreign Latin American Integration been developing a similar trade, agricultural, industrial, Association (LAIA; in Spanish, bilateral process of integration transportation, and ALADI, for Asociación in certain specific areas, and communications policies and Latinoamericana de Integración), the favourable experience legislation to ensure similar which was created by the acquired will be further conditions for companies in Montevideo Treaty of 1980. This extended within Mercosur. all four member countries, to association includes Mexico and attain greater competitiveness. all the Latin American countries Treaty of Asunción in South America. Its long- The treaty establishing • In general terms, common term objective is to establish Mercosur, the Treaty of external tariffs have been a common market in a gradual Asunción, provides for established so that products and progressive manner. the following: entering Mercosur will be subject Duty concessions have been to the same duties, regardless extended to many products • Free circulation of goods, of their point of entry. shipped by other LAIA countries. services and productive elements between member • Complementary sector- Mercosur (Southern countries through the by-sector agreements Common Market) elimination of customs duties may be reached to optimize In March 1991 the Presidents of and non-tariff restrictions that the use and mobility of Argentina, Brazil, Paraguay, and might hinder or prevent trade. resources and attain Uruguay signed a treaty aimed improved production levels. at creating a regional common • Common external tariffs market (Mercosur) that became and a common trade policy • Each country has established fully effective in January 1995, concerning third countries, a List of Exceptions, itemising when barriers between the with a coordinated participation products to be initially excluded four countries in the way of in regional and international from the tariff reduction exchanges of assets, services economic and trade forums. agreement. The Treaty of and factors were eliminated. Asunción provides for the • Mechanisms for the gradual elimination of such items. The integration of these permanent exchange of economies is helping to information on regional • To ensure fair trading overcome many of the interests have been conditions, member limitations that each country implemented. countries enforce their existing faces individually with regard legislation to prevent dumping to international trade. This Tariffs and tax reduction and the importation of goods association is eliminating the programme measures taken at subsidised prices or from disadvantages of small domestic are set out below sources that apply other unfair markets and strong protective • In general terms, a progressive, trading practices. barriers and economies of scale lineal and automatic reduction and increased competition in tariffs and other Policies are coordinated to should ensure a supply of better- non-tariff restrictions. provide for common rules quality goods at lower prices. on commercial competition. The Mercosur common Exports On the other hand, Non- of additional documentation Other taxes market became effective Special incentives for automatic Import Licensing (which is not part of the In addition to customs duty, on 1 January 1995. Intrazonal exports include exemptions shall not have trade-restrictive regulation), such as lists of prices imports are also subject to trade customs duty has been from excise taxes and zero or -distortive effects on imports of both imported and domestic the following taxes: eliminated for most goods, rating for value-added tax additional to those caused by products commercialised locally while time frames for the as well as import duty the imposition of the restriction. in 2010, 2011 and 2012, and • A statistical charge, total elimination of such duty drawbacks, non-taxable In relation to the period for an export plan, among others. which is a tax equal to have been agreed upon for tax refunds and preferential processing applications, shall This additional information, in 0.5% of the customs value the exemptions. Common financing arrangements. not be longer than 60 days. whole or separately, could be of the goods on a CIF basis. customs tariffs have been requested or not, depending on Notwithstanding the rate set for all countries for Trade barriers In February 2012, the the consideration of the local and the method of calculation, imports from outside the As noted above, the government implemented authorities. In connection with various caps have been set zone, with some exceptions depreciation of the exchange a new prior condition for the import duties, they range in this connection, as a result for which time limits have rate raised an ER against importation of goods into between 0% and 35%, except in of which the total payable been set for full convergence. imports. the customs territory. The cases where specific minimum cannot exceed US$500 Resolution establishes that duty is applied or which involve for shipments higher than In view of the differing Export duties are applicable to importers are subject to submit merchandise with a specific US$100,000. stages of economic all definitive exports of goods. an advance import sworn treatment. These percentages development in the four statement (‘DJAI’), prior were established considering the • VAT at a standard rate of 21%, countries involved, it Import restrictions issuing the Purchase Order individual competitive conditions plus a further VAT collection was agreed to recognise Imports of pharmaceuticals, or the document used for prevailing in different production (excluding exceptions) of 10% a difference in the timing drugs, foodstuffs, defence setting up overseas purchases sectors and the relative (20% for taxpayers who do of the implementation of material, and certain other operations, in relation to all advantages of contributing to the not hold the Importer Data the proposed measures items require the approval final destinations of imports for introduction of equipment and Validation Certificate or CVDI). in the cases of Paraguay of the appropriate government consumption. technology for local industry. In Certain goods are subject to and Uruguay. department (e.g. Ministry general, merchandise originating a reduced rate (10.5%). of Health and Social Welfare, It is important to note that from LAIA countries is entitled In December 1995 a Ministry of Defence). the DJAI must be approved in to preferential duty. The Ministry • Excise taxes for certain goods. framework agreement state ‘Exit’ in order to be able of Economy, based on economic was reached with the In addition, there are some to continue with the import conditions and considering • A 3% income tax pre-payment European Union with a view products that are subject to operation. international market prices and (excluding exceptions) (6% for to attaining a customs union Automatic or Non-Automatic local needs, may modify the taxpayers who do not hold the between the two common Import Licensing, depending on As regards the evaluation customs duty rates. These CVDI). In some special cases markets in ten years’ time. the HS Code in which they are criteria to authorise the DJAI, changes are fairly frequent. For the rate is 11%. Turnover tax included. even though it has not been a number of textile products is collected at the rate of The Mercosur members informed by the authorities, it is and toys, specific levels of duty 1%, and is assessed on imports signed an Economic The WTO defines the Automatic publicly known that imports of have been set which function for consumption of goods Complementation Treaty Import Licensing as import products that have no domestic as the minimum for the ad- entering the customs territory, with Chile which came licensing where approval of the production are more likely to be valorem duty. It is therefore except items to be used as into effect on 1 October application is granted in all cases authorised. In the cases that the recommended that exporters fixed assets or for personal use. 1996. A similar treaty within a maximum of 10 working DJAI has been ‘observed’ by to Argentina consult the norms was subsequently signed days from its submission. the local authorities (regardless beforehand so as to ascertain the with Bolivia. the origin of the goods), it has tariff position and tax treatment. been required the presentation Banking in Argentina

Banking system Financial entities In general, commercial banks Mortgage banks Source of funds Availability to are organised as corporations, Mortgage banks and building foreign investors The present structure The Argentine financial however, some are organised as corporations cater to the Local financing There are no restrictions on has been in force since system consists of private and cooperatives. Commercial banks needs of the building and Interest rates are still high the access of foreign investors the enactment of Law No. government (state, provincial may conduct all banking activities, real estate markets. as measured by international to sources of local financing 21,526 (Financial Entities Law) or municipal) entities. e.g., credit and deposit operations standards. No discrimination or on their ability to invest in in 1977, as amended, whose and providing fee-based services. Foreign banks is made between local government securities and in object was to consolidate the The private banking sector Only commercial and state banks Foreign banks operate in and foreign borrowers. local quoted companies. financial system and create operates mainly through are allowed to offer checking Argentina on the same basis a guarantee for deposits in commercial banks and finance accounts, issue drafts and make as local private banks. Most The importance of negotiable See above additional comments financial entities. Within the companies. Under the terms intermarket transfers. Strictly engage in wholesale and bonds as a foreign financing has on Exchange Control Regime. framework of this law, the of the Financial Entities Law, speaking, commercial banks are retail activities, and may increased considerably, driven banking system is regulated state and mixed banks are the only monetary intermediaries. operate through branches or by favourable tax treatment, by the central bank (Banco comparable to commercial subsidiaries. A number of them in spite of the fact that during Central de la República banks, their main objective Investment banks, finance were licensed many years ago. the last decade they have been Argentina - BCRA). being to promote regional and credit companies Licenses are granted by the affected by the increase in development and handle Investment banks channel Central Bank mainly on the basis the country risk rate and the Central bank government revenues. savings and foreign funds to of reciprocity. debt public default. Corporate The Argentine Central Bank, finance investment projects. . bonds may be issued in local or established in 1935, has The financial system comprises They may receive term deposits, foreign currency; they are freely supervisory powers to regulate approximately 80 entities, of grant medium and long-term negotiable, and interest and credit and monetary supply, to which 12 entities are state banks credit, invest in securities, amortisation may be paid locally supervise and control the proper lease capital assets, and or abroad. Debt securities functioning of the financial Financial entities may operate in foreign currency with must be risk-rated by at least system and the application of be classified as follows: central bank approval. Finance two rating agencies registered the Financial Entities Law, to companies deal mainly with Securities Commission. act as the state’s financial agent, • Commercial banks short-term credit facilities, as do and to represent the country • Investment banks credit companies, but within a Law No. 24,441, on in the international monetary, • Mortgage banks much more limited scope. construction and home financial and banking institutions • Finance companies financing, is in force as from of which Argentina is a member. • Credit companies 9 January 1995. It deals with, among other things, trusts (which can be used as vehicles for securing mortgages) and leasing. At present, neither alternative is widely used.

40 HSBC in Argentina Overview

Who we are Network in Argentina Coporate Real Estate works for reducing our own HSBC Bank Argentina HSBC Bank Argentina is present environmental footprint and represents one of the main in more than 70 Argentinean share good practices on this financial groups in our country. cities with 135 agencies, 427 with our stakeholders. Based on four pillars – Stability, electronic service stations and Proximity, Relationships and 457 ATMs. The headquarters of Corporate Sustainability focus Know-how, the institution HSBC Bank Argentina is located our community investment on follows Principles and Values in Florida 201, Buenos Aires. education and the environment. that ensure an ethical, fair and . responsible standard when Total Assets The education programmes doing business, always focusing help young people to reach on the client. US$8.277 million (April 2012). their potential, regardless of their background, through Head Office Profit (before taxes) access to education, life skills and entrepreneurships, and HSBC Bank Argentina has its US$153 million (April 2012). discovering cultures and the headquarters in Buenos Aires. natural world. Human Resources An International Brand The environmental programme Over 4,900 employees. focuses on the HSBC Water The origin of HSBC Bank Programme, a five-year global Argentina began in 1992, when Clients environmental programme bought 29% of focusing on water and how it Banco Roberts S.A. Over 1.5 million individual helps communities flourish. clients and 85,636 legal In 1997, HSBC bought 100% of entity clients. Banco Roberts S.A. and started a gradual change of the brand Corporate Sustainability to the current brand HSBC. In HSBC Argentina, In 2006, HSBC Bank Argentina Sustainability means bringing bought Banca Nacionale del social and environmental Lavoro S.A. issues together with financial performance to maintain and HSBC Argentina Holdings S.A. grow a successful business for is also constituted by HSBC the benefit of our stakeholders. Valores S.A. Sociedad de Bolsa, HSBC Participaciones Credit & Risk applies clear (Argentina) S.A., Máxima policies and processes to S.A. AFJP, HSBC Seguros de manage potential social and Vida (Argentina) S.A., HSBC environmental risk in our lending Seguros de Retiro (Argentina) and other financial activities in S.A., HSBC Administradora de sensitive sectors. Inversiones S.A. S.G.F.C.I. and Uniservicios S.A. Country overview

Capital city Autonomous City of Buenos Aires

Area and population Area of 2,800,000 sq km and population size of 41.7 million

Language Spanish

Currency Argentine peso ($)

International dialling code +54

National Holidays for 2013 There are 12 national holidays, as follows:

New Year’s Day 1 January Epiphany 6 January Day of Remembrance for Truth and Justice 24 March Maundy Thursday 28 March Good Friday 29 March Easter Sunday 31 March Malvinas Day (Día de las Malvinas) 2 April Labour Day 1 May First National Government Day 25 May The Flag’s Day 20 June Independence Day 9 July Anniversary of Death of General San Martín 19 August Columbus Day (Día de la Raza) 14 October Feast of the Immaculate Conception 8 December Christmas Day 25 December

Business and banking hours 9am to 6pm and 10am to 3pm

Stock exchanges Argentina has a number of stock exchanges, but the importance of the securities quoted and the volume of business conducted are negligible except on the Buenos Aires Stock Exchange

Political structure 24 autonomous provinces with their own political, administrative and economic administrations (23 provinces and the City of Buenos Aires)

44 Contacts

Ricardo D. Tavieres Partner

Tel: +54 11 4850 6722

Email: [email protected]

Santiago Airasca Public Affairs

Telephone: +54 11 4344 9770

Email: santiago.airasca@.com.ar

Carolina Scarampi Public Affairs

Telephone: +54 11 4340 9716

Email: [email protected]

3rd Edition: December 2012

Copyright

Copyright 2012. All rights reserved.

‘PwC’ and ‘PricewaterhouseCoopers’ refer to the network of member firms of PricewaterhouseCoopers International Limited (PwCIL), or, as the context requires, individual member firms of the PwC network. Each member firm is a separate legal entity and does not act as an agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way. No member firm is responsible or liable for the acts or omissions of any other member firm nor can it control the exercise of another member firm’s professional judgment or bind another member firm or PwCIL in any way.

Copyright 2012. All Rights Reserved. Issued by HSBC Bank (Argentina) S.A. Law 25.738 (art.1°): HSBC Bank Argentina S.A., is a corporation constituted under argentine laws. Its operations are independent of other companies within HSBC Group. 46 Shareholders limit their responsibilities up to

the invested capital. 141TP_Argentina_041212_3