Doing Business in Argentina This document describes some of the key commercial and taxation factors that are relevant on setting up a business in Argentina. dfk.com Prepared by Estudio Sambuccetti y Asociados +44 (0)20 7436 6722 2 Doing Business in Argentina Background Brief description of Argentina has had, in the areas of exports and substitution of imports, a significant Argentina is a democratic republic; it opportunity to regain both activity and is divided into 23 provinces and the profitability levels. Also, it is important to Autonomous City of Buenos Aires, where include activities like Commerce, Hotels, the Federal Government is established. and Restaurants, and Finance, Insurance The President is elected every four years. and Real Estate, that represent 13,5 % and 15% of the GDP respectively. The GPD total In Argentina, there are 43 million is estimated as USD 964 billion (2015). inhabitants, a third of whom live in Buenos Aires City and its suburbs. Buenos Aires The official currency is the Argentine Peso Province is the most important province in and the reference currency is the terms of population and economic activity, US dollar. followed by Cordoba, Santa Fe, and the City of Buenos Aires. This city has a population of 3 million people in 200 km². Infrastructure Spanish is the official language and around The main commercial ports are Buenos 80% of the population is catholic. Aires, Bahía Blanca, Quequén, Rosario and Paraná. Over 90% of the Argentine foreign trade is carried out by sea. But the Argentine economy Argentine ports have some disadvantages: high taxes, low depth, and limited Argentina has traditionally based its infrastructure. There is no deep-water economic structure on the magnificent port, except for Madryn, which is outside natural resources it has in many areas of the commercial area. of the country, and a highly qualified manpower. Railways have developed in the last decades by through private companies, Its ‘agro’ products have been for many and freeways and routes by private decades been the sole source of its companies and the government. export policy and the mainstay of the economy. Fishing, forestry and mining, There has been a great advance in digital and agriculture and livestock represent communication networks, that allows more than 12% of the GDP. Industry has communication with the rest of the world become increasingly important since at high speed. World War II, and currently represents over 18% of the GDP. Major manufacturing From 2015, the country has started a plan industries include agro-industries and to develop railroads for short and middle- food processing, automobiles and trucks, distance transportation. Likewise, from chemicals, machinery and equipment, 2016, the new administration is opening metallurgy (including steel and aluminum), airplane routes to “low cost” companies. petrochemicals, paper, cellulose, and textiles. Since 2002, the industrial sector dfk.com +44 (0)20 7436 6722 Doing Business in Argentina 3 Choice of Legal Form Business in Argentina may be conducted Corporación (Sociedad Anónima - S.A.) by incorporated companies, partnerships, individuals, and branches of foreign This form is the most commonly used constituted enterprises. In all cases for doing business in Argentina. There pertinent information must be registered must be at least two shareholders and with the Public Registry of Commerce. the shares may be either privately held or quoted publicly. The minimum capital Foreign investors generally choose is $100.000. Their operation is governed either the form of a Corporation, Limited by statutes in which the name, object, Liability Company or a Branch to start duration, capital, election and powers of operations in Argentina. The former may the Board of Directors, and all other rules be a Sociedad Anónima (Corporation) or a are established. The Board may have Sociedad de Responsabilidad Limitada. The one or more directors but the absolute Branch has certain advantages, especially majority must be domiciled in Argentina. in the initial investment. It is mandatory for foreign companies operating in Argentina The responsibility of the shareholders to name legally responsible individuals and is limited to the amount of their to keep separate accounting records for contribution, with the exception of the their Argentine operations. legal representative or the members of the Board of Directors and the Board of Oversight (Sindicatura). dfk.com +44 (0)20 7436 6722 4 Doing Business in Argentina General Partnership – Unlimited Managers have the same rights and responsibility (Sociedad Colectiva) duties as the directors of corporations. Partners are responsible up to the The partners acting as legal amount of their contribution unless representatives or members of the Board they are part of the Board of Directors of Directors have unlimited liabilities for or the Board of Oversight. In recent the corporation or subsidiary. years, local subsidiaries of US companies have preferred this form, and former corporations have changed to this one. Limited Liability Partnership (Sociedad de Responsabilidad Limitada- S.R.L.) Limited Partnership These companies are similar in all aspects (Sociedad en comandita) to corporations except that: A limited partnership is subject to The number of partners may not exceed the Commercial Code, and has two 50, a corporation may not be a partner, categories of partners: “silent” partners they are always privately held, formation (“comanditarios”), whose liability to procedures are simplified and greater third parties is limited to the capital flexibility is permitted in the deed. subscribed by them, and “active” partners (“comanditados”), who do not enjoy a similar limitation of liability. dfk.com +44 (0)20 7436 6722 Doing Business in Argentina 5 There are two classes of limited Temporary unions of companies are partnerships: “sociedad en comandita allowed to develop or execute a specific por acciones” where the capital subscribed task, service or supply, and/or any by the “silent partners” is divided into extension thereof, both locally and abroad. nominative shares of equal value, and Their duration is therefore limited to “sociedad en comandita simple” where that particular task or service. In this the capital is proportionally divided, contract, the bankruptcy of the members but shares as such may not be issued. or the disability or death of the individual The appropriate description must be entrepreneurs does not in itself lead to the shortened to S.C.A. and S.C.S. respectively. extinguishment of the U.T.E. contract. Non-commercial General Partnerships Both types of joint ventures must have the following characteristics: General partnerships not engaging in commercial activities (“sociedad civil”) are • They are not separate legal entities subject to the Civil Code. A “sociedad civil” in their own right. is a matter of private agreement between the persons involved, and is generally • Agreements are entered through found among professional groups. private or public deeds. • Agreements must be registered in Societies with only one partner the Public Registry of Commerce and must include their objectives, term of It is prohibited in Argentina to form duration, name and other information societies with only one partner. It is on their partners’ responsibilities, strongly recommended that one partner financial contributions and other l holds no more than 80%. egal implications. Joint ventures may also exist under private Joint Ventures agreements not registered in the Public Registry of Commerce when they are not Two types of contractual joint ventures are one of the two types mentioned above. recognized by law: temporary partnerships Such joint ventures enjoy similar rights (“agrupaciones de colaboración”) and and obligations and have the same tax temporary union of companies (“uniones requirements as those described above. transitorias de empresas - U.T.E.”). Temporary partnerships embody joint Foreign Corporations organizations for renewable periods up to a maximum of ten years, to provide Foreign corporations that carry out or develop certain stages of the business occasional transactions in the country do activity of their partners, or to improve and not need to be registered. develop their mutual activities. dfk.com +44 (0)20 7436 6722 6 Doing Business in Argentina Since 2003, the Public Registry of under the responsibility of the head- Commerce has announced several office, through its nominated legal resolutions that must be followed by representative, who is liable to the extent foreign corporations in order to comply of the corporation’s subscribed capital. with the framework of the Act 19550- The legal representative must apply for Business Associations. the registration of the branch, together with the necessary documentation, duly Foreign corporations registered in tax authenticated by a public notary in the havens are subject to additional conditions country of origin, then recognized by and parameters. The same applies with an Argentine consul or with the Haya’s foreign corporations that are used only Apostille, and finally translated locally as a vehicle by other companies that by an Argentine public translator. control them directly or indirectly and together with them form an economic The tax burden is similar to that of an foreign group. S.A. As the branch is managed by its legal representative through a power of attorney, his attributes may be limited Branch of a Foreign Corporation accordingly. On the other hand, as the parent is wholly responsible for the A registered branch of a foreign branch’s liabilities, it may be easier to corporation may perform all the acts deal with financial institutions and other its head office is authorized to perform. suppliers locally. Therefore, operations are carried out Audit Requirements It is mandatory that every “Sociedad Registry of Commerce. This requirement Anónima”’s financial statements be is applied to almost every company and audited by accountants registered in the its branches. Accounting Council, and filed in the Public dfk.com +44 (0)20 7436 6722 Doing Business in Argentina 7 Taxation Corporation tax For example, the tax rates on rent rises to 26.582%.