Explore Argentina’s tax system, including individual income tax, social security contributions, wealth tax, corporate tax, incentives, and more.
With the shortening of distance, time and minds, one is forced to know the tax details of many countries, particularly G 20 countries which constitute nearly 80% of global trade, 90% of global GDP and nearly two thirds of global population for sheer survival if your stay, profession, personal assets are related there.
Let us learn about Argentina’s tax system.
The obvious reference is to its revenue department web site.
https://www.argentina.gob.ar/sites/default/files/tax_system_in_argentina.pdf
http://www.afip.gob.ar/
To be frank, many other big four web sites who serve the global tax payers do contain enormous details in English which have been extensively used.
Let us learn the details of tax structure and other relevant information.
Individual income tax.
Yes, like everywhere global income attracts taxes for permanent residents or citizens.
As per our expectations, Non-residents and foreign beneficiaries are only taxable on their Argentine-source income only.
Residents and non-residents are taxed at progressive income tax rates ranging from 5% to 35%; however, special tax rates are applicable in case of gains derived from securities (including dividends), interest, and real state property.
Let us view the details.
Taxable income in ARS
| Over (column 1) | Not over | Tax on column 1 | Tax on excess (%) |
| 0 | 173834 | – | 5 |
| 173834 | 347669 | 8,691 | 9 |
| 347669 | 521503 | 24336 | 12 |
| 521503 | 695,338 | 45197 | 15 |
| 695,338 | 1043007 | 71,272 | 19 |
| 1043007 | 1390676 | 137329 | 23 |
| 1390676 | 2086015 | 217293 | 27 |
| 2086015 | 2781353 | 405034 | 31 |
| 2781353 | and on | 620,589 | 35 |
| Gross income tax |
Gross income tax is a provincial tax applicable to self-employed individuals on gross earnings. The average tax rate is 4% in the Federal Capital (the City of Buenos Aires), and similar rates are applicable at different provinces.
Professionals who do not perform their activity in the form of a company are exempt from the gross income tax in the City of Buenos Aires.
Monthly tax returns are filed.
Foreign beneficiary tax
Foreign beneficiaries working temporarily in Argentina for no more than six months during the year, who earn income through either the visual or performing arts or other profession, are subject to income tax on these earnings at the rate of 24.5% (35% on assumed profit of 70% of gross income) to be withheld by the local payer.
Who are residents?
Obviously Argentine nationals, foreigners living for more than 5 years, or those who have been living for 13 months abroad but become non – resident from 14th month onwards, and foreigners living for more than 12 months in Argentina.
Social security contributions
Employer contribution is 26.4% for companies mainly engaged in services or trade, provided their annual sales exceed , from April 1, 2022: ARS 1,438,900,000 for services and ARS 5,495,450,000 for trade), and 24% for all other companies. No cap indeed.
For employees, social security withholdings, which include pension fund, health care and social services, are payable on the monthly salary, up to a cap of ARS 548,651.90 (as from June 2022), except for June and December, when the cap is increased by 50% due to the 13th month salary. This salary cap is index-adjusted in March, June, September and December of each year.
What about capital wealth tax?
It is based on local/ global holding like house, bank balances, or cars.
As of fiscal year 2021, the exempt minimum has risen from ARS 2,000,000 to ARS 6,000,000. Also, the Non-taxable minimum for dwelling house was increased from ARS 18,000,000 to ARS 30,000,000. The wealth tax ranges from 0.5% to 1.75% locally and 0.7% to 2.25% for global holdings. I have never seen holding a car means so much as a wealth tax!
No inheritance and gift tax except in the province of Buenos Aires.
As visualized by both of us, property tax and automobiles tax fall under the category of provincial tax authorities and like everywhere based on the data released by authorities they do change.
Capital gains tax is 15%.
More interesting facts:
- Taxable income for individual includes salaried income, business income, dividends, rental income, global income but taxes paid abroad get foreign tax credit.
- Deductions do include donations paid to approved agencies, special employee/spouse/child deductions, medical expenses, mortgage interest on housing loans, cost of domestic help etc.
- Calendar year tax return and no joint tax returns with spouse.
- Withholding of tax by employers and income up to ARS 2 million entitle no filing of tax returns if no additional income.
- Yes, electronic filing is a must, if additional income emerges for employees, they pay from August onwards till the closure of the year in December and tax return is filed in June of the next year.
- No doubt, interest @4% monthly and penalties cloud the non- payment of taxes on time and punishments up to jail terms are applicable in case of tax evasion.
- Withholding tax on interest paid to residents, companies, royalties paid, technical fees paid, some of them as high as 35% to be adjusted against income tax to be paid later,
Let’s talk of corporate tax.
The information gives below gives jitters to any corporates working in Argentina and that too in foreign exchange. Imagine a top Indian corporate winning a huge IT contract from Argentina.
- Prior permission needed to buy foreign exchange market -oriented USD for remittance above for USD of 100,000 and keep in any account of the banks of Argentina.
- Pay dividends to foreign shareholders.
- Settle foreign liabilities before dates required for remission.
- To repay a loan from a related party in foreign exchange before date.
- It is equally interesting to know that none gets the required permission. From whom and within what time? None knows and no one follows the laid down procedure since it is impossible to follow the instructions which look primitive and unlike for a dynamic nation whose players carry billions in values for their talents. India imported US D 4.29 billion of goods, finished goods and even nuclear reactors, vegetable oils and fats etc. They rank among the top nations for exports of oils and related products.
- India exported USD worth 1.2 billion of various products and services. With virtual exports of services, India should concentrate on services sector.
Some information from the government website quoted below for reference.
https://www.argentina.gob.ar/sites/default/files/tax_system_in_argentina.pdf
With political upheavals not unheard of in Argentina, it is struggling to meet its obligations to its people whose demands have gone up dramatically.
Let us look sector wise annotations.
TAX INCENTIVES (quoted from government web site for authenticity and their actual thinking process)
Mining: Yes, applicable for entities and individuals. “Mining ventures included within this regime enjoy fiscal stability (i.e., tax rates will remain basically the same) for a term of 30 years, except for VAT, which will adjust to the general regime. Furthermore, the regime grants incentives for tax on profits, tax on assets, import duties, and any other tax for introduction of certain assets.”
Then, what about Companies engaged ln the production of energy?
Renewable sources are entitled to certain tax benefits, like early return of VAT or accelerated depreciation of capital goods for Income Tax purposes, among others, in tune with the rest of the world growth in green energy segment.
Similarly, bio-technology gains immediate attention and special tax treatments.
Let me introduce you to the growth needed for small and medium sized industries.
Special incentives for above industries and for development of infra-structure for them.
- “Full exemption on Minimum Notional Income Tax starting January 2017 (tax to be repealed by 2019).
- Full credit (against income tax and its prepayments) on tax on financial transactions paid by micro and small- sized enterprises. A 50% credit on the tax paid by medium-sized manufacturing entities.
- Deferral of due date for payable VAT balance
- Fiscal stability (from July 2016 to December 2018) for SMEs that invest in infrastructure projects and/or capital goods. They might have continued later on too.
- Income tax credit for an amount equal to 10% of the amounts invested in infrastructure projects and capital goods.
- Tax bond (creditable against federal taxes) for the Input VAT credit balances resulting from infrastructure investments.”
With the Indian industrial often talking of above sectoral development, please compare above information with what we need for our industries in the same segment?
Knowledge based industries
It may include IT, research- oriented works in various fields and all types of AI or other technological growth needed for future.
Benefits include fiscal stability, a reduction of Corporate Income Tax rate to 15%, a higher deduction for the calculation of social security contributions, a transferable tax certificate that can be used to offset other Federal tax obligations and a non-withholding certificate for VAT purposes. The promotional regime will be applicable as from January 1, 2020 and will be in force until December 31, 2029.
What is the corporate tax?
Corporate taxation
|
Taxable income |
Rate |
| Up to ARS 5 million | 25% |
| 5 million – 50 million | 30% |
| More than 50 million | 35% |
| Branch tax rate | 35%/30%/25% plus 7% on after tax profits remitted to foreign H/O. |
| Capital gains tax | 35%/30%/25%. |
A tax inflation adjustment is applied to determine taxable income for fiscal years beginning from 2018 (Jan 1) where the variation in consumer price index over 36 months ending on the last day of relevant accounting period is greater than 100%. The adjustment starts from variation exceeds 55% in the first year, 30% in the second year and 15% for the third year.
There is no sur-tax or alternate minimum tax.
Sad but true, capital gain is included in the corporate income and taxed accordingly.
Net operating loss is permitted for carry forward of 5 years but no backwards allowed. There is a tax free zone operating in Tierra del Fuego for certain activities which attract no corporate tax, net-worth tax or excise tax.
One can’t forget that Argentina is aspiring to join OECD with the current prospects of one of the fastest economically growing economies.
What about tax year for a corporate?
Yes, it is a calendar year of January through December or any 12 months period covering consecutively.
Being self- assessment system of accounting for income and paying taxes, Argentine tax authorities intervene in rare cases of audit or falsification of filing of taxes.
How to file tax returns with expected taxes?
An annual tax return needs to be filed by a resident Argentine company as well as branches of foreign companies operating in the nation along-with financial statements duly audited by approved accountants by 15th day of the fifth month after the financial year. Technically by May 15 of the next financial year 2024 in case of the accounting year 2023, for example. 25% of tax liability has to be paid by 15th of sixth month and rest 10 instalments thereafter for the full last years tax liability, with the certainty of completing the current liabilities with the last month’s quota.
An interesting information which has not been anywhere.
Penalties include 4% interest on monthly basis, with fines varying between 100% to 200%. Tax evasion definitely attracts higher penalties including jail term. One often finds great footballer forgetting their tax liabilities from global income and facing the penalties unwillingly.
Let’s talk of controlled foreign companies, a concept which has attracted the attention of the whole world tax regimes who suffer due to vast investment by their residents in foreign countries as passive investment to gain the required income, avoiding the local tax regime to suffer.
Yes, your assumption is right if you decided that local residents add their income from foreign company investments who operate abroad in a tax haven country or countries who come under low-tax jurisdiction, as they are called popularly. Many nations like Mauritius, Ireland, British islands etc. adorn this list.
These entities pay taxes which are less than 75% of current Argentine taxes by investments, popularly known as passive income like: dividends, interest, royalties, rentals, or gains from sale of shares, participations and bonds, or activities involving derivatives, and similar financial activities.
Obviously low tax or tax havens do not fall under the approved tax regime of AR tax authorities. Special efforts are made to catch those who attempt to deviate the income for nefarious activities. But, the tax authorities have circulated those countries who fall under cooperative in nature.
Transfer pricing guidelines
With the vast economic development of any nation, big corporates try to cover their cost of operations under transfer pricing rules which are favorable to them.
In case of Argentina, OECD guidelines are followed as transfer pricing guidelines.
It proudly ranks among those countries who have signed OECD reporting standard allowing exchange of tax information among the signatories of nations. This enables greatly to get tax information on transfer pricing guidelines and deep consultations with the nations which involve the operational areas of corporates who operate with Argentina and other countries. This has helped many economically fast developing nations to get the required information about big MNCs who traditionally hide their expenses abnormally with various activities of their corporate office, associate companies or branches operating abroad.
Conclusion
We have huge balance of payments, adversely with Argentina, one of the fastest growing countries in the world aspiring to join OECD which will open up the whole world of opportunities for our corporates. Fields like IT, R&D, pharmacy, human resource development or new frontiers of human resources development which have enabled our nation to emerge as one of the fastest growing economies are needed in Argentina which has opened up its territories with enormous tax incentives till 2029. I do not limit my imagination of seeing the best of TCS, Infosys, Tata Motors or any of the IIMS or IISC operating there in their export development zones and contributing enormously in the economic growth of Argentina. Who knows the best talents of young Indians with quick adept of Spanish would conquer the world, unknown till date as forbidden zones?
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Disclaimer: The contents of this article are for information purposes only and do not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc. before acting because of the above write up. The possibility of other views on the subject matter cannot be ruled out. By use of the said information, you agree that Author/Tax Guru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors, or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.
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