Argentina
Introduction A person’s liability to Argentinean tax is determined by residence status for taxation purposes and the source of income derived by that individual. Income tax is levied at progressive rates on an individual’s taxable income for the year, which is calculated by subtracting allowable deductions from the total assessable income, with the exception of foreigners who are in the country for less than six months; foreigners who are in the country for less than six months are assessed tax at a flat rate.
Contact Rodolfo P. Canese Mendez KPMG in Argentina Partner T: +54 11 4316 5869 E: rcanese@kpmg.com.ar
Adriana Laurino KPMG in Argentina Partner T: +54 11 4316 5784 E: alaurino@kpmg.com.ar
Key messages
Extended business travelers are likely to be taxed on employment income relating to their Argentinean workdays.
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Income tax
Liability for income tax A person’s liability to Argentinean tax is determined by residence status. A person can be a resident, a nonresident on a ”permanent” basis, or a nonresident for Argentinean tax purposes (foreign beneficiary). Individuals are considered to be resident in Argentina when: • They are of Argentinean nationality, whether by birth or naturalization, except for those individuals who have lost their residence status. • They are foreign individuals who have become permanent residents of Argentina (and have a permanent visa) or who are not residents but have spent sufficient time in Argentina during a 12-month period. Generally, individuals who have been resident in Argentina will lose their residence status when they acquire permanent residence in another country or remain in another country for 12 months or more. The 1998 law also established a new category of individuals who are considered to be nonresidents present in Argentina on a permanent basis. For example, foreign individuals whose presence in Argentina is based on the grounds of employment that is duly accredited and requires their permanency in Argentina for a period not exceeding five years are considered to be nonresidents. The same treatment applies to family members who accompany them.
Tax rates For 2010, net taxable income is taxed at graduated rates ranging from 9 percent to 35 percent for both residents and nonresidents. The maximum tax rate is currently 35 percent on income earned over 120,000 Argentine pesos (ARS). Foreign beneficiaries may be subject to a flat rate if income tax is withheld at the source (see the section on employee compliance obligations and employer reporting and withholding requirements).
Social security
Liability for social security Argentinean nationals and expatriates living in Argentina are subject to social security contributions. Social security contribution exemption is granted on request for foreigners on short-term assignment (less than two years). Currently, social security taxes represent 17 percent of gross wages. Since March 2011, a monthly cap amount of ARS13,879.25 has been applicable to the employees’ contributions; employers’ contributions are not capped. In accordance with the laws currently in force, the cap is updated every March and September. Summary of the applicable rates and taxable bases for salaried persons Employer (I) (Percent)
Employer (II) (Percent)
Employee (Percent)
Pension fund
10.17*
12.71*
11.00***
The general rule is that people who are residents of Argentina are assessable on their worldwide income. Nonresidents are generally assessable on income derived directly or indirectly from sources in Argentina. Extended business travelers are likely to be considered nonresidents of Argentina for tax purposes or foreign beneficiaries.
Pensioner’s Healthcare Fund
1.50*
1.62*
3.00***
Family Allowance Fund
4.44*
5.56*
Unemployment Fund
0.89*
1.11*
Definition of source Employment income is generally treated as being Argentinean-sourced compensation where the individual performs the services while physically located in Argentina.
Medical Care
6.00**
6.00**
3.00***
Total
23.00
27.00
17.00
Tax trigger points Technically, there is no threshold/minimum number of days that exempts the employee from the requirements to file and pay tax in Argentina. To the extent that the individual qualifies for relief in terms of the dependent personal services article of the applicable double tax treaty, there will be no tax liability. The treaty exemption will not apply if the Argentinean entity is the individual’s economic employer. Types of taxable income For extended business travelers, the type of income that is generally taxed is employment income.
Source: KPMG in Argentina, June 2010
Notes: (I) Employers for manufacturing, commercial, and service activities, invoicing less than ARS48 million a year. (II) Commercial and service activities invoicing more than ARS48 million a year. Additional information: *These percentages apply to the total remuneration without any limit. **These percentages apply, without any limit, to the total remuneration since November 2008. ***These percentages apply to the total remuneration or to the monthly limit of ARS13,879.25 (taxable salary, called ”MOPRE”) since March 2011.
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Argentina has entered into formal social security totalization agreements to prevent double taxation and allow cooperation between Argentina and overseas tax authorities in enforcing their respective tax laws: – Bilateral treaties: Spain, Portugal, Italy, Chile, Greece – Multilateral treaties: Uruguay, Paraguay, Brazil – Ibero-American treaty: Argentina, Bolivia, Brazil, Colombia, Costa Rica, Chile, Ecuador, El Salvador, Spain, Paraguay, Peru, Portugal, Uruguay, Venezuela. The Convention will come into force and effect on the first day of the month following the date when the deposit of the seventh instrument of ratification, acceptance, approval, or joining was made. However, this action will affect the relationship between said states once the Implementation Agreement is signed by said states. The deposit of the seventh instrument of ratification to the SEGIB made by Bolivia in February 2011 implies that its coming into force will be in May 2011.
Compliance obligations
Employee compliance obligations The deadline for filing individual income tax returns and paying any annual tax due depends on the final digit of the taxpayer’s tax board registration number and usually ranges from April 15 to April 20 following the tax year-end, which is December 31. Individuals whose only source of income is employment income, which may often be the case with extended business travelers, do not need to file tax returns if the income was subject to withholding at the source unless their annual gross income exceeds a minimum that is set by the Argentine tax authorities (currently set at ARS144,000), in which case it becomes mandatory. For many types of income, including any income other than employment income paid to a nonresident, the payer must withhold tax at the source and remit taxes withheld to the tax authorities. Employer reporting and withholding requirements Withholdings from employment income are covered under the Pay-As-You-Go (PAYG) system. If an individual is taxable with respect to employment income, the employer has a PAYG withholding requirement. Foreigners who are present in Argentina for less than six months are subject to a withholding rate of 24.5 percent on their gross compensation.
Other
Work permit/visa requirements Foreign nationals generally must obtain visas at Argentine consulates in order to enter Argentina. A waiver of the visa requirement is available to nationals of most developed countries if a trip is brief and for tourism or nonemployment business purposes. Executives coming to Argentina for the purpose of engaging in employment must obtain a visa (prior to departure) with the Argentine migratory authorities through the Argentine company that will act as their employer during the assignment.
There are two kinds of visas: temporary resident and permanent resident. Temporary resident A temporary visa (Residencia Temporaria) provides permission for an individual to stay in the country on a nonpermanent basis to develop certain activities. This visa is granted for one year and can be renewed every year. Once they have arrived in Argentina, individuals and their employers can proceed in making arrangements to obtain their DNI (personal ID card in Argentina). Permanent resident A permanent visa provides permission for an individual to stay in the country indefinitely. Once they have arrived in Argentina, individuals and their employers can proceed in making arrangements to obtain their DNI (personal ID card in Argentina), Argentine driver’s license, and tax registration. The visas for residency and work are not differentiated in Argentina. Therefore, if the individual’s spouse or dependants receive visas, they will also be able to work in the country. Double taxation treaties In addition to Argentina’s domestic arrangements that provide relief from international double taxation, Argentina has entered into double taxation treaties with approximately 18 countries to prevent double taxation and allow cooperation between Argentina and overseas tax authorities in enforcing their respective tax laws. Permanent establishment implications There is the potential that a permanent establishment could be created as a result of extended business travel, but this would depend on the type of services performed and the level of authority the employee has. Indirect taxes The standard rate of VAT is 21 percent. VAT or IVA (impuesto al valor agregado in Spanish) is a general tax on consumption within the Argentine territory. It is levied on the delivery of goods or the rendering of services by any person or legal entity conducting an economic activity and on the importation of goods and services. VAT is levied on: • The sale by VAT taxpayers of movable property located in Argentina • Work, leasing, and services specified in the law, provided they are performed in Argentina • The final importation of movable property • The use or exploitation in Argentina of services that are supplied by nonresidents (i.e., import of services)
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Employment income is not subject to VAT. For VAT purposes, the concept of taxable “sale” includes: • Sales and other transfers for consideration of movable property located in Argentina (payment in kind, allocation of property on the liquidation of a company, contribution to a company) • The incorporation of movable goods produced by the taxpayer in the case of leasing and rendering of exempt services or those excluded from taxation • Transfers of movable goods that are attached to the soil at the time of the transfer, provided they have their own individuality and represent goods in trade for the taxpayer • The removal of movable property by the owner for personal use or consumption • Transactions carried out by commission agents, consignees, and others who sell or buy personal property in their own name but on behalf of third parties Under the VAT system, tax is levied at each stage of the manufacturing and distribution process on a noncumulative basis. The accumulation of tax is avoided through the deduction of VAT invoiced to an entity. The entity pays VAT on the total amount invoiced by it in each monthly tax period, but is entitled to recover the input VAT that was invoiced to the entity during the same period. If, in any tax period, the credit for input VAT is higher than the amount of VAT due on output, the entity is not entitled to a refund (unless the refund is related to exports). In cases where there is an excess, it is credited against future VAT liabilities. If a business manufactures taxable supplies in Argentina, it will be required to register and account for Argentine VAT. Note that under Argentine VAT legislation, it is not possible for a non-Argentine entity to register voluntarily in Argentina and act as an”Argentine established entity.” VAT must be filed on a monthly basis.
Transfer pricing Argentina has a transfer pricing regime that applies to transactions made with foreign affiliates and other entities. More details can be found in Argentine Tax Office Law 20.628 and relevant amendments, as well as in Decree 1344/98 and General Resolution No. 1122/01. A transfer pricing implication could arise to the extent that the employee is being paid by an entity in one jurisdiction but performing services for the benefit of the entity in another jurisdiction, in other words, when a cross-border benefit is being provided. This would also be dependent on the nature and complexity of the services performed. Forms F742 and F743 require disclosure of related-party transactions with foreign entities. Management fees can be deductible but must meet an arm’s-length standard and be directly related to the income being generated, and the relevant documentation must be kept. Local data privacy requirements Argentina has data privacy laws, including the Law for the Protection of Personal Data enacted in 2000 and the related regulations enacted in 2001. The laws are enforced by the National Data Protection Commissioner. The European Union (EU) has determined that Argentina’s laws meet the EU’s”adequacy” standard for data flows outside Argentina. Exchange control Exchange houses and banks trade foreign currencies freely. A visitor would be well advised, however, to travel with U.S. dollars in Argentina, as these are exchangeable and are often accepted directly as payment. Nondeductible costs for assignees Nondeductible costs for assignees include contributions by an employer to non-Argentinean pension funds and medical insurance premiums.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. The material contained within draws on the experience of KPMG tax personnel and their knowledge of local tax law in each of the countries covered. While every effort has been made to provide information current at the date of publication, tax laws around the world change constantly. Accordingly, the material should be viewed only as a general guide and not be relied on without consulting your local KPMG tax adviser for the specific application of a country’s tax rules to your own situation.
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