Value-added tax (VAT)
VAT is assessable on the sales value of products (e.g. raw materials, produce, finished or partly finished merchandise) with few exemptions, most services (e.g. construction, utilities, professional and personal services not derived from employment, rental), and on import of goods and services. The VAT rate is 21%, although certain specific items are subject to a 27% or 10.5% rate. VAT is payable by filing monthly tax returns.
The increased rate of 27% applies to ‘utilities services’ (e.g. telecommunications, household gas, running water, sewerage, and energy) not rendered to dwelling-purposes real estate.
A reduced rate of 10.5% applies to certain transactions, including (but not limited to) the following:
- Construction of housing.
- Interest and other costs on personal loans granted to final consumers by financial institutions.
- Sales and imports of living bovine animals.
- Supply of publicity and advertising in some specific cases.
- Any passenger transportation operating inside the country when the distance does not exceed 100 km.
- Medical assistance in some specific cases.
- Certain capital goods, depending on the Customs Duty Code.
VAT paid on purchases, final imports, and rental of automobiles not considered as inventory cannot be computed by the purchaser as a VAT credit. The same tax treatment applies to other services, such as those provided by restaurants, hotels, and garages.
As a result of the 2017 tax reform, VAT legislation has also been amended to include ‘digital transactions' (e.g. digital services, hosting, on-line technical support, software services, Internet services) provided from abroad as a taxable event. Hence, these types of services are now subject to VAT at a 21% rate if they are supplied by a non-resident entity to an Argentine customer, provided that they are effectively used in Argentina.
Among others, the following transactions are exempt from VAT:
- Sales of books, ordinary natural water, common bread, milk, medicine, postage stamps, aircraft used in commercial activities and for defence or internal safety, and ships or boats acquired by the national government.
- Supply of certain services, such as services rendered by the government (national, provincial, or local) or by public institutions; school or university education provided by private institutions subject to public educational programmes; cultural services supplied by religious institutions; hospital and medical care and related activities; transportation services for sick or injured persons in vehicles specially designed for the purpose; tickets for theatre, cinema, musical shows, and sport events; the production and distribution of motion picture films; local transport of passengers (e.g. taxis, buses) up to 100 km; and international transportation.
- Rental of real estate for housing purposes.
VAT exemption on importation
The following import transactions are also exempted from VAT:
- Final importation of goods qualifying for exemption from customs duties under special regimes for tourists, scientists and technicians, diplomatic agents, etc.
- Final importation of samples and parcels exempted from customs duties.
VAT export reimbursement regime
Exports of goods and services are treated as zero-rated transactions. Nevertheless, input VAT related to these transactions can either be used as a credit against output VAT or refunded pursuant to a special procedure.
Services rendered within the country shall be deemed to be exports if they are effectively applied or economically utilised outside the country.
Exporters must file an export return with the tax authorities, reporting the VAT receivables related to their exports to be reimbursed on VAT paid in relation to the export operations. A report certified by a public accountant with respect to the value, registrations, and other characteristics related to the refund must be attached to the export return.
The tax credit related to exports and other taxable activities can only be refunded in proportion to the exports, and can be fully refunded to a cap of 21% of the freight on board (FOB) value of the exported products.
There is no specific method stated in the legislation for allocating the tax credit related to exports, but taxpayers are able to use any methods of calculation that would be suitable to their business model. This calculation has to be approved by the tax authorities.
Finally, it is important to highlight that the tax authorities have to approve the tax credit to be refunded.
VAT reimbursement on investments in infrastructure projects and acquisition of capital goods
The 2017 tax reform established an expedient VAT recovery mechanism for VAT credit balances on certain infrastructure and investments in capital goods, to the extent that companies have not been able to recover the VAT within six months.
All VAT-registered taxpayers are compelled to use electronic invoices. In order to apply for this regime, an authorisation must be obtained from the tax authorities. As a result, the tax authorities will assign an Electronic Authorization Code (Código de Autorización Electrónico or CAE), which is included in every issued electronic invoice.
Import and export duties
The levels of import duty currently range between 0% and 35%, except in cases where a specific minimum duty is applied or that involve merchandise with a specific treatment. These percentages were established considering the individual competitive conditions prevailing in different production sectors and the relative advantages of contributing to the introduction of equipment and technology for local industry. In general, merchandise originating from Latin America Integration Association (LAIA) countries is entitled to preferential duty.
As of 4 September 2018, and until 31 December 2020, an export duty of 12% is established for the export of all merchandise included in the tariff positions of the Mercosur Common Nomenclature. However, Decree 37/2019, in force since 14 December 2019, modified such rate for certain products and for some others. The Decree also modified the limit in Argentine pesos of export duties to be paid. Thus, the export duty rate and the ARS limit, if applicable, vary depending on the type of product being exported.
For goods whose export was taxed before 4 September 2018, such as agro-industrial soy products, the export duty of 12%, with no ARS limit, is added to the export duties in force.
Other goods, such as wheat and corn cereals, which started to pay a rate of 12% with a limit of ARS 4 for each United States dollar (USD) of the taxable value (or the official FOB price) on 4 September 2018, currently pay a 12% duty rate with no ARS limit, as Decree 37/2019 eliminated the said ARS 4 limit.
Products indicated in Annex II of Decree 37/2019 pay an export duty rate of 9%, instead of 12%, which is applicable on the taxable value or the official FOB price.
For other certain products, the ARS limit is still in force. For the merchandise indicated in Annex I of Decree 723/2018, the 12% export duty may not exceed ARS 3 for each US dollar of the taxable value or the official FOB price, as applicable.
In addition to the above, Decree No. 1,201/2018, published in the Argentine Official Gazette on 2 January 2019, established a new duty on the exportation of services. The tax applies to services rendered in Argentina where (i) there is no employment relationship between the supplier and recipient of the service and (ii) the service is used or exploited abroad. This includes the exportation of software-related services, as well as consulting services rendered in Argentina and used abroad.
The taxable value is generally the value invoiced. Through Decree 99/2019, the rate was modified from 12% with a limit of ARS 4 for each US dollar of the taxable value to 5% with no ARS limit.
Micro and small exporters will be subject to tax once their annual revenues from the export of services exceed USD 600,000.
The exportation tax of 5% is effective as of 1 January 2020 and it temporarily applies through 31 December 2021.
Excise tax is assessable on a wide variety of items sold in Argentina (not on exports), principally on tobacco, wines, soft drinks, spirits, gasoline, lubricants, insurance premiums, automobile tyres, mobiles services, perfumes, jewellery, and precious stones. The bases of the assessment and tax rate of some items are as follows:
|Products||Nominal rates (%)|
|Tobacco, cigars, and cigarettes||20/25/70|
|Jewellery and precious stones||20|
|Automobiles, motor vehicles, motor vessels, motor homes, etc.||20|
Stamp tax is levied by each of the 24 jurisdictions into which Argentina is divided, and applies principally to contracts and agreements, deeds, mortgages, and other obligations, agreements, and discharges of a civil, financial, or commercial nature of which there is written evidence or, in certain instances, that are the subject of entries in books of account. The average tax rate is 1% applicable on the economic value of the contract.
In the city of Buenos Aires, the standard tax rate is 1% of the aggregate amount of the transactions, contracts, and deeds that are subject to the stamp tax. Special rates of 0.5%, 1.2%, 3%, and 3.6% are also established.
Turnover tax (gross income tax)
Each of the 24 jurisdictions into which Argentina is divided imposes a tax on gross revenues from the sale of goods and services. Exports of goods are exempt, and certain industries are subject to a reduced tax rate. Rates, rules, and assessment procedures are determined locally. On average, rates for trade and services range from 3% to 5%. In case of industry, rates are generally lower (ranging from 0% to 2%).
Real estate tax
Similar to the turnover tax, real estate tax is imposed by each Argentine jurisdiction. It is levied on the ownership of real estate located in the territory of the jurisdiction.
Real estate tax is usually assessed by the local tax authority, considering the property’s fiscal value and the tax rates established by the current year tax law.
Tax on financial transactions (on credits and debits on bank accounts)
Bank account movements (deposits and withdrawals) are subject to a national tax on financial transactions at the following rates:
- 0.6% of deposits and withdrawals in bank accounts opened in local financial entities.
- 1.2% of any transactions made in a bank without using a bank account.
33% of the tax on financial transactions effectively paid on bank account transactions (0.6%) and movement of funds (1.2%) is creditable against CIT and minimum notional income tax and/or respective tax advances.
An annual wealth tax is levied on the shares or holding in the capital of local companies owned by individuals or undivided estates domiciled in Argentina or abroad, and/or companies and/or any other type of legal person domiciled abroad. It shall be assessed and paid directly by the local company as a full and final payment on behalf of the shareholders (the issuing company has the right to recover from the shareholder the tax paid).
By virtue of a recent tax reform, the applicable tax rate has been increased to 0.5% (formerly 0.25%) and is applicable on the value of the participation, which is generally calculated on the difference between assets and liabilities arising from the financial statements closed at 31 December or during the respective fiscal year.
Note that a Supreme Court decision has ruled on the non-applicability of this tax to Argentine branches of foreign companies.
Payroll taxes and social security contributions
Foreign and local nationals working for a local company must be included on the local payroll and will be considered as local employees for local labour, tax, and social security purposes. Both the local company and the employees will be subject to the corresponding regulations.
All the compensation paid in Argentina or abroad for work performed for the local company will be considered as local compensation and should be reported to the tax and social security authorities, as the case may be, and included in the salary slips and recorded in the local labour books.
The local employer must withhold income tax on an actual and monthly basis and make the corresponding payments to the tax authorities through monthly WHT returns. Individual tax rates range from 5% to 35%, and personal deductions are available.
The local entity must issue salary slips every month for each employee included on its payroll, considering the total compensation mentioned above.
Employer social security contributions add between 24% and 26.4% to payroll costs. There is a compulsory 13th-month salary. There is no restriction regarding the employment of foreigners, provided they hold working visas.
Workers’ (Employees’) Compensation: Argentine labour regulations determine different forms of compensation for employees. These include, but are not limited to, the following:
- Vacation compensation.
- Compensation in a case of termination of employment contract with employee (prior notice of dismissal and to a severance payment, both based on seniority).
Main social taxes and contributions assessable on salaries are as follows:
|Social taxes and contributions||Percentage of gross monthly earnings (%)|
|(including 13th month salary)|
|Employer (2, 3)||Employee (1)|
|National unemployment fund||-||-|
|Family allowances fund||-||-|
|Social services institute for pensioner||-||3|
|Social health care plan||6||3|
- Social security charges borne by employees are applicable up to a monthly salary cap, which currently amounts to ARS 208,357.30 as of December 2020.
- Argentine employers are exempt to pay social security contributions for the first ARS 7,003.68 per month per employee.
- Employers' contributions to the national unemployment fund, family allowances fund, and social services institute for pensioners is paid at a unified rate of 18%. The rate is increased to 20.4% for companies whose main activity consists of rendering services or commerce, provided the amount of their total annual sales exceeds the amount to be considered a small and medium-sized enterprise (SME).