Extended business travelers are likely to be taxed on employment income relating to their Argentinean workdays.
Liability for income tax
A person’s liability to Argentinean tax is determined by residence status. A person can be a resident, a non-resident with permanent presence, or a non-resident for Argentinean tax purposes (foreign beneficiary).
Individuals are considered to be resident in Argentina for the following reasons.
- They are of Argentinean nationality, whether by birth or naturalization, except for those individuals who have lost their residence status; or
- They are foreign individuals who are not residents for immigration purposes but have spent more than 12 months in Argentina, or foreign individuals with permanent residence for immigration purposes, or those who have been in the country for more than 5 years.
Generally, individuals who have been resident in Argentina will lose their residence status when they acquire permanent residence (for immigration purposes) in another country or remain in another country for a period exceeding 12 months.
The 1998 law established a new category of individuals who are considered to be non-residents with permanent presence in Argentina. In this sense, 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 5 years with a temporary visa are considered to be non-residents with permanent presence. The same treatment applies to family members who accompany them.
The general rule is that people who are residents of Argentina are assessable on their worldwide income. Non-residents are generally assessable on income derived from sources in Argentina.
Extended business travelers are likely to be considered non-residents with permanent presence in Argentina or foreign beneficiaries.
Definition of source
Employment income is generally treated as being Argentinean-sourced compensation where the individual performs the services in Argentina (irrespective of the place of payment).
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.
For 2014, net taxable income is taxed at graduated rates ranging from 9 percent to 35 percent for both residents and non-residents with permanent presence in Argentina. The maximum tax rate is currently 35 percent on net income earned over 120,000 Argentine pesos (ARS). Foreign beneficiaries may be subject to a flat rate if income tax is withheld at source (see the section on employee compliance obligations and employer reporting and withholding requirements).
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 assignments (less than 2 years with a temporary visa).
Currently, social security taxes represent 17 percent of gross wages. Since September 2013, a monthly taxable base of ARS 28,000.65has 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
|Pensioner’s healthcare fund
|Family allowance fund
Source: KPMG in Argentina, 2013
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 (MERCOSUR).
- Ibero-American treaty: Argentina, Bolivia, Brazil, Colombia, Costa Rica, Chile, Ecuador, El Salvador, Spain, Paraguay, Peru, Portugal, Uruguay, Venezuela, Andorra, Cuba, Guatemala, Honduras, México, Nicaragua, Panamá and the Dominican Republic. 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 Secretaría General Iberoamericana (SEGIB) made by Bolivia in February 2011 implies that its coming into force will be in May 2011. This treaty is not in force in Argentina.
- Other agreements have been signed but they are not currently in force/fully operational.
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 registration number and it usually operates by mid April following the tax year-end, which is 31 December.
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 an informative income tax return
For many types of income, including any income other than employment income paid to a Foreign Beneficiary, the payer must withhold tax at 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 6 months are subject to a withholding as the rest of the employees. However, each case should be evaluated.
Work permit/visa requirements
Every assignee travelling to Argentina to perform tasks different from tourism and pleasure purposes, must request the appropriate category and benefit conferred by the Immigration Office in Argentina or Consular Authority in the Country of residence.
There are three categories of residences for Argentina: Transitional, temporary and permanent residences.
This type of residence is for those foreigners remaining in the Country for a short period of time, generally less than 3 month. This residence does not allow working in the Country except technical residents.
Technical residence: This residence type is applied to foreigners who perform technical or professional activities for a short term. It can be obtained at the Argentinean Consulate in the country of residence of each foreigner or after the arrival as a tourist.
The Consular request is a 30 days period of time residence, which could be extended upon the Immigration Office’s discretion. The local request is for 90 days period of time residence, which could not be extended; it can be requested twice a year only.
Business residence: This residence is issued for foreigners who are invited by a company established in Argentina. This process can be requested at the Argentinean Consulate of the Country of residence only. This type of residence is admitted for business issues. This is a 60 days period of time residence, which could be extended upon the Immigration Office’s discretion.
This type of residence is for those foreigners who want to live in the Country for a long period of time. They are able to work, study, live, etc.
Work residence: This residence type is applied to foreigners who are employed by a local company for a long term. The Residence will be valid for one year and it could be extended indefinitely.
Intra Company transfer residence: This residence type is applied to employees who are transferred from a home country company to an Argentinean company for a long term. The Residence will be valid for one year and it could be extended indefinitely.
Family reunification temporary residence: This residence type is applied to foreigners who have a relative with temporary residence in Argentina. The Residence will be valid for the same period of time of the relative and it could be extended indefinitely.
Renter residence: This residence is for owners or pensioners who receive money from their home Country in Argentina. It will be valid for one year and it could be extended indefinitely.
Study residence: This residence is for foreigner students in Argentinean officially recognized establishments. It will be valid for one year and it could be extended indefinitely.
MERCOSUR citizen residence: This residence type is applied to foreigners born in the MERCOSUR countries (Bolivia, Brazil, Chile, Colombia, Ecuador, Paraguay, Peru, Uruguay, and Venezuela) who want to live in Argentina for a long term. It will be valid for two years and it could be extended indefinitely.
Investor residence: The Immigration Office considers an investor to a person who makes a investment of ARS 1.500.000 in Argentina and provides a productive, commercial or service-supplying activity. This Residence will be valid for one year and it could be extended indefinitely.
This type of residence is for those foreigners who want to live in the Country permanently. Under this residence, the foreigners can work, study, live, etc.
Family reunification permanent residence: This residence type is applied to foreigners who have a relative with permanent residence in Argentina or an Argentinean citizen relative in the Country.
Citizens who live in Argentina for 2 or 3 years: The permanent residence for MERCOSUR citizens could be required after the first period of temporary residence (two years). The permanent residence for Non MERCOSUR citizens could be required after live in Argentina for at least three years.
Registration of the local company
RENURE is the national registry where all the local companies requiring foreign staff must be enrolled in order to require the type of residence which involves a local company. The requesting person (private or public, physical or juristic) must be registered at RENURE.
Foreigners’ Identity Card
The Identity Card issued for temporary and permanent residents in Argentina is the DNI.
Foreigners’ Labor Card
The labor card or Social Security Number (CUIL) is mandatory for those foreigners employed by a company.
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 16 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 (PE) 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 and the time spent in Argentina.
The standard rate of value-added tax (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 sale 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
- 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 non-residents (i.e. import of services).
Employment income is not subject to VAT
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 excess, it is credited against future VAT liabilities.
If a business has taxable activities 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.
Argentina has a transfer pricing regime that applies to transactions made with foreign affiliates and companies located in low-tax jurisdictions. More details can be found in Argentine income tax law and relevant amendments, as well as in Decree 1344/98 and General Resolution No. 1122/01.
When a company renders services to a related company through its employees, transfer pricing should be considered in order to give said transaction a market value.
The local company must file a report to the local tax authorities (in Spanish) accompanied by a CPA certification of certain contents legally required, by the first week of the eighth month after the end of the fiscal year.
The transfer pricing return F. 4501 should be prepared for filing the referred documentation, which shall bear the digital signatures of the taxpayer, CPA involved and representative of the professional association where the CPA has been licensed.
Also, together with the aforementioned report, the local company will have to submit a transfer pricing annual return (F.743) which must disclose the intercompany transactions carried out during the fiscal period under analysis.
Additionally, in order to comply with local regulations, the company will have to submit another annual transfer pricing return (F.969) which must be filed with the Administracion Federal (AFIP) 15 calendar days after the income tax return deadline.
Finally, the local company will have to file a semiannual transfer pricing return (F.742) with the local tax authorities which must disclose the intercompany transactions carried out during the first semester of the fiscal period. The deadline for this return operates on the first fortnight of the eleventh month of the fiscal period.
Management fees would 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.
Please note that there are recently implemented restrictions on the outflow of money which is restricting the transfer of money abroad and the payment of invoices. Consequently, a further analysis should be conducted on each case in order to evaluate the best strategy to implement for each assignment.
*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 ARS 28,000.65 (taxable salary, called ”MOPRE”) since September 2013.