When incorporating a business in a new country, it is essential to familiarize yourself with local business laws to ensure your company operates in accordance. This requirement holds significance from the initial launch and remains pertinent as your business expands. Being unaware of the legislation and not adhering to regulatory frameworks may increase the likelihood of facing penalties or reprimands in the future. Such situations can potentially have lasting consequences for both you and your business. Continue reading to gain insights into corporate legal compliance in Argentina.
Business law in Argentina differs from that of your home country, reflecting the unique methods each government employs to provide employment assurances for citizens, combat corruption, and foster a business environment characterized by fairness, competitiveness, and safety for all. In the sections that follow, we provide an introduction to corporate legal compliance in Argentina and offer guidance on ways to safeguard your firm from inadvertent negligence or non-compliance, taking into account the current economic situation in the country.
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Corporate Legal Compliance in Argentina – Overview of Foreign Direct Investment
While Argentina encourages foreign direct investment (FDI), the government places a strong emphasis on fostering the growth of local businesses that cater to the needs of the Argentine people. This policy approach may contribute to the significant variations in Argentina’s foreign direct investment inflows from year to year.
However, in the first quarter of 2023, Argentina witnessed net inflows of US$ 3.81 billion in Foreign Direct Investment (FDI), reflecting a modest year-over-year growth of 2%. The primary sources of these inflows were debt transactions and the reinvestment of profits. Notably, sectors such as deposit-taking corporations, the manufacturing industry, and mining and quarrying attracted the lion’s share of FDI. The United States led as the main contributor to FDI flows, followed by Brazil and Spain. As of March 31, 2023, the gross FDI position amounted to US$ 133.304 million, encompassing equity holdings and debt.
Low Minimum Capital a Key Drawcard
One of the things Argentina does offer that favors investors is low startup costs. This is why many businesses choose Argentina to incorporate a Latin American hub. The minimum capital required for incorporating a Limited Liability Company in the country is just US $300, which reduces barriers to entry and enables businesses to start operations as quickly as possible.
With a growing number of exciting startups to watch, Argentina’s economy will experience an influx of new businesses in the coming years. With such little startup capital required, investors and entrepreneurs with varied investment capital can get started.
Directorship Requirements
Whether you are a foreign investor looking to form a company in Argentina or a local entrepreneur, understanding the laws surrounding directorship is crucial for long-term growth. All Argentine companies are required to have a majority of resident directors. If you are not an Argentine national, then you will need to find local business partners or pay for a company to represent your firm and serve as a director in order to bypass the directorship requirements for company incorporation.
You must lodge annual company returns, confirming the details of your company. This includes the names and addresses of your directors, the address of the principal business site, and details on your shareholders and their shareholdings. It is important to keep a record of all of your shareholders’ and directors’ personal information and make them aware that their personal information will be submitted to the government.
It is also important to note that, whilst company secretaries are not required when forming a new business in Argentina, they are recommended to ensure compliance with the Corporation Act.
Obtain a tax identification number, or Código Único de Identificación Tributaria (CUIT).
This is essential for submitting tax declarations and fulfilling other tax requirements.
UBO Information
Once a year, it is required to submit an affidavit specifying the beneficial owner(s) of the company.
Authorize Repatriation of Profits
Whether launching a new business in Argentina or an Argentine sales branch of a multinational company, you must get authorization from the Central Bank for the repatriation of all profits. This is critical – even more so if you have a foreign director or shareholder – in order to deliver profits and assets to the right people without falling foul of the law.
When growing your business in Argentina, it is recommended you work with an accountant or bookkeeper who can keep on top of your finances and ensure compliance with financial reporting. Indeed, failure to provide your corporation’s appropriate profit and losses can result in fines or prosecution. Doing so on your own, alongside the other demands that forming a new business requires, is not worth the risk. Be aware that you cannot remove assets from your company and distribute them to shareholders as and when desired. Playing by the books will ensure your business stays within the law and enjoys long-term success.
Data Protection and Discrimination
Argentina’s Data Protection Law (known as Bill No. MEN-2018-147-APN-PTE) was recently overhauled, and re-designed to prevent companies from disclosing private information about an individual, whether that be a customer or an employee. The new bill is in line with the European Union’s General Data Protection Regulation and includes accountability obligations for all companies.
Another aspect that falls under corporate legal compliance in Argentina is gender laws. It is illegal to discriminate against an employee based on their gender, race, religion, or sexual orientation. Make sure you weave this consideration into your recruitment strategy to ensure compliance and create a diverse team to bolster your growth.
Anti-corruption, Bribery and Money Laundering Regulations
There are different regulations and laws related to the obligation of companies to prevent bribery, among other crimes, or the facilitation of tax evasion.
Compliance
In Argentina, entities of all types must perform certain activities to meet regulatory obligations. These include:
- Conducting an Annual General Meeting (AGM)
- Submitting financial statements to the Public Registry, if applicable based on the entity’s type.
Regulations for Healthy Competition
The final aspect of corporate legal compliance in Argentina is complying with anti-trust laws. Argentina’s anti-trust laws were designed to stop firms from creating or entering into contracts that would create monopolies. Permission must first be granted to your proposed business activities to ensure the market remains fair and competitive.
What’s more, Argentina’s Commercial Practices Code has a policy on preventing dominant companies in the country from forcing out competitors using predatory techniques such as unreasonable pricing and operating non-profitable stores.
Frequently Asked Questions for Entity Corporate Legal Compliance in Argentina
Based on our extensive experience these are the common questions and doubts of our clients on corporate legal compliance in Argentina:
The following are the most common statutory appointments for Argentinian legal entities:
– A local “Principal Director” and a “Substitute Director” who will be personally liable, both legally and financially for the good operation and standing of the company. The Principal Director can be either a local national or a foreigner with residency in Argentina, meanwhile, the substitute director can be a local national or a foreigner (If a foreigner is selected for this role, he must be duly registered with the country’s governmental authorities).
– An appointed Legal Representative for each foreign legal entity shareholder. This should be a local national or a foreigner with residency in Argentina and must have a tax identification number assigned within the Country and a personal fiscal address (different from the Company address). Please note that the Legal Representatives are required to contract a surety policy in favor of the entity they represent.
Yes, a registered local Fiscal Address is required for all entities in Argentina for the receipt of legal correspondence and governmental visits
Work With Biz Latin Hub
It’s vital to seek corporate law advice when starting a business in Argentina. Biz Latin Hub is best placed to assist in your entry or expansion into Argentina and Latin America. Whether you have spotted a gap in the market and want to operate in the country, or have plans to expand but need guidance on compliance, our team of lawyers and legal experts are on hand to help.
To find out more, get in contact with our team of experts today and check our site regularly for more guides and assistance on corporate legal compliance in Argentina in order to maximize your profitability.
Watch our short video below for insights on what makes Argentina a smart choice for doing business.
The information provided here within should not be construed as formal guidance or advice. Please consult a professional for your specific situation. Information provided is for informative purposes only and may not capture all pertinent laws, standards, and best practices. The regulatory landscape is continually evolving; information mentioned may be outdated and/or could undergo changes. The interpretations presented are not official. Some sections are based on the interpretations or views of relevant authorities, but we cannot ensure that these perspectives will be supported in all professional settings.
