Company Incorporation in Argentina

Can foreigners incorporate a company in Argentina?

Yes, foreigners can incorporate a company in Argentina, and the country has a legal framework that allows for foreign shareholding in various business structures, with the Limited Liability Company (Sociedad de Responsabilidad Limitada, SRL) being one of the most popular choices. Argentina's Foreign Investment Law (Law No. 21,382) ensures that foreign investors have the same rights and obligations as local investors, including the ability to own up to 100% of a company’s shares. Moreover, there are no restrictions on the repatriation of profits or capital, which further encourages foreign investment.

The SRL structure is particularly advantageous for foreign founders because it offers limited liability, meaning that shareholders' responsibilities are confined to their capital contributions. The incorporation process requires at least two shareholders, who can be either individuals or legal entities, and one or more managers who can be foreigners, provided they are legally authorized to work in Argentina. Recent reforms, such as the introduction of the Simplified Stock Company (Sociedad por Acciones Simplificada, SAS), have further eased the incorporation process by allowing companies to be established more quickly and with fewer formalities.

What is the structure of an LLC in Argentina?

Directors

In an Argentine Limited Liability Company (Sociedad de Responsabilidad Limitada, SRL), at least one director must be appointed to manage the company. There is no requirement for the director to be a resident of Argentina, which allows foreigners to hold this position. However, if the director is a foreigner, they must obtain a local tax identification number (CUIT) and may need to appoint a legal representative in Argentina. Corporate directors are not allowed in an SRL; the director must be an individual. Nominee directors are permissible.

Shareholders

The SRL requires a minimum of two shareholders, who can be either individuals or legal entities. There is no upper limit on the number of shareholders, though it is common to see a small number due to the nature of the SRL structure. Shareholders can be of any nationality, and there are no restrictions on foreign ownership, allowing foreigners to hold up to 100% of the company's shares. Like directors, shareholders must obtain a CUIT if they are non-residents. Nominee shareholders are permitted, but transparency in shareholding is critical to complying with Argentina’s anti-money laundering regulations.

Share Capital

The minimum share capital required to establish an SRL in Argentina is relatively low, making it accessible for small and medium-sized businesses. While the law does not stipulate a specific minimum amount, it should be sufficient to fulfill the company’s objectives. Typically, the initial capital is determined by the founders based on the company’s needs. The share capital is divided into quotas (not shares), and each quota represents a portion of the company’s equity. These quotas cannot be traded on the stock exchange but can be transferred to other parties with the approval of the other shareholders.

Office Space

To establish an SRL in Argentina, the company must have a registered office in the country. This registered office serves as the company’s legal address and must be a physical location, not just a virtual office. The office can be rented or owned and must be registered with the Public Registry of Commerce. The registered office address is where all legal documents and notices will be sent, and it is crucial for maintaining compliance with local regulations.

Documents required for a company formation in Argentina

To incorporate a company in Argentina, you need to prepare and submit various documents. These documents are essential to comply with Argentine regulations and ensure your business operates legally. The documents will be used in KYC due diligence procedures, application preparation, and document submission to the authorities.

Proposed Company Details:

1. Proposed company names.
2. Business Activities: Detailed description of the company’s purposes and objectives.
3. Share Details: Number of shares, share classes (if any), rights attached, and nominal value.
4. Power of Attorney: Signed by each shareholder for submission.
5. Proof of a registered address in Argentina

Personal Documents for Directors, Shareholders, and Promoters:

1. Copy of colored passport with at least 18 months of validity.
2. National identity card
3. Proof of a foreign residential address.
4. Resume and contact information.

Corporate Documents for Corporate Shareholders:

1. Certificate of Incorporation.
2. Memorandum & Articles of Association/Constitution and Amendments.
3. Certificate of Incumbency.
4. Proof of the registered address.
5. Board of Directors structure and corporate chart.
6. Corporate representative details and board resolution.

Additional Requirements:

1. Written confirmation that directors, shareholders, and other key individuals are not Politically Exposed Persons (PEPs).
2. Principal place of business address.
3. Source and origin of funds used in the business.
4. Expected location of the company’s customers and suppliers.
5. Information on the beneficial owner, if different from the named shareholder.

How do I incorporate a company in Argentina?

Step 1 - Check for the Company’s Name Availability

The first step in incorporating a company in Argentina is to check if your desired company name is available. This is done through the General Inspection of Justice (Inspección General de Justicia, IGJ). Ensure that your company name is unique and not already registered by another entity. Once the name is approved, you can proceed with the registration process, which can be completed online.

Step 2 - Appoint a Legal Representative

If the shareholders of the company are not residents of Argentina, it is necessary to appoint a legal representative in the country. This is typically done through a Power of Attorney (POA), allowing the representative to carry out the incorporation process locally. For foreign shareholders, additional documentation may be required, and all documents must be legalized and apostilled, if applicable. It’s important to note that documents not in Spanish must be translated and certified before they are accepted by Argentine authorities.

Step 3 - Draft the Company Bylaws

The company bylaws, or articles of incorporation, are a critical document that outlines the structure and governance of the company. This document must include essential details such as the company name, legal representative’s information, share capital, company activities, and the registered office address. The bylaws must be carefully drafted and be signed by all shareholders, and these signatures must be notarized.

Step 4 - Deposit the Initial Company Capital

Before finalizing the registration of the company, 25% of the initial share capital must be deposited into an account at the National Bank of Argentina (Banco Nación de Argentina). This deposit is a legal requirement and acts as proof of the company’s financial commitment. The funds remain in the bank until the registration process is complete, after which they can be transferred to another bank account of the company’s choosing.

Step 5 - Pay the Incorporation Fee and Submit Company Documents

To officially register the company with the Ministry of Justice and Human Rights, an incorporation fee must be paid. After this payment, all required documents, including the bylaws and proof of capital deposit, must be submitted for review. The submission process is usually conducted online, streamlining the registration process.

Step 6 - Publish the Company Formation Notice in the Official Gazette

Once the company is registered, a notice of its formation must be published in the Official Gazette of Argentina. This notice includes key details such as the registered office address, share capital, and the date of incorporation. Only a registered lawyer in Argentina can carry out this publication, ensuring that it meets all legal requirements. The publication fee is typically charged per line of text.

Step 7 - Register Your Company Books

The registration of the company’s accounting and legal books is a mandatory step to ensure compliance with Argentine regulations. These books include records of meetings, shareholder decisions, and financial transactions. The books must be registered with the Public Registry of Commerce and properly maintained to avoid any legal issues or penalties.

Step 8 - Obtain a Tax Identification Number (CUIT)

After the company is registered, it will be assigned a Tax Identification Number (Código Único de Identificación Tributaria, CUIT) by the Federal Public Revenue Administration (AFIP). This number is essential for tax reporting and other legal obligations. If the company’s legal representative is an Argentine resident, the process can be completed online; otherwise, it must be done in person at an AFIP office.

Step 9 - Register with the Social Security System

Finally, the company must register with the Argentine social security system to comply with labor regulations. This involves registering the company’s employees and ensuring that all social security contributions are correctly managed. This step is crucial for companies planning to hire staff and operate legally within Argentina.

Compliance requirements post-incorporation

After incorporating a company in Argentina, there are several post-incorporation compliance requirements that must be adhered to in order to maintain the company’s legal standing and avoid penalties. These include financial reporting, tax obligations, regulatory filings, and corporate governance practices. Here's a detailed overview of the key compliance requirements:

Annual Financial Statements

All companies in Argentina are required to prepare and submit annual financial statements. These statements must adhere to Argentine Generally Accepted Accounting Principles (GAAP) and should include a balance sheet, income statement, and cash flow statement. The financial statements must be audited by a certified public accountant registered in Argentina. For companies registered in Buenos Aires, the financial statements must be submitted to the General Inspection of Justice (IGJ); companies in other provinces must submit them to the respective provincial authorities.

Annual Shareholders’ Meeting

An annual shareholders’ meeting is mandatory, during which the shareholders review and approve the company’s financial statements, discuss the company’s performance, and make decisions regarding dividend distribution, management changes, or other significant issues. The minutes of this meeting must be recorded in the official corporate books and, depending on the jurisdiction, may need to be filed with the Public Registry of Commerce.

Tax Compliance

Companies in Argentina are required to comply with various tax obligations, including the payment of corporate income tax, Value Added Tax (VAT), and social security contributions. The company must file monthly and annual tax returns with the Federal Public Revenue Administration (AFIP). Additionally, the company must comply with any local taxes specific to the province or municipality where it operates. Failure to meet these tax obligations can result in penalties and interest charges.

Maintenance of Corporate Books

Companies are required to maintain accurate and up-to-date corporate books, including the Shareholders’ Registry, Minutes Book, and Accounting Books. These books must record all relevant corporate activities, such as shareholder meetings, board meetings, and financial transactions. The books must be kept in Spanish and may need to be registered or updated periodically with the Public Registry of Commerce.

Social Security and Employment Obligations

If the company employs staff, it must register with the Argentine social security system and comply with labor laws regarding employee rights, benefits, and contributions. This includes registering employees with AFIP, making regular contributions to social security, and adhering to regulations regarding employment contracts, working conditions, and termination procedures.

Regulatory Filings and Updates

Any changes to the company’s structure, such as changes in directors, shareholding, or registered office, must be promptly reported and registered with the relevant authorities, such as the IGJ or the provincial registry. These changes must also be reflected in the company’s official books and may require the filing of updated documents with the Public Registry of Commerce.

VAT and tax considerations for companies in Argentina

Value Added Tax (VAT)

In Argentina, VAT is known as Impuesto al Valor Agregado (IVA). The standard VAT rate is 21%, which applies to most goods and services. However, certain goods and services may be subject to a reduced rate of 10.5% or an increased rate of 27%. For instance, essential goods like food items and medical supplies often fall under the reduced rate, while services such as utilities (electricity, gas) might be taxed at the higher rate.

Businesses are required to register for VAT with the Federal Public Revenue Administration (AFIP) if their activities are subject to VAT. VAT returns must be filed monthly, and companies are responsible for collecting VAT from their customers and remitting it to the government. Companies can usually claim credits for the VAT they pay on business expenses, which can offset the amount they owe to the government.

Corporate Income Tax

Corporate income tax in Argentina is levied at a flat rate of 35% on the company’s taxable income. Taxable income is determined by the company’s profits, which are calculated as gross income minus allowable deductions, including operating expenses, depreciation, and interest. Argentina operates on a worldwide income basis, meaning that resident companies are taxed on their global income.

Companies are required to make advance payments of corporate income tax throughout the year based on their estimated annual tax liability. These payments are reconciled at the end of the fiscal year, when the company files its annual tax return. Any shortfall must be paid, while any excess payments can be refunded or applied to future tax liabilities.

Withholding Taxes

Argentina imposes withholding taxes on various payments made to non-residents, including dividends, interest, royalties, and technical assistance fees. The withholding tax rates vary depending on the type of payment and the existence of a tax treaty between Argentina and the recipient’s country. For example, the standard withholding tax rate on dividends is 7% or 13%, depending on the distribution date, while the rate on interest and royalties can range from 15.05% to 35%.

Social Security Contributions

Companies with employees must also contribute to Argentina’s social security system. Employers are required to contribute around 27% to 28% of an employee’s gross salary to social security, which covers pensions, healthcare, and other benefits. Employees also contribute a portion of their salary, usually around 17%, which is withheld by the employer and remitted to the government.

Tax Treaties

Argentina has signed tax treaties with several countries to avoid double taxation and prevent tax evasion. These treaties can reduce or eliminate withholding taxes on cross-border payments and provide mechanisms for resolving tax disputes.