Is it necessary to establish a company to hire workers in Argentina?

by 1 May 2023Companies, Doing business in Argentina, Labor and Social Security

Yes. Establishing a company to hire workers in Argentina is a necessity to avoid legal liabilities. Even if the employers are foreign companies that hire human resources residing in Argentina to provide services remotely.

Hiring individuals in Argentina to work for non-resident companies

In Argentina, labor law is governed by the principle of territoriality: Argentine law will apply to the validity, rights, and obligations of the parties, whether the employment contract has been entered into in the country or abroad, insofar as it is performed in its territory (Labor Contract Law No. 20,744, Section 3).

Therefore, foreign laws do not apply to labor relationships performed in Argentina (regardless of whether they were entered into abroad), and a foreign company may not hire an employee in Argentina unless it does so through a branch or a subsidiary set up in the country, and complies with applicable labor and social security obligations.

Although the hiring of an independent contractor is admissible, if the hired contractor turns out to actually be an employee, the relationship will be deemed a de facto labor contract, with significant legal liabilities arising out of such a qualification and the labor and social security liabilities derived from the termination of employment.

To rule whether there is an employment relationship or an independent contract, labor judges customarily consider, among others, the following facts:

1. If the individual is immersed in a third party’s business, or has a business organization of his/her own;

2. If the individual performs services on an exclusive basis for the contracting party or has different clients;

3. If the individual is economically submitted to or mostly dependent on the considerations collected from the contracting party or has other sources of income;

4. If the individual runs his / her own business organized as a company, has his/her facilities, employees, and other business expenses, etcetera.

Besides the aforementioned labor and social security risks, the rendering of services by independent contractors in Argentina also implies potential tax liabilities, as those services may establish the existence of a permanent business for tax purposes. The lack of registration of a permanent business may create contingencies regarding taxes, interests, and penalties.

Conclusion: although with practical difficulties to have them accountable, foreign companies without an establishment in Argentina that hire resident individuals and make them issue invoices for their services as if they were independent contractors when they are employees may face significant liabilities. 

As for general guidelines on Argentina´s labor laws, you may consult our Labor Guide to Doing Business in Argentina https://cspabogados.com.ar/en/labor-guide-to-doing-business-in-argentina-2/ 

How to establish a company to hire workers in Argentina

If you want to know more about legal vehicles to establish your company in Argentina, please, review our article https://cspabogados.com.ar/en/legal-vehicles-to-do-business-in-argentina-2/ .

 

Mario E. Castro Sammartino

 

For additional information on these or any other issues related to doing business in Argentina, please, sign up for our Legal Blog or contact us at any time. Our publications exclusively express the author´s opinion and do not purport to be legal counsel on any case. Should you need it, you must consult with your trusted lawyer.​

 

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