From time to time, foreign foundations show interest in carrying out activities in Argentina, particularly registering in the Autonomous City of Buenos Aires (CABA).

Whether for social, educational, scientific, or cultural projects, these organizations must comply with the applicable regulatory framework before the Public Registry of CABA, which is under the authority of the General Inspection of Justice (IGJ), an agency reporting to the Ministry of Justice of the Nation.

This article provides a practical overview of how a foreign foundation may obtain authorization to operate in Argentina, the available registration alternatives, and the tax implications arising from each option.

Registration alternatives before the IGJ

Pursuant to IGJ General Resolution No. 15/2024, a foreign foundation wishing to operate in Argentina has two alternatives:

1. Establishing a representation or a permanent establishment of the foreign foundation in Argentina (Article 289 of the Resolution).
• The same legal entity operates directly in Argentina.
• No new entity is created; instead, it is the foreign foundation itself acting locally.
2. Forming an Argentine foundation as the founding entity (Article 290 of the Resolution).
• In this case, the foreign foundation incorporates a new local foundation, which acquires its own legal personality, assets, and operations.
• This domestic foundation is legally independent from the foreign foundation.

The choice between these two alternatives is critical, as it will determine whether the foundation may access tax exemptions under Argentine law.

Tax Treatment of Foundations in Argentina

Foundations incorporated under Argentine law are, as a general rule, treated as corporations for tax purposes, unless they apply for and are granted tax-exempt status.

1. Income Tax

• The general corporate income tax rate is up to 35% of net income.
• An Argentine foundation may apply for exemption from income tax under Article 26, subsection f), of the Income Tax Law No. 20,628, provided that:
• Its purposes are related to social assistance, public health, charity, education, science, art, culture, or similar public-benefit activities.
• Its income and assets are used exclusively for its statutory purposes and are not distributed, directly or indirectly, among members of its governing bodies.
• Its resources are not derived from public shows, gambling, horse racing, or financial activities (except for financial investments intended to preserve the foundation’s assets).
• It does not engage in commercial or industrial activities unrelated to its statutory purposes, or, if it does, such activities do not exceed the percentage of total income allowed by regulation.
• Its directors are not compensated for governance functions, although they may receive reasonable compensation for other roles, subject to statutory limits.

A foreign foundation operating only as a permanent establishment in Argentina will not qualify for these exemptions, unless it is formally declared of national interest.

2. Value Added Tax (VAT)

• The standard VAT rate is 21%.
• Services rendered by Argentine foundations are exempt under Article 7 of the VAT Law No. 23,349.

3. Tax on Bank Debits and Credits

• The general rate is 0.6%.
• For entities exempt from both VAT and income tax, the reduced rate applies: 2.5‰ on credits and 5‰ on debits.

4. Gross Receipts Tax (CABA and Province of Buenos Aires)

• In CABA and the Province of Buenos Aires, foundations are exempt if they are also exempt from income tax.

Why it is advisable to establish a domestic foundation in Argentina

The law is clear: to access tax exemptions in Argentina, a foreign foundation must incorporate a domestic foundation.

This structure provides several advantages:

• Eligibility for income tax and VAT exemptions.
• Access to tax-deductible donations from Argentine residents and companies.
• Exemptions from import duties for donated goods from abroad.
• A stronger institutional presence in Argentina through a recognized legal entity.

Tax benefits for donors

Domestic donors (Argentine Residents and Companies)

• May deduct from taxable income up to 5% of net annual income for donations made to Argentine foundations whose main purposes involve assistance, health, education, science, or culture.
• To qualify, the foundation must be registered as an authorized donee before the Federal Tax Authority (ARCA).

Foreign donors

• May make donations in cash or in kind.
• Donations of goods are exempt from import duties and other taxes under Article 27 of Law No. 23,871, provided that the Argentine foundation is exempt from income tax and the goods are destined for social, health, or emergency relief purposes.

Practical recommendations for foreign foundations

1. Define the scope of intended activities in Argentina before choosing between a permanent establishment and a domestic foundation.
2. Incorporate an Argentine foundation if access to tax exemptions and deductible donations is a priority.
3. Comply with IGJ registration requirements and ensure proper governance standards.
4. Apply for tax exemptions with ARCA and the relevant tax authorities under local jurisdictions.
5. Plan for cross-border donations and imports with attention to tax and customs rules.

Conclusion

Foreign foundations seeking to operate in Argentina must carefully consider the legal and tax implications of their registration. The distinction between a permanent establishment and the incorporation of a domestic foundation is decisive.

Creating a domestic foundation not only maximizes tax benefits but also strengthens institutional legitimacy and donor confidence. However, the process requires careful planning and specialized legal and tax advice to ensure compliance and achieve operational efficiency.

At Castro Sammartino & Pierini Abogados, we provide comprehensive legal support to foreign and domestic foundations, from incorporation before the IGJ to securing tax exemptions and managing cross-border donations.

Mario E. Castro Sammartino

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