Information and Communication Technology companies in Argentina: what to consider when starting up

by 11 Jun 2024Companies, Doing business in Argentina, Technology

1) The booming of Information and Communication Technology companies in Argentina

Supported by rising levels of digitalization, a well-trained workforce, and tax and foreign exchange benefits, the Information and Communication Technology (hereinafter, also ICT) industry in Argentina is booming.

Professionals in Information and Communication Technology companies in Argentina are open-minded, with solid technological skills, and good working capacities in English. Human resources departments compete fiercely, struggling to devise better scheme compensations to attract and retain the best talents (e.g. payment of salaries in foreign currencies, hiring and retention bonuses, productivity bonuses, etc.).

The thriving of the industry has brought about several so-called unicorns, such as companies like Globant and MercadoLibre.

2) What to consider when starting Information and Communication Technology companies in Argentina

a) Legal vehicle

(i) Choosing the legal vehicle

There are different vehicles to do business in Argentina.

As a ballpark figure, foreign companies usually do business in Argentina through two different legal vehicles: a branch or most commonly a subsidiary structure (meaning that one or more foreign companies register in Argentina for, in turn, incorporating a domestic company as shareholders. We would call this domestic company the “NewCo”).

The company type most chosen by foreign business as NewCo is the so-called Sociedad Anónima (hereinafter, the SA, a vehicle of the sort of the US Corporation). A SA may be formed by a single partner (Sociedad Anónima Unipersonal).

The branch is simpler, but it does not provide a limitation of liability and the parent company is fully responsible for the debts of the branch. On the contrary, the subsidiary structure is more complex, but the NewCo provides said limitation of liability, and the partners are not liable for the debt of the NewCo.

Branches may be registered without capital allocation (except for certain regulated activities). On the opposite, the NewCo does require a certain minimum share capital.

(ii) Filing for registration

Either for setting up a branch or forming a subsidiary structure, the foreign companies involved must register with the Public Registry (submitting certain documents and information). However, setting up a subsidiary is a two-step process:

  • First, you have to register one or two foreign companies with the Public Registry that, thereafter, would be the partner (s) of the NewCo; and
  • Second and once the foreign (s) company (ies) is (are) registered, it (they) may form the NewCo granting the deed of incorporation and registering the NewCo with the Public Registry.

(iii) Residency requirements for managers

The branch, the foreign (s) company (ies) registering in Argentina, or the NewCo domestically incorporated, have certain residency requirements for the management:

  • The branch: needs at least one active legal representative legally residing in Argentina (it is advisable to appoint also an alternate legal representative);
  • The foreign (s) company (ies): same requirements as the branch; and
  • The NewCo: the SA calls for an absolute majority of active members of the board legally residing in Argentina (it is also advisable to appoint alternate directors). More about this issue on our Legal Blog: https://cspabogados.com.ar/en/directors-and-legal-representatives-of-foreign-companies-in-argentina/

b) Commercial facilities

Pleae, review the main features of commercial leases, on this post: https://cspabogados.com.ar/en/regulations-on-real-estate-leases-in-argentina/.

c) Tax benefits

The so-called knowledge-based economy promotion regime has been enacted by Law Number 27,506, as amended by Law Number 27,570 and Decree Nro. 679/2022 (hereinafter, the Regime).

The Regime´s scope is much broader than the ICT industry and extends to areas not strictly related to technology.

The Regime provides for tax, social security, and foreign exchange benefits:

(i) Income Tax

The Regime´s beneficiaries will enjoy reductions in the income tax rates applicable to incomes derived from promoted activities.

Beneficiaries may consider as a deductible expense for income tax purposes, the amount equivalent to the analogous taxes effectively paid or withheld abroad, on account of the income obtained in consideration of the promoted activities, to the extent that such income was considered as Argentine source income.

(ii) Value Added Tax

Exporters of the promoted activities will not be subject to withholdings and perceptions on account of value-added tax.

(iii) Social Security Contributions

Under certain conditions and caps the Regime´s beneficiaries may convert into a tax credit bond a certain percentage of the employer contributions effectively paid to the social security systems and subsystems in relation to the employees duly enrolled in the promoted activities.

The tax credit bond may be applied to offset federal taxes (e.g. the Value Added Tax), except income tax (only exporters of promoted activities are allowed to offset income tax).

(iv) Foreign exchange market

By National Decree No. 679/2022, published in the Official Gazette on October 11, 2022, the National Executive Power created the so-called “Regime for the Promotion of Investments for Exports of Knowledge Economy Activities”.

Those companies submitting investment projects under certain conditions or showing a net increment in their exports will enjoy the relaxation of certain foreign exchange market rules concerning the settlement of foreign currencies or access to the foreign exchange market.

d) Human resources

Human resources are key in Information and Communication Technology companies in Argentina.

To learn about labor laws in Argentina, please, surf the following post: https://cspabogados.com.ar/en/labor-guide-to-doing-business-in-argentina-2/

The ICT industry in Argentina does not have an officially approved collective bargaining agreement. Yet, some unions have unofficial collective bargaining agreement templates the companies may agree to enter into.

Only a very limited number of unions have status officially granted by the government to represent the ICT´s workers but within different personal and territorial scope.

Many ICT personnel work remotely, from across the country. For teleworking in Argentina, please, read on https://cspabogados.com.ar/en/teleworking-in-argentina/.

3) Conclusion

The ICT industry field is very attractive in our country.

Information and Communication Technology companies in Argentina enjoy many advantages that entice multinational companies to establish themselves in the country or acquire some of the many existing and promising ones.

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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