ESP | ENG

16 Abr 18 Argentine companies facing a new legal framework

Posted at 22:06h in Publications by

By Agustin Cerolini and Tomas French 

Argentina has been implementing significant reforms on its institutions and its commercial and international policy, aiming to foster its economic growth. These reforms meant the amendment and the issuance of numerous regulations and the creation of new instruments, which were unknown in our country.

In that sense, during the last months, several regulations have been issued that have a direct impact on commercial activity, including tax, financial and corporate matters, among others.

What follows is a short review of the main developments that will probably impact business in Argentina over the next few months/years:

1. Tax Reform

With the purpose of reducing the current account deficit and tax burden, Law No. 27,430 was approved during December 2017 introducing important amendments to the Argentine tax system. The main changes introduced were: (i) the exemption of income tax for capital gains obtained by non-resident investors and the implementation of tax benefits for those who carry out reinvestments; (ii) the reduction of social security contributions; (iii) the abrogation of the real estate transfer tax; and (iv) the introduction of taxation on income derived from financial transactions, among others. Many of these changes are already in force, such as the recently regulated income tax on financial transactions, while others will be implemented gradually by way of reducing their aliquots over a 3 to 5 years period, such as stamp tax, gross income tax and corporate income tax.

2. Reforms in corporate matters

Aiming to facilitate and accelerate the administrative procedures involved in the incorporation of investment vehicles, a new corporate type -the Simplified Corporation (“SAS” after its acronym in Spanish)- was introduced and other regulatory changes were made in connection with other commonly used corporate types. Among them: (i) the introduction of an 100% online procedure that enables the incorporation of companies in 24 hours and the procurement of its Tax ID at the same time, (ii) the possibility for these corporate types to be incorporated as a sole member entity, (iii) the authorization to carry their corporate and accounting books through digital registries; (iv) the possibility to hold Board and Shareholders´ meetings trough digital means; and (v) the introduction of online procedures to perform several corporate filings. These measures have produced a significant impact in the corporate sector, where during the last year 2,100 SAS were incorporated.

3. Public-Private Partnership Contracts Regime

A Public-Private Partnership (“PPP”) Contracts Regime has been implemented aiming to promote private investment in the execution of major infrastructure works needed to correct deficiencies in basic public services, such as transportation, energy and drainage. The PPP regime is a novelty for public contracts, since permits a more balanced and predictable cooperation between the private and public sector, focusing on providing the investor with the legal framework needed to make large infrastructure investments as it excludes or limits the public law prerogatives of the administration. The main current and upcoming projects to be launched during the following months are: the “Highway Network and Safe Routes” project (“Red de Autopistas y Rutas Seguras”), the “Energy Efficiency in Public Lighting” project (“Eficiencia Energética en Alumbrado Público”) and the “Regional Train Network” project (“Red de Expresos Regionales”).

4. De-bureaucratization and simplification

In January, the Executive Branch issued Emergency Decree No. 27/2018, which sets forth numerous regulatory changes in different matters aimed at reducing bureaucracy barriers and simplifying procedures before the public administration. The main changes introduced by the Decree, which was then divided into separate bills (not passed yet), include: insurance matters, labor law, anti-money laundering and terrorism financing regulations, import and export matters, corporate matters, patent and trademark practice, regulations applicable to foreign exchange agencies, use of electronic means and digital signature.

5. Regulation of the Capital Market

With the aim of growing the Argentine capital market by increasing the number of investors and companies taking part, it is expected that during the following weeks a new Capital Markets Law will be approved by Congress. The new law seeks to establish clear and transparent rules in order to achieve a modern financial regulatory framework that contributes to the development of the country’s economy. In addition, the National Securities Commission («CNV» after its acronym in Spanish) has been introducing several amendments to the regulatory framework by way of utilizing a procedure of non-binding consultations prior to their issuance. This new method produces the valuable engagement of the various market participants and the general public in the regulation making process, deriving in more valued regulations and making the regulatory work significantly more efficient.

6. Compliance, Money Laundering and Corporate Criminal Liability

Regarding anti-money laundering, counter-terrorist financing and bribery prevention, a new Law on Corporate Criminal Liability was approved, which allows the punishment of companies, regardless of any other sanction applicable to the individuals involved. Additionally, the Anti-Corruption Office completely modified the regulatory criteria on anti-money laundering and counter-terrorist financing, changing from a formalist regulatory compliance approach to a risk-based approach. The new regulatory standard is based on the identification and evaluation of each activity’s risks, so that each participant can adopt tailored administration and mitigation risk measures, resulting in a more effective prevention of illicit activities. All this in line with the requirements of the Organization for Economic Cooperation and Development (OECD), which Argentina hopes to incorporate during the current year.

In short, Argentina is going through a process of implementing important regulatory reforms that strongly impact on the business activity and on the work of the professionals involved in its implementation. The recent developments addressed herein are just a sample of the several matters that have been amended and updated aimed at fostering economic growth, opening the Argentine economy and strengthening its institutions.

For any questions or additional information please contact: