Political System

Argentina is organised as a federal republic with a democratic political system. Although each of the 24 jurisdictions (23 provinces and the City of Buenos Aires) enjoys a strong degree of autonomy (each has its own constitution, holds elections for its governor and legislators, and appoints judges to its provincial courts), federal laws pre-empt provincial legislation in several matters.

The National Constitution divides the federal government into three branches: the executive, the legislative and the judiciary. The first one, headed by the President, is the dominant branch at the federal level. The President is elected by direct vote and may serve a maximum of two consecutive four-year terms. The legislative branch, or Argentine Congress, consists of two houses: the Senate and the House of Representatives.

Judicial System

A federal and a provincial judicial system coexist in Argentina. Each province has its own lower and appellate courts together with a Provincial Supreme Court. There is at least one federal court of lower jurisdiction in each province, several Federal Courts of Appeals and the Argentine Supreme Court.

The Argentine Supreme Court has the power to review all decisions involving the interpretation of the National Constitution and has original jurisdiction over some cases of federal legislation, such as those in which a state is a party and all cases concerning ambassadors, ministers or foreign consuls.

In connection with decisions issued by governmental agencies, Argentine law allows resorting to the judicial system once all steps pertaining to administrative proceedings have been exhausted.

Legal System

Argentina has a civil law legal system, with a uniform substantive law (despite the above-mentioned federal system), with the following common to all provinces:

• the Civil and Commercial Code;
• the Criminal Code;
• the Aeronautic Code;
• the Labour Code;
• the Social Security Code; and
• the Mining Code.

Civil Procedure Codes approved by each Provincial Congress materially resemble the provisions contained in the Federal Code of Civil and Commercial Procedure.

Argentine Agency of Investment and International Trade

Argentina does not have a public office specifically dedicated to the supervision of foreign investments. However, the Argentine Agency of Investment and International Trade (Agencia Argentina de Inversiones y Comercio Internacional) is in charge of:

• engaging investors with government entities to facilitate and fast-track processes;
• assisting investors in alternate conflict resolution proceedings throughout the investment life cycle;
• providing updated statistics on investment-related issues and specific information in every sector; and
• developing ad hoc analysis and information packages for potential investors.

Foreign Investment Act

The legal regime for foreign investment is governed by the Foreign Investment Act (Ley de Inversiones Extranjeras) enacted in 1993. For the purposes of this law, there is no distinction between national and foreign investors irrespective of the type of business they get involved in. Foreign investors have the same rights and obligations as local ones under the parameters stated by the National Constitution regarding the development of lawful economic activities in Argentina. Generally, there are no limitations on the participating percentage by foreigners in a local entity, regardless of the type of vehicle chosen.

Argentina has executed a number of Bilateral Investment Treaties (BITs) with third countries and is a member of the Multilateral Investment Guarantee Agency (MIGA), the Overseas Private Investment Corporation and the International Centre for the Settlement of Investment Disputes (ICSID).

Certain Limitations on Foreign Investment

Despite the general rule of equality set forth by the Foreign Investment Act, there are certain specific regulatory provisions that establish restrictions to investment by foreign individuals or entities in Argentina. The most relevant of these restrictions are the following.

• The Rural Lands Act provides limits for the acquisition of rural lands by foreign individuals or entities, according to the details further developed in 7.1 Applicable Regulator and Process Overview.
• Security Zones Regulations provide that foreign individuals or entities must obtain an exceptional governmental authorisation in order to acquire ownership or other rights (including leases) over lands located near international borders or certain security areas. This is also further described in 7.1 Applicable Regulator and Process Overview.
• The Cultural Heritage Act provides that foreign entities or individuals can own up to 30% of the stock or voting rights of any national broadcasting company.
• The Aeronautic Code provides that most stock or voting rights of national aviation companies dedicated to the internal transportation of passengers, cargo or mail must be owned or controlled by Argentine companies or individuals domiciled in Argentina.

A Complex Macroeconomic Context but With Some Positive Aspects

When reviewing the most relevant macroeconomic factors for Argentina in 2022, it becomes clear that, in many ways, it has been a tough year for the country. Argentina’s inflation rate in 2022 climbed to 94.8%, once again, increasing sharply as compared to an already very high rate on the previous year (in 2020, it reached 36.1% and in 2021, 50.9%). Measures adopted by the Argentine government to contain inflation continue proving to be insufficient, which is why several consulting firms estimate that, in 2023, inflation could reach up to 120%, and even exceed such rate.

The Argentine peso has devaluated roughly 70% interannually in 2022 with respect to the US dollar at the official exchange rate. At the MEP exchange rate (ie, a legal mechanism to obtain US dollars by operating with certain bonds in the local stock market), the devaluation was 66% in the same period. The MEP exchange rate is generally considered to be a more realistic indicator of the devaluation of the Argentine peso because – due to foreign exchange restrictions further described in 8.1 Other Regimes – the official exchange rate is not generally available for the acquisition of US dollars.

However, all is not entirely negative: economic activity still grew, albeit at a decelerated pace as compared to 2021, and some sectors are doing quite well. Argentina’s gross domestic product is expected to have grown by 4% in 2022 (official data was not yet available on the date of issuance of this report, 19 January 2023), and around 2% in 2023 (with such slowdown being a generalised reality for most countries). And, despite many challenges, several sectors relevant to the Argentine economy performed particularly well in 2022, including the automotive, construction, mining, and high-tech and knowledge-intensive industries.

General Elections in 2023 and Opportunities for Investors

In October 2023, there will be a general election in Argentina. As precedent, in the November 2021 mid-term election, Frente de Todos (the governing party) lost the election – both at a national level and in most jurisdictions – against Juntos por el Cambio (the largest opposing party). Notwithstanding the continued high level of disapproval concerning the federal government’s overall performance – which led to its defeat in the 2021 mid-term elections – it is difficult to anticipate the result of the 2023 elections.

In the short-term, electoral uncertainty in 2023 will likely increase already high levels of political and economic instability. The expectation is that whichever party ultimately wins the election will necessarily have to implement strong measures to change the course of the country’s economy. Such measures may gradually help to improve Argentina’s overall macroeconomic situation and the conditions necessary to increase inbound FDI.

Until that happens, the potential upside of Argentina’s complicated economic and political context is that, in the short and mid-term, the strong devaluation of the Argentine peso and the local companies’ need for financing are creating interesting opportunities for investors to acquire businesses in Argentina. The valuation of assets is currently at historical lows, creating high growth opportunities.

Most Common Structures for Acquiring a Business

The two most common structures for acquiring a business in Argentina are stock deals and asset deals. Of these, stock deals are considerably more popular, mainly for the reasons detailed below.

• Tax efficiency – from a seller’s perspective, selling shares is generally more tax-efficient than selling assets, because:
1. shareholders transferring shares of a local entity are taxed at a rate of 15% over the net gain (note that foreign shareholders can elect to be subject to an alternative rate of 13.5% over the purchase price); and
2. local companies selling assets are taxed at a sliding scale rate ranging from 25% to 35% over the income made by such sales, in addition to other taxes that may apply over the transaction –
1. value added tax at a rate of up to 21%,
2. turnover tax at a rate (variable depending on the local jurisdiction) of around 3% or 4%, and
3. stamp tax at a rate (variable depending on several factors) between 0.5% and 4%, approximately.
• Simplicity – from the perspective of permits, it is generally much simpler to acquire a target company that owns and operates a business, and will continue to do so following closing, than to transfer the relevant assets and permits (or obtain new permits, in some cases) to the acquiring entity.

Liability Regime in Asset Deals

As a rule, a buyer will not assume the liabilities and contingencies of the seller by acquiring its assets. An exception to this general rule applies if the assets involved in the transfer fall within the definition of a total or partial “transfer in bulk” or of a “going concern” provided under the Bulk Transfer Law. In this case, if the buyer does not rigorously follow the procedure of the Bulk Transfer Law, the buyer may be held jointly liable with the seller vis-à-vis the seller’s creditors. Also, in order to avoid the assumption of the business’s prior tax and social security liabilities, there are special proceedings – complex and lengthy – both at a federal and provincial level.

Given that the procedures set forth in the Bulk Transfer Law and federal and provincial tax regulations are burdensome, parties to a transaction only rarely decide to follow those.

Acquisition of Public Companies

In order to acquire all or a substantial portion of the assets of a public company, such sale must be approved at a shareholders’ meeting of the public company.

Alternatively, after acquiring a controlling participation in a public company (ie, more than 50% of the voting rights) or in order to acquire all outstanding shares of a public company, a mandatory public acquisition offer must be made to the other shareholders. In such cases, the offering party will have to comply with specific requirements and procedures set forth by law.

Certain M&A transactions may be subject to governmental approval or to mandatory filing requirements (whether to provide notice or to obtain registration of the deal), depending mainly on the industry involved or the type of transaction.

Below is a list of some examples of transactions that may be subject to governmental approval or mandatory filing:

• acquisitions or mergers of financial institutions require the prior approval of the Argentine Central Bank;
• mergers must be registered with the Office of Companies and, if structured as tax-free economic group reorganisations, with the Federal Tax Authority;
• initial public offerings as well as voluntary and mandatory offers to acquire publicly listed shares are subject to the prior approval of the National Securities Commission;
• the acquisition of rural lands by a foreign investor may be subject to a prior authorisation or to a mandatory notice (for the relevant authority to check that certain limitations have been complied with), depending on whether the deal is structured as an asset deal or share deal – this is described in further detail in 7.1 Applicable Regulator and Process Overview;
• the acquisition by a foreign investor of any interest (ownership, lease or similar right) in a real estate near an international border or in certain security areas is subject to a prior exceptional approval – this is described in further detail in 7.1 Applicable Regulator and Process Overview;
• the acquisition of shares of insurance and reinsurance companies and the mergers and spin-offs of such entities require the prior approval of the Insurance Regulator (Superintendencia de Seguros de la Nación);
• the acquisition of companies owning products registered with, or otherwise operating under the scope of, the Federal Foods and Drugs Administration (Administración Nacional de Medicamentos, Alimentos y Tecnología Médica, or ANMAT) generally do not require a governmental authorisation, whereas the transfer of the products themselves may be subject to ANMAT’s approval;
• the transfer of licences or shares of a company holding a licence from the National Communications Authority (Ente Nacional de Comunicaciones, or ENACOM), which regulates internet, fixed and mobile telephony, radio, mail and television, must be done ad referendum of ENACOM’s approval;
• in general, the assignment of contracts with the federal state and change of control transactions affecting companies with certain types of contracts with the state require prior governmental approval.

Corporate Governance Rules

Corporate governance rules in Argentina are mainly set forth in the Companies Act and, in the case of publicly listed companies, in the Capital Markets Act.

Directors of Argentine companies are subject to the duties of care, loyalty and good faith. Generally, directors are not personally liable before the company or third parties for the performance of their duties unless they breach such duties.

Shareholders that on a given transaction have an interest contrary to that of the company cannot vote on the resolutions or agreements related to such transaction. Also, shareholders that have not voted in favour of resolutions adopted in violation of the law of the by-laws of the company are entitled to legally challenge such resolutions. Directors and members of the surveillance committee of the company may also challenge such resolutions.

Gender diversity rules by the IGJ

In August 2020, the Office of Companies of the City of Buenos Aires (Inspección General de Justicia, or IGJ) enacted General Resolution 34/2020, as amended, to promote gender diversity. Pursuant to it, certain entities must have the following composition in their administrative bodies and, if appropriate, in their surveillance committees: (i) in the case of an even-numbered body, the same number of women as men; (ii) in the case of an odd-numbered body, at least one-third of women. The resolution only applies to:

• certain associations and foundations;
• state companies or state-controlled companies;
• companies carrying out operations of capitalisation, savings or otherwise requiring money or securities from the public with promises of future benefits or profits; and
• companies holding public concessions or services.

However, in August 2021, a decision by the Division C of the National Commercial Court of Appeals stated the inapplicability of General Resolution 34/2020 in a case in which an entity affected by such resolution had challenged its validity. The IGJ has appealed the resolution and issued a subsequent resolution in which, among other things, it ratified the validity of General Resolution 34/2020 and instructed its Office of Judicial Affairs to impeach the judges of the Court of Appeals that issued the judgment. There is still not a final decision in the case, and therefore the validity of General Resolution 34/2020 is unclear at this stage.

Corporate Forms Typically Used

Foreign companies may operate in Argentina either through a branch or through a wholly or partially owned subsidiary. Any such subsidiary may operate under any of the several types of corporate entity available. The most common are (i) the stock corporation (Sociedad Anónima, or SA); and (ii) the general partnership (Sociedad de Responsabilidad Limitada, or SRL). As from 2015, single-shareholder stock corporations (Sociedad Anónima Unipersonal, or SAU) are allowed as a subtype of stock corporation. Since then, the use of such type of entity has slowly become more frequent.

Foreign entities wishing to hold an interest in an Argentine entity must register with the Office of Companies as foreign shareholders. Also, foreign shareholders – whether entities or individuals – must register with the Federal Tax Authority and obtain a tax ID (Clave de Identificación).

Foreign shareholders registered with the IGJ

In May 2021, the IGJ enacted General Resolution 8/2021, which states the following main rules.

• Foreign entities filing for registration as “vehicle companies” with the IGJ must state such condition at the time of filing for registration. If not originally registered as “vehicles”, foreign shareholders will not be allowed to subsequently become vehicle companies. Vehicle companies are defined by the IGJ as entities whose place of incorporation or registration prohibits or restricts the development of all their activities or their main activity or activities, or that cannot provide evidence of having an economically significant activity outside Argentina (ie, non-current assets or shareholdings abroad).
• The IGJ will not allow the registration of more than one vehicle company per economic group.
• The IGJ will not allow the registration of a vehicle company if its direct or indirect controlling company is already registered in Argentina, either as a branch, permanent representation or foreign shareholder.
• The IGJ will not allow the registration of a vehicle company resulting from a chain of control between successive SAUs.
• The IGJ will not allow the registration of Argentine SAUs whose sole shareholder is also a foreign SAU, whether it is a vehicle or not.
• Foreign companies with shareholdings “mainly” in companies domiciled and with headquarters in the City of Buenos Aires, must be registered with the IGJ, irrespective of whether such foreign companies are already registered in other provincial jurisdictions. The IGJ rules provide certain criteria to determine if a foreign company has shareholdings “mainly” in companies within the jurisdiction of the City of Buenos Aires.
• Companies filing for registration as foreign shareholders with the IGJ must include a statement detailing their investment plan (mainly, their activity abroad, the local entities they want to incorporate or in which they wish to participate and their activity, the identity of other shareholders and the amount of shares they intend to acquire or subscribe).

Certain Considerations When Selecting the Type of Company to Incorporate

Liability regime

As a rule, the parent company of a branch is liable with all of its assets for the obligations of its branch, whereas shareholders of a local company are only liable up to the amount of capital contributed to the company by such shareholders. However, in certain very exceptional cases, local courts may apply the doctrine of “piercing the corporate veil” so that shareholders may be held jointly and severally liable together with the legal entity for acts or omissions performed by the subsidiary.

Tax treatment

Although SAs and SRLs are subject to the same tax treatment in Argentina, SRLs are eligible entities that may be treated as partnerships or disregarded entities for taxation purposes in other jurisdictions (eg, SRLs qualify to make a check-the-box election for US Federal Income Tax purposes). Branches are also generally treated in the same way as subsidiaries, since they are considered Argentine tax residents, except for the treatment of personal assets tax corresponding to shares and participations: while companies are taxed with 0.5% over the shareholdings held by natural persons and legal entities located abroad, branches are not subject to this tax.

Public companies

Only SAs can publicly list their shares. However, other types of companies, such as SRLs and branches of foreign corporations, are allowed – together with SAs – to publicly issue notes (obligaciones negociables). Nonetheless, most issuers are still SAs.

The Companies Act

When a corporation has different classes of shares, the by-laws can provide that each class elects one or more directors. If that is not the case, then shareholders have the right to elect up to one-third of the vacancies to be filled on the board of directors by the cumulative voting system. Also, the board of directors may not be renewed in a partial or staggered manner if by doing so the exercise of the cumulative vote is prevented.

In the case of corporations in which the state owns at least 51% of the shares of the company, private shareholders owning at least 20% of the company’s shares are entitled to a proportional representation in the board of directors and to elect at least one member of the surveillance committee.

Capital Markets Rules

The Capital Markets Act contains certain specific defence provisions for minority shareholders of public companies. The main protection relates to several disclosure obligations imposed on public companies, both periodically and to inform about relevant events.

Also, where an entity or individual acquires a controlling share of a public company (whether a voluntary or mandatory offer triggered under certain circumstances set forth by law), or where the public company itself makes an offer to acquire its own publicly traded shares so as to go private, there are certain rules aimed at protecting minority shareholders. In such instances, in addition to disclosure obligations to which both the acquiring entity/individual and the target company are subject, the law sets forth a specific mechanism – applicable to mandatory public offerings as well as certain voluntary public offerings – to determine the fair price per share.

Annual Reporting Regime With the IGJ

In 2020, the IGJ – where most foreign entities are registered as foreign shareholders – reinstated the Annual Reporting Regime (Régimen de Información Anual, or RIA).

The purpose of the report is to show that the foreign entity’s main activity is performed outside Argentina. The RIA requires foreign companies – within 120 calendar days after the end of their subsidiaries’ or branches’ fiscal year – to file with the IGJ:

• evidence that they own equity interests in other foreign companies or assets outside Argentina, which under Generally Accepted Accounting Principles (GAAP) would be considered non-current assets; and
• the disclosure of their shareholders and beneficial owners.

Stock Exchanges

The main stock exchange in Argentina is the Buenos Aires Stock Exchange (Bolsa de Comercio de Buenos Aires, or BCBA). Shares are purchased and sold on the BCBA through authorised brokers, some of whom are related to national or international banks or international broker dealers. Negotiable instruments and options are also traded on the BCBA. The system is controlled by the National Securities Commission (Comisión Nacional de Valores, or CNV), which has functions similar to those of the Securities and Exchange Commission (SEC) in the USA. Listed companies must file their financial statements and board of directors’ reports quarterly with the exchange and file annual audited financial statements.

The over-the-counter market is also regulated by the CNV. The daily volume of shares traded is similar to that of the BCBA, and the volume of government securities traded is considerably higher. The shares traded in this market are those of the companies listed on the BCBA.

To list shares on the stock exchange, a company must be registered for public offering with the CNV and must submit an application including several items of documentation and information.

Primary Sources of Funding for Businesses

Despite efforts from current and recent policymakers, financing through capital markets in Argentina is only reserved to seasoned issuers and a limited range of local products.

The main goals of Argentine securities regulations are:

• to protect investors;
• to reduce systemic risks; and
• to guarantee transparency and efficiency in markets.

Recent amendments in these regulations were intended to strengthen transparency rules, provide a more expedite registration procedure for public offering, and to generalise mandatory tender-offer rules. Some of these provisions are explained in 4.2 Relationship Between Companies and Minority Investors (“Capital Markets Rules”).

Foreign investment funds are not subject to FDI regulatory reviews in Argentina. Where foreign investment funds conduct regular activity in Argentina (as opposed to isolated acts), they will be required to incorporate a permanent establishment in the country – ie, either a branch or local subsidiary, as explained in 4.1 Corporate Governance Framework (“Corporate Forms Typically Used”).

Merger Control Regulations

Argentine Merger Control Regulations (the “Regulations”) require certain economic concentration transactions (“economic concentrations”) to be notified to and approved by the Argentine Antitrust Authority (ie, the Trade Secretariat of the National Ministry of Economy, which is the adjudicating authority, and the National Commission for the Defence of Competition, which issues non-binding reports – together, the Antitrust Authority).

Economic concentrations affected by the Regulations are those resulting in the control or attainment of substantial influence, directly or indirectly, of one or more companies or assets. Economic concentrations subject to notification include mergers, transfers of ongoing concerns, stock acquisitions, asset acquisitions, shareholders’ agreements, joint venture agreements and any other agreement granting de iure or de facto control or substantial influence over management decisions of a business (provided that they meet the quantitative thresholds explained below in “Transactions Covered”, and that none of the legal exemptions explained further below in “Exempt Transactions” applies).

Transactions Covered

An economic concentration must be notified to the Antitrust Authority if the following two thresholds are met:

• the combined Argentine annual net sales of the acquiring group (including its controlling and controlled entities) and the acquired group (including its controlled entities), including exports by foreign subsidiaries to Argentine clients as well as exports from Argentine subsidiaries to clients abroad, during the last fiscal year exceed ARS8,345 million; and
• either the amount of the Argentine portion of the transaction or the value of the assets to be transferred in Argentina exceed ARS1,669 million.

The quantitative threshold amounts must be updated by the Antitrust Authority before 31 January of each year (those mentioned above correspond to year 2022). Therefore, new quantitative thresholds are expected to be issued by the Antitrust Authority on (or around) 31 January 2023. Also, an economic concentration may require notification despite not meeting the second threshold listed above if the acquiring group was involved in prior transactions – that meet certain parameters – in the same relevant market in Argentina.

Exempt Transactions

The following economic concentrations are exempt from the notification requirement:

• acquisitions of companies in which the buyer already owns more than 50% of the shares and of the voting rights, as long as it does not entail a change in the nature of control of the company (ie, from sole to joint control or from joint to sole control);
• acquisitions of bonds, debentures, notes and non-voting shares;
• acquisitions of a single Argentine company by a foreign company that owns no assets in Argentina (excluding those held for residential purposes) or shares in other Argentine companies, and had no significant, regular and periodic exports to Argentina during the preceding 36 months; and
• acquisitions of companies in liquidation that did not transact business in Argentina in the preceding year, except if the main activity of the target company is the same as that of the acquirer.

According to well-established case law of the Antitrust Authority, the above legal exemptions are to be narrowly interpreted.

Notifying Entity

Economic concentrations must be notified by the direct acquirer (or its immediate controlling entity or the parent entity of the economic group). In the case of mergers, notification shall be made by the “merging” and the “merged” entity. In all cases, notification by the seller is voluntary; however, the Antitrust Authority may expressly require the notification to be also performed by the seller, depending on the circumstances of the economic concentration under review.

Filing Deadline

Current ex post merger control regime

Pursuant to a transitory clause embedded in the Regulations, until one year after the creation of the new National Antitrust Authority, the notification of a reportable economic concentration may take place anytime (as from the moment the parties execute some sort of binding legal document) up to one week after the closing or the acquisition of control, whichever happens first. Therefore, at present, there is no stand-still obligation, and the notifying companies may consummate an economic concentration without first having antitrust approval, and to notify up to one week thereafter.

Even if closing without antitrust clearance is allowed, the Antitrust Authority always retains the power to – partially or totally – undo economic concentrations that are considered to be anti-competitive and harmful to the general economic interest.

Envisaged ex ante merger control regime

Once one year elapses from the creation of the new National Antitrust Authority (although its creation is uncertain at the present time) and thus the above-mentioned transitory clause in the Regulations expires, the ex ante merger control regime shall become operative. At that time, the consummation of economic concentrations or the acquisition of control without the prior authorisation from the Antitrust Authority will be prohibited and sanctioned accordingly.

The Regulations do not stipulate a specific deadline for the notification once the ex ante regime becomes effective. However, it would be in the parties’ interest to file as early as possible to obtain a clearance decision from the Antitrust Authority and thus be legally allowed to close the economic concentration.

The Regulations provide that economic concentrations that have the object or effect of restricting or distorting competition in a manner that may affect the general economic interest are prohibited. The general economic interest has been interpreted as comparable to the concept of economic efficiency, although more inclined to consumer surplus rather than to total surplus.

According to the Antitrust Authority’s guidelines, the following economic concentrations would be deemed unlikely to trigger competition concerns:

• horizontal economic concentrations (ie, those taking place between competitors) resulting in a post-transaction combined market share not exceeding 20% of the relevant market;
• vertical economic concentrations (ie, those taking place between companies active in different stages of the productive chain of a same good or service) where the market shares of the merging parties in both the upstream and downstream relevant market do not exceed 30% (ie, in the supply and demand of the involved product, respectively).

The Antitrust Authority may request structural and/or behavioural remedies or commitments from the merging parties in order to approve a reportable economic concentration if it may be deemed potentially harmful to the general economic interest.

Process – Timing

Under the Regulations, the Antitrust Authority has a maximum of 45 business days (as from the filing of a complete and accurate notification) to issue a decision that must either:

• approve the economic concentration;
• conditionally approve the economic concentration subject to the fulfilment of certain conditions; or
• prohibit the economic concentration.

However, if the Antitrust Authority considers that the reported economic concentration has the capability to distort competition, it shall issue a statement of objections to the parties (which is made public), extend the deadline mentioned above for up to an additional 120 business days and summon the parties to a special hearing to explore potential remedies to address the Antitrust Authority’s competition concerns.

In practice, the above deadlines are regularly suspended by the Antitrust Authority by means of issuing information requests to the notifying companies, to which they have 30 business days to respond. Generally, once the information request is fully answered, the Antitrust Authority’s clock restarts.

The Antitrust Authority is highly unpredictable in connection with the timing for issuing clearance decisions. At present, the Antitrust Authority is taking, on average, between ten and 18 months to clear non-problematic economic concentrations. In the case of economic concentrations posing competition concerns and where a remedy might be requested, the Antitrust Authority can take between two and four years to issue clearance.

Appeals

The Antitrust Authority’s decision to partially or totally block a reportable economic concentration may be appealed to the Federal Court of Appeals in Civil and Commercial matters, and the appeal must be filed within 15 business days. The Regulations provide for the creation of a specialised division – that has not yet been created – within such court of appeals, which shall hear appeals to decisions adopted by the Antitrust Authority.

Although there is no specific foreign investment/national security review regime applicable to FDI, certain laws and regulations may affect the possibility of investments by foreigners, as mentioned in 1.2 Regulatory Framework for FDI.

In particular, there are certain legal limitations affecting the possibility for foreigners – whether individuals or entities (including local subsidiaries) – to own rural lands and to hold ownership or other types of rights (including leases) over lands located near certain international borders or certain security areas.

Rural Lands Regulations

Restrictions

The main restrictions set forth by Law 26,737 and its Regulatory Decree 274/2012, as amended, are the following:

• foreign ownership or possession of rural lands shall not exceed 15% of the total amount of rural land of:
1. the Argentine territory;
2. each province; and
3. each municipality, taken individually;
• foreign owners from the same nationality cannot own rural lands exceeding 30% of the 15% mentioned in the first bullet point (above) at each of the national, provincial and municipality levels;
• ownership or possession of rural lands by the same foreign owner shall not exceed:
1. 1,000 hectares in the “core area” (ie, a central area of the country with high agricultural production potential); or
2. certain number of hectares – set by each province – in the “non-core areas”; and
• foreign entities or individuals are prevented from becoming owners or possessors of rural lands that comprise or are adjacent to “permanent and significant bodies of water”.

Pre-closing approval and post-closing filing

Even when complying with the restrictions mentioned in “Restrictions” above, the transactions are subject to the following requirements.

• The transfer of ownership over rural land in favour of a foreign entity or individual requires the prior approval of the Rural Lands Registry (Registro Nacional de Tierras Rurales). Upon obtaining the approval, the parties can conclude the transaction within 120 days thereafter (an extension to such term can be requested).
• The direct or indirect change of control, in favour of a foreign entity or individual, of an entity owning rural land must be notified to the Rural Lands Registry within 30 days following closing of the transaction, so that the authority can review whether the thresholds are met. If the transaction entails a breach of the limitations mentioned in “Restrictions” above, the relevant foreigner shall – within 90 days following closing – take actions necessary to comply with these limitations. These may include:
1. transferring all or a portion of the rural lands that exceeds the limitations mentioned in “Restrictions” to a third party;
2. modifying the use given to the rural lands; and
3. transferring the relevant shares to third parties that comply with these limitations.

The approval or rejection of a transaction by the Rural Lands Registry is only subject to the objective limitations mentioned in “Restrictions” above.

Security Zones Regulations

Restrictions

“Security zones” are certain areas – specifically determined by the Ministry of Defence – near international borders or surrounding certain specific real estate property located within Argentina.

The Security Zones Regulations (Decree Law 15,385/44, Law 23,554, Law 26,338, Law 22,352, Law 26,737 and Resolution 166/2009 of the Ministry of Domestic Affairs) set forth that any transaction involving real estate located within security zones must be previously approved by the National Commission of Security Zones (NCSZ). The purpose is to allow the federal government to keep control over those strategic security zones, for national defence purposes.

Pre-closing approval

The transfer of ownership, the granting of a lease or any form of personal or real right, by which the possession or tenancy of a real estate property located within a Security Zone is transferred to a foreign individual or entity (defined broadly so as to include local subsidiaries of foreigners), is subject to the prior approval of the NCSZ under an exception standard. This means that the approval will be subject to stricter requirements than those applied to approval requests made by Argentine individuals or entities.

The filing before the NCSZ requires the parties to provide a copy of the agreement by which the transaction is agreed (together with various other documentation and information, including an investment plan to be made in the involved real estate). Therefore, in principle, the filing cannot be made before signing the relevant agreement.

Although the NCSZ has discretion on whether to authorise or reject a proposed transaction, in general transactions are cleared provided that the parties fully comply with the requirements of the filing.

The matter is not applicable in this jurisdiction.

The matter is not applicable in this jurisdiction.

The matter is not applicable in this jurisdiction.

Foreign Exchange Control Regime

The Argentine government has put in place a strict foreign exchange control affecting the foreign exchange market (FX market), the ability for local and foreign residents (either companies or individuals) to perform cross-border transfers – including payments of principal and interest of loans and other indebtedness, services provided by foreign residents and imports – and the free availability of foreign currency for exporters of goods and services. Foreign exchange rules are subject to continuous amendments and clarifications on a regular basis to further restrict access to the FX market or to clarify the existing regime.

Below is a brief overview on certain foreign exchange regulations that may be particularly relevant to FDI.

Legal entry of export proceeds of goods and services

Argentine exporters of goods and services are required to transfer their export proceeds into Argentina and exchange them for Argentine pesos in the foreign exchange market (legal entry of export proceeds of goods and services) within a timeframe depending on the applicable tariff position of the product. In the case of exports of services, the deadline for compliance with the legal entry of the proceeds is five business days upon collection.

Profits and dividends

Except under certain circumstances, local legal entities require prior written authorisation from the Central Bank to access the FX market for distribution of profits and dividends abroad. Such authorisation is rarely obtained in a timely manner.

The most relevant exception to the rule is for local companies that have received direct investment (equity/capital) contributions entered through the official FX market after 17 January 2020, to the extent all the following conditions are met:

• the aggregate amount of the transfers abroad on account of profits and dividends made through the FX market since 17 January 2020, including the payment being requested, does not exceed 30% of the amount of the new contributions of foreign direct investments received as from 17 January 2020 (computed in Argentine pesos);
• the transfer abroad is intended to be made within a term not less than 30 calendar days as from the settlement in the FX market of the last contribution that is computed for the purposes of the requirement set forth in the first condition mentioned above; and
• the local company must provide written evidence of the definitive capitalisation of the capital contributions, or proof of the initiation of the registration procedure before the relevant Office of Companies of the capitalisation of the contributions, and undertake to submit the documentation of the definitive capitalisation of the contribution within 365 calendar days from the initiation of the procedure.

Repatriations by foreign residents

Repatriation by foreign residents of either foreign direct investments or portfolio investments requires prior written authorisation from the Central Bank, which is rarely obtained in a timely manner.

Prohibitions against selling foreign currency denominated securities before and after requesting access to the FX market

Local entities and individuals cannot sell foreign currency denominated securities, or transfer such securities to a depositary institution located abroad (i) during the previous 90 calendar days from the date in which access to the FX market is being requested, and (ii) for the subsequent 90 calendar days.

Thus, although blue chip swaps transactions are not specifically forbidden, in practice these new regulations imply an effective restriction to perform these types of transactions for companies or individuals that usually operate through the FX market.

Administrative approval for imports of goods and services

The federal government has recently put in place a web-based system (called SIRA) for local importers to request and obtain authorisation for accessing the FX market in order to pay for goods and services imports.

The intervening agencies (the Trade Secretariat of the National Ministry of Economy, the Federal Tax Authority, the Federal Customs Office, and the Argentine Central Bank) must analyse the information filed with SIRA and rule over the operation subject to authorisation within 60 calendar days as from such filing. Authorisations issued by SIRA have a validity term of 90 calendar days as from their issuance. As part of the filing to be made with SIRA, the local importer must include the proposed payment term of the import (as from the date of the official dispatch). If the import operation is approved by SIRA, the system will also indicate the approved term for accessing the FX market for making the payments.

Payments of principal in excess of USD2 million

Resident individuals and legal entities borrowers of financial indebtedness and debt securities with principal maturities in excess of USD2 million falling due between 15 October 2020 and 31 December 2023 intending to access the FX market for payment of such maturities must submit to the Argentine Central Bank a refinancing plan based on the following parameters (the “Mandatory Refinancing Plan”):

• the net amount to be paid through access to the FX market within the original term must not exceed 40% of the principal amount due; and
• the outstanding principal must be refinanced through new foreign debt with an average life of at least two years.

Certain types of indebtedness do not require a Mandatory Refinancing Plan, such as indebtedness with international organisations or their associated agencies or with official credit agencies, or guaranteed by any of them, and certain refinancings that implied a net inflow of funds to the country or that have met the parameters mentioned above for the Mandatory Refinancing Plan.

FX criminal regime

The Argentine FX Criminal Regime provides different types of penalties for actions/omissions that violate the FX rules set forth by the Argentina Central Bank. These include: monetary fines; the suspension or cancellation of the person or entity involved in the infraction, of its authorisation to operate or intermediate in the FX market or to act as importer, exporter or FX broker; and/or imprisonment.

Additionally, if the infringement to the FX rules was executed by the directors, legal representatives, agents, managers, trustees or members of the supervisory board of a legal entity on its behalf, the monetary fine may be effective not only on the assets of the legal entity, but also on the private assets of the above-mentioned individuals who have intervened in the commission of the infringement.

The following taxes apply to an Argentine company carrying out a business in Argentina.

• Income tax – a federal tax calculated on the legal entity’s worldwide income (ie, Argentine and foreign-sourced income) at a sliding scale ranging from 25% to 35% rate, and a 7% withholding tax at the time of distribution of dividends.
• Value added tax (VAT) – a federal tax applicable to the sales of goods, provision of services and the import of goods in Argentina. VAT is levied on the difference between the tax debit and tax credit at a 21% general rate.
• Tax on debits and credits – a federal tax which shall also be applicable on debits and credits from and to Argentine bank accounts and similar transactions, at an applicable rate of 0.6%. This tax is also levied on transfer and delivery of funds when these transactions are made through organised payment systems as a replacement of bank accounts, without considering the person or entity responsible for making or receiving such payments.
• Personal assets tax – shareholders of Argentine companies are liable for the personal assets tax at a 0.5% rate on the company’s net worth.
• Turnover tax – a local tax levied on revenue resulting from business and activities carried out within an Argentine province and/or the City of Buenos Aires. Each province has different tax rates and exemptions under their tax codes. The average tax rate is 3%.
• Stamp tax – a local tax applicable on onerous acts and agreements executed in Argentina or executed abroad with effects within the country. The applicable tax rate is approximately 1% but may vary according to the jurisdictions involved and the type of instrument. Parties executing an agreement are jointly responsible for payment. Tax codes usually include a large variety of exemptions to stamp tax which, along with certain tax-efficient ways to implement contracts, should be analysed on a case-by-case scenario.

Federal tax regulations applicable to foreign beneficiaries are different to the ones described above for local entities. A foreign beneficiary may be subject to the following taxes applicable to the activities carried out or the services rendered to Argentina.

• Income tax – foreign beneficiaries are only subject to tax with respect to their Argentine-sourced income through a withholding mechanism. The applicable withholding tax rate depends on the type of income and whether a DTT is applicable or not.
• VAT – shall apply to the import of certain goods and services to Argentina at a 21% rate. VAT shall be paid by the end consumer either by a withholding in charge of the bank issuing the credit or debit card used to pay or self-assessed by the end-consumer. This means that no payment obligation shall arise for the foreign beneficiary.
• Personal assets tax – shareholders of Argentine companies are liable for the personal assets tax at a 0.5% rate on the company’s net worth. The Argentine company is responsible for making this payment on behalf of the shareholders.
• PAIS tax – levies Argentine individuals and legal entities on the access to the foreign exchange market in Argentina for the payment of services rendered from abroad. The applicable tax rate is 30% but capped to an 8% for services already falling under the scope of VAT. However, PAIS tax is to be paid by end consumers of the digital services rendered from abroad by means of a withholding made by intermediaries for payment (eg, banks), meaning that no payment obligation shall arise for the foreign beneficiary.
• Turnover tax – this shall be applicable when the foreign entity has a “relevant digital presence” in certain jurisdictions, considering that there is such relevant digital presence in its territory whenever certain thresholds are surpassed. Each jurisdiction’s tax code should be analysed in order to determine if there is a relevant digital presence which would trigger the taxable event in the turnover tax.

Income tax withholdings are applicable for certain payments in favour of individuals or entities domiciled abroad (ie, foreign beneficiaries). The applicable tax rate will be determined by the type of income and whether a DTT is applicable or not. As an example, payments stemming from interest are subject to a general effective withholding tax rate of 35% (unless a DTT applies or the lender is a foreign financial institution). Royalty payments are generally subject to a 21% or 28% effective withholding tax rate, depending on the technology involved.

As stated above, the applicable withholding tax rates might be reduced if a DTT is applicable. In general, these tax treaties are based on the OECD Model and generally entail certain ownership requirements in order to benefit from reduced tax rates set forth therein.

Under Argentine Law, asset deals provide the most beneficial treatment to the buyer as it shall allow a step-up on the tax basis of the acquired assets. On the contrary, one usual concern relates to the ability to step-up the basis of the underlying assets of the target company in case of a stock deal, which is not possible under Argentine tax law: the target tax basis in its assets remains unaffected, disregarding the price paid for the stock. A step-up in basis would only take place upon a taxable realisation of the assets.

It is possible to structure certain debt-pushdown strategies or similar arrangements.

Capital Gains

Income stemming from the sale, exchange or disposition by a foreign beneficiary of shares and any type of corporate participation in Argentine companies is subject to income tax at (i) a 15% rate on the net gain, or (ii) a 13.5% rate on the gross amount of the transaction, at the option of the seller. The foreign beneficiary may benefit from a reduced tax rate if a DTT is applicable.

Direct Sale of Assets

Sale of assets located in Argentina by a foreign beneficiary shall be subject to income tax at an effective 17.5% withholding rate.

Indirect Sale of Assets

Where a foreign beneficiary sells its shares or corporate participations in an entity incorporated abroad, the resulting income shall be deemed as Argentine-sourced income, as long as certain requirements and conditions are duly met. In that case, the foreign beneficiary may choose to pay 15% on the net gain or 13.5% on the gross amount of the operation, only in the proportion of the participation of the Argentine assets on the total value of the shares being transferred. Again, the foreign beneficiary may benefit from a reduced tax rate if a DTT is applicable.

Reporting Regimes

The Argentine Tax Authority has several reporting regimes currently in force. Reporting subjects are obliged to disclose documents and supporting evidence of certain transactions, operations and businesses. Failing to comply with reporting regimes currently in force will trigger the application of the fines and sanctions set forth in the Tax Procedure Law.

Transfer Pricing Provisions

Transfer pricing provisions are triggered in Argentina when a local entity conducts international business transactions with a related foreign company or with a company located or domiciled in a non-co-operative or low tax jurisdiction. Consequently, the local entity shall be obliged to file annual tax returns and supporting evidence, disclosing relevant information regarding pricing methods and practices agreed. The Argentine Tax Authority may also request further information as to the global activities of the related foreign company, including an in-depth analysis of the group’s activities and a country-by-country report.

Argentine labour laws consist of very comprehensive pro-employee rules addressing almost every aspect of an employment relationship. Labour laws are designed to protect the rights of employees by setting forth, among other matters:

• working conditions and working hours;
• mandatory payment of a 13th monthly salary per year and of salary during illnesses;
• surcharges on salary for overtime;
• annual vacations;
• mandatory life and labour risk insurance; and
• payment of severance compensation in the event of dismissal without justified cause.

Labour laws are public policy and, therefore, mandatory. Employers can grant employees benefits on top of what is provided by laws and collective bargaining agreements (CBAs). However, agreements in detriment of, or waivers to, employee rights provided by such laws and applicable CBAs are null and void. Also, employers can only change the terms and conditions of labour employment provided that those changes are not unreasonable and do not (i) modify the essential terms of the employment contract, nor (ii) cause material or moral damages to the employee.

CBAs are negotiated between unions and the chambers that represent employers of each industry. Provisions of CBAs are mandatory and regulated by law. There are specific CBAs applicable to employees working in activities such as industrial, commerce, health and others. In general, employees working as managers, supervisors or other hierarchical position are excluded from CBAs. CBAs usually provide benefits to employees on top of what is provided by the Employment Labour Law.

As a rule, labour laws provide that employees must be paid salary in cash, or into a local bank account, in Argentine pesos (ARS). Employers can pay up to 20% of the total salary in fringe benefits. Also, employees are entitled by law to mandatory vacations, medical coverage and pension plans funded through mandatory contributions made by both employers and employees.

Companies usually grant performance bonuses, as well as fringe benefits such as mobile phones and company cars to top executives. In the case of very highly ranked employees, some international companies grant them stock options or restricted shares as retention bonuses. If, under these plans, the executive compensation is impacted by an acquisition or change of control transaction, a conservative approach is to fully comply with such provisions or amend those for the benefit of employees.

In stock deals, employees are not affected and remain as employees of the target, subject to their existing employment conditions. Instead, in asset deals, the key issue to analyse is whether the transaction implies the transfer of an independent business unit – ie, an independent technical and productive unit that may continue with its usual business after closing.

If an acquisition or merger involves the transfer of an independent business unit, employees are transferred as a matter of law and, therefore, neither the consent of employee nor prior notice shall be required. However, if the transfer does not entail an independent business unit, employees are not transferred as a matter of law and their consent is required.

In all cases, the new employer must maintain the employee’s employment category, benefits, rights, salary and seniority existent with the seller (previous employer) and can only change the terms of employment for the benefit of the employee. If any changes are detrimental to the employee’s rights, they shall be entitled to terminate the employment relationship upon constructive terms and claim the mandatory severance package, or judicially request the restoration of former working conditions by means of an injunction.

There is no legal obligation to inform or consult with trade union/employee representatives or local labour or regulatory authorities.

There is no governmental screening of FDI in Argentina.

Argentina provides an intermediate level of intellectual property protection granted by federal legislation such as the Trademark Law, the Patent Law, the Model and Design Executive Decree, the Copyright Law and the Commercial Secret’s Law.

Obtaining patent protection usually takes several years (anything from three to eight years), depending on the industry. Patent applications for biotech products generally take longer to obtain registration and are more likely to be rejected by the Patent Office.

Although counterfeited goods are found in the jurisdiction, federal civil and commercial courts are swift to enforce intellectual property when requested by the lawful owner of the infringed intellectual property right.

The collection and processing of personal data in Argentina is regulated by the Personal Data Protection Law 25,326 (DPA) and its Regulatory Decree 1558/200, as well as its complementary regulations. The scope of the DPA – as opposed to the General Data Protection Regulation of the European Union – does not have an extraterritorial scope. Instead, the DPA only applies to the collection and processing of personal data within the Argentine territory.

In September 2022, the Argentine Agency of Access to Public Information (AAIP), an autarchic in charge of the enforcement of personal data protection rules in the country, published the draft bill of law to amend the current DPA. The provisions set forth in the draft bill resemble the main European Union General Data Protection Regulation dispositions.

Audits and Sanctions Under the DPA

Under the current data protection rules in Argentina, the AAIP may impose administrative sanctions consisting of warnings, suspensions and fines from ARS1,000 to ARS5 million, closure or cancellation of the database. The amount of the sanction is determined according to the nature of the rights affected, the volume of the data processing, the benefits obtained, the degree of intentionality, the recidivism, the damages caused to the data subjects and to third parties, as well as any other relevant circumstances.

Over the last years, the AAIP conducted several audits of local companies in order to certify whether the collection and processing of personal data is carried out in accordance with the provisions of the DPA.

Below is a list of some of the sanctions imposed by the AAIP during 2022, which may help to understand the graduation of the fines according to their infringements:

• in January, the AAIP imposed a fine in Argentine pesos equal to approximately USD19,000 (at the time the sanction was imposed) upon RAPPI Tecnología for failing to comply with the national no-call registry law, for introducing privacy policies that did not comply with the information principle, and for failing to respond to AAIP’s requests;
• in March, the AAIP imposed a fine in Argentine pesos equal to approximately USD250 (at the time the sanction was imposed) upon the health clinic Swiss Medical, for failing to comply with a request for access to clinical information;
• in July, the AAIP imposed a fine in Argentine pesos equal to approximately USD500 (at the time the sanction was imposed) upon COMAFI Financiera for failing to register its databases; and
• also in July, the AAIP imposed a fine in Argentine pesos equal to approximately USD500 (at the time the sanction was imposed) upon AMX Argentina SA (Claro) for failing to comply with a request to suppress personal data.

The authors consider there are no other significant issues to mention in this report.