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Legal & Business Overview of Argentina. North Carolina Bar Association, May 6, 2008 Carlos Gabriel Kaplan JD University of Buenos Aires LLM Duke University. Argentina. Facts Legal system Business law Vehicles available Regulations on foreign investment Taxation Business Opportunities.

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Legal & Business Overview of Argentina

North Carolina Bar Association, May 6, 2008

Carlos Gabriel Kaplan

JD University of Buenos Aires

LLM Duke University


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Argentina

  • Facts

  • Legal system

    • Business law

      • Vehicles available

      • Regulations on foreign investment

    • Taxation

  • Business Opportunities


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Facts

  • Location

  • Mercosur


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Facts

  • 23 provinces + City of Buenos Aires

  • Territory:

    • 1,068,302 sq mi

    • 8th largest country in the world

    • 2nd in the region

  • 40 million inhabitants


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Economic Growth

  • Economy

    • Crisis in 2001/2002

    • Growing ~8.5% for 5 years


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Trade (2006)

  • RTP:

    • (At least!) 4 Companies


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Foreign Direct Investment (2005)

  • Spain

  • United States (~15%; $13.2bn)

  • France

  • Brazil

  • Canada

  • Mexico


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Legal System

  • Democratic Republic

  • Federal Constitution

    • 3 Levels of Government

      • Federal

      • Provinces + City of Buenos Aires

      • Municipalities

    • Each with

      • Executive

      • Legislative

      • Judicial powers: Civil law


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Foreign Investment Act

  • Foreign investors

    • Same rights than local investors

    • May use any type of business organization

    • Free access to local and international financing

    • Allowed repatriation at any time of revenues and investment, now subject to regulation


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Areas of investment

  • No restriction to foreign investors

    • Exceptions:

      • Media: Limit 30%


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Federal Companies Law

  • Types of Business Organizations

  • Jurisdiction

    • Provincial / City of Buenos Aires

      • Incorporation

      • Control

    • Federal

      • Public offerings


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Business Organizations

  • Branch: Sucursal

  • Corporation: Sociedad Anónima (S.A.)

  • LLC: Sociedad de Responsabilidad Limitada (S.R.L.)

  • Trust: Fideicomiso

  • Partnership: Sociedad de Hecho

  • Joint Venture: Unión Transitoria de Empresas (UTE)


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Branch

  • Same entity

  • Separate accounting

  • Parent responds with assets

  • Registration

    • Domicile

    • Representative resident in Argentina

    • Additional requirements


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Corporation: Sociedad Anónima

  • At least 2 shareholders

  • Limited liability

  • Capital

    • Minimum requirements

    • Par value

    • Classes of shares

  • Purpose

    • “Unique and determined”


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Corporation: Sociedad Anónima

  • Governance

    • Shareholder meetings

      • Ordinary

      • Extraordinary

    • Board of Directors

      • President

    • Control

      • Registry of commerce


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Corporation: Sociedad Anónima

  • Control

    • Registry of commerce

    • Statutory supervisor

    • Supervisory Commission, if

      • Capital > A$2,100,000

      • Public offering

      • Public concessions


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LLC: Sociedad de Responsabilidad Limitada (S.R.L)

  • Limit 50 partners

  • Limited liability

  • No capital requirement

  • Pass Thru

  • Start as S.R.L. convert to S.A.


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Trust: Fideicomiso

  • Widely used in real estate financing

  • Allows to

    • Isolate risks

    • Securitization of funds

  • Fiscal benefits


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Foreign Investor

  • Activity in Argentina

    • Branch: Regular activity

    • Shareholder in S.A. / Partner in S.R.L. (Art. 123)

  • Registration and information requirements

    • Articles of incorporation, by laws

    • Shareholders

    • Non off shore

      • Principal purpose out of Argentina

      • No prohibition to act in place of incorporation

      • Activity and assets in other jurisdiction

    • Exception: part of a corporate group


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Central Bank Regulations

  • Capital inflows

    • Minimum term for loans: 365 days

    • Subject to mandatory 30% non - interest local Bank deposit

    • Exceptions:

      • Direct investment

      • Real estate operations

      • Portfolio investments in publicly traded securities


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Federal Taxation

  • Income Tax

    • Residents: World Wide Income

    • Non residents: Argentine source income

    • Treaty with US not in force

  • Value Added Tax

    • Sale of goods, provision of services and imports

  • Personal assets

    • Residents or assets located in Argentina

  • Tax on Credits and Debits in Bank Accounts

  • Tax on Exports


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Local Taxation

  • Provinces

    • Turnover tax “Gross Income”

    • Stamp Tax

  • Municipalities

    • Service fees


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Risks

  • Inflation

    • Official: ~ 8%

    • Unofficial: ~ 20%?

  • Legal uncertainty


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Business Opportunities

  • Agriculture: machinery, genetics

  • Financial services

  • Information technologies

  • Telecommunications

  • Airport and ground support equipment

  • Residential building materials and supplies

  • Travel and tourism


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Thank you very much!

Carlos Gabriel Kaplan carlos.kaplan@law.duke.edu


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