Hacienda Virtual Realty Argentina - HVRA
Foreign
Investment
Legal reforms and the Foreign
Investor
Argentina's sweeping move
towards full-fledged free enterprise has been extended to foreign investors.
The Argentine Constitution contains very clear principles in this matter - never
before fully implemented - guaranteeing equal treatment for foreign and local
investors (article 20) and making the "import of foreign capital" a specific
congressional duty.
Law 21.382 regarding foreign investment, as amended in 1993, places foreign
and local investors on an equal footing and expressly states that both capital
and profits can be repatriated at any time without any government approval being
needed.
Equal treatment means foreign investors have the same tax treatment as locals,
are entitled to make full use of local credit lines, and move both capital and
profits freely in and out of the country without any approvals being required.
Capital repatriation waiting periods, and the need to register foreign investment
have both been abolished.
This clear commitment to free enterprise and non discrimination between foreign
and local investors is further strengthened in over 36 bilateral
treaties for the promotion and protection of foreign investment, all
of them signed or negotiated under the Menem administration, including the U.S.,
Canada, United Kingdom, Germany, France, Italy, Spain, and Switzerland among
many others.
The
laws and decrees implementing the program of economic reform do not exhibit
legal technical flaws so as to lend support to foreign investors concern over
the rule of law.
The origin of such concerns then, has to be traced back to the political and
social context, and Argentina's history of institutional instability.
To this respect we expect time will settle the enormous economic changes on
the political and economic fronts and on Argentine society at large.
Only then the international community will be ready to form a conviction as
to the permanent character of the deep reforms carried out by the Menem administration.
Foreign Investment
Highlights
Foreign investments are warmly
welcome and virtually unrestricted; Argentina's is probably the most
pro-business foreign investment legislation in the world, with no sector restrictions
- investments allowed even in sensitive areas like oil, mass media (broadcasting,
cable, newspapers and magazines), nuclear power generation and nuclear mineral
mining.
No approvals or paperwork of any kind are required to materialize foreign investments
- there is absolutely no red tape.
No registration of investments is ever required: complete confidentiality assured.
Foreign investors are entitled, without approvals or formalities, to repatriate
capital and remit profits abroad at any time -no waiting periods whatsoever.
Unrestricted access to foreign exchange markets -absolutely no approvals or
formalities for making transfers abroad.
No discrimination against foreign investors: foreign and domestic companies
are treated equally under the law, including access to domestic or foreign currency
financing in the local market and full eligibility for economic development
incentive programs.
No performance requirements to be met by foreign investors.
International law protection: most capital-exporting countries covered by a
valid bilateral investment treaty.
Foreign Investor-specific
Tax Highlights
As a result of the national
treatment principle, Foreign investors face the same tax liabilities as local
firms.
The bulk of taxes are assessed on consumption and importation; others are assessed
inter alia on income, value-added, wages (social security), assets and other
property (real estate and vehicles mainly, although these tend to be negligible).
Argentine-based or foreign corporations (whether branches or full-fledged corps.)
are taxed at a 30% flat rate on their taxable income.
No provincial income tax in Argentina.
No capital gains tax.
No income tax on dividends paid by corporations, regardless of whether the dividends
are cash or share-originated.
No income taxes on interest on fixed-term deposits and savings accounts.
No tax on income derived from public or private securities.
No export taxes on manufactured products.
No special tax on the remittance of earnings abroad has been repealed.
[NOTE: ... read their lips]
Foreign Investment Regulations
Since the Argentine Constitution grants
foreigners the same rights to work, conduct business, buy, own and sell property
as it does to Argentine nationals, foreign investment has traditionally been
welcomed and is virtually unrestricted today.
Beyond these legal basis and perhaps more importantly, the Menem administration
warmly welcomed foreign investment since its inception, which it views as necessary
to Argentina's continued economic growth. Consequently, the government encourages
investment through national treatment in most cases under a free foreign exchange
regime without price controls.
Foreign investors from virtually all capital-exporting countries operate in
every major sector of the economy.
Decree Law #1853 of September 1993 governs foreign
investment, combining in one piece of legislation the liberalization measures
contained in the Economic Emergency
and State Reform Acts of 1989 and the Foreign
Investment Law of 1993.
• This law provides foreign companies may invest in Argentina without prior
government approval on an equal footing with domestic firms, effectively making
national treatment the undisputed principle applicable to foreign investors.
• Foreign investors are entitled to the same rights and subject to the
same obligations as domestic investors, and may enter any area of economic activity
on their own, as no law or regulation forces them to associate with local partners.
In fact, the typical bidding terms and conditions for the privatization of the
many state run companies call for certain types of expertise that only foreign
bidders possess, therefore making foreign participation necessary in practice.
• Foreign firms have participated extensively and without discrimination
in the government of Argentina's unparalleled privatization program, becoming
most involved in the telecommunications, oil, electric power, gas, transportation
and water and sewer sectors.
• There are no approvals or procedures required to effect foreign investments.
Regardless of the amount, or the area of economic activity in which they are
made, foreign investments may be made without any kind of prior approval.
• This principle applies even if a foreign investment results in full foreign
ownership of a domestic company.
• In banking and insurance, areas where special statutes require all operators
to apply for licenses, foreign and domestic investors are guaranteed access
to them on an equal footing.
• As of January 1, 1994 the Central Bank started accepting applications
for opening of new banks, whether foreign or domestic, therefore overhauling
a former prohibition in this regard (which had been motivated by the excessive
number of banks and branches in the country, not by a desire to limit foreign
investment).
• The "no discrimination principle" applied to banking laws went
so far as to eliminate the traditional reciprocity requirement when considering
a foreign bank application for doing business in Argentina, which effectively
places foreign banks on an absolute legal equal footing with their domestic
counterparts.
• Foreign capital participation in broadcasting is allowed by law, but
presently subject to a regulatory restriction. In fishing, locals secure most
of the annual permits -their number being limited in compliance with conservation
policies- but foreign investors are free to enter the activity through buyout
or joint venture.
• Due to national defense considerations, foreigners require permission
from the National Superintendent of Frontiers to invest in non-mining activities
near an international border.
• Nuclear power generation will soon be open to full private ownership.
Consistent with its decision to transfer all nuclear activities to private hands,
the Government has recently announced national treatment on uranium mining and
is looking into ways of opening atomic power generation to foreign and domestic
capital.
• Foreign investors are entitled to repatriate their capital and transfer
abroad their realized liquid earnings at any time, with absolutely no approvals
or paperwork necessary.
• Foreign investors may repatriate the full amount of their invested capital
at any time regardless of the time elapsed since the investment was made. Access
to the foreign exchange market is also unrestricted.
• There are no discriminatory withholding taxes on income; and there are
no taxes applied to the remission of profits and dividends emanating from foreign
capital.
• Foreign investors are entitled to utilize any of the corporate structures
recognized by Argentine law, and therefore free to enter the market via the
most convenient vehicle available, be it through merger, takeover, greenfield
or joint venture.
• As a result of the no discrimination principle, foreign and domestic
companies are treated equally under the law, including access to short, medium
or long term domestic or foreign currency financing in the local market and
full eligibility for economic development incentive programs. Competitive equality
is applied to private enterprises vis a vis public firms in access to markets
and credit.
• Additionally, foreign firms may also participate in publicly financed
research or subsidized research and development programs on a national treatment
basis.
• There are no performance requirements to be met by foreign investors.
The government maintains a system of incentives which can be enjoyed by both
foreign and domestic firms alike.
• Foreign corporations and individuals are eligible for the government's
various export promotion schemes, including one which provides for lower import
duties or restrictions on inputs to production tied to increased exports in
non-traditional areas.
• The above rights assisting foreign investors have been further established
under international law by means of over 30 international
treaties, all of them signed under the Menem administration.
Investment promotion and protection agreements have been signed with all countries
where foreign investment usually originates, such as the United States, Canada,
United Kingdom, Germany, France, Italy, Switzerland, Sweden and Spain as well
as many others.