Argentina reforms the economic legal landscape: updates and key reporting deadlines

Argentine President Javier Milei, who has been in office more than a month, has already put in place a number of reforms to the legal landscape aiming to deregulate the economy and the business environment. Congress is also actively discussing further reforms.

In this alert, we sum up the most relevant developments from the tax, foreign exchange, and customs perspectives. We also set out certain key reporting deadlines coming up this month. We will review:

1. Executive Branch Decree Nbr. 70/2023 on customs matters
2. New foreign exchange regulations on payment for imports of goods and services
   • Access to FX markets to pay for imports of goods
   • Access to FX market to pay for imports of services
   • Repatriation and settlement to AR$ of the export´s proceeds
3. PAIS tax
4. The new system for authorization of imports to replace SIRA and SIRASE
5. Debt of local entities with foreign providers Registry of Commercial Debt for Imports from foreign suppliers – note the deadline for reporting is January 24, 2024.
6. BOPREAL bonds issued to pay debt for imports
7. Bill of reform and deregulation
   • Tax amnesty
   • Regularization Plan
   • Export duty rates
   • Incentive regime for large investments. agroindustry, infrastructure, forestry, mining, oil and gas, energy and technology

1. Executive Branch Decree Nbr 70/2023. Customs Matters

On December 21, 2023, the Official Gazette published the Executive Branch Decree of Necessity and Urgency 70/2023. The Decree contained more than 360 sections, abrogating 32 laws and amending 19 laws, introducing modifications in regulations of a variety of topics such as – but not limited to – the regulations applicable to the financial system, labor laws, customs code, foreign trade regulations, civil and commercial code, energy, oil and gas and mining regulations, public works and utilities, and airline transport regulations, among others.

The Decree entered into force on December 29, 2023 and it will continue in force until further revision by Congress, which will either confirm or reject it.

Customs matters

Regarding customs matters, we highlight the following:

• For imports and exports, there is now the possibility of requesting an anticipated binding administrative ruling which includes the possibility of requesting the Custom´s opinion with respect to the tariff classification, origin, or valuation of the merchandise, or in relation to the elements necessary for the correct application of the customs regime, incentives, or prohibitions or restrictions at the time of import and export.
• The “guarantee regime” aimed at prompt clearance though Customs and release of goods has been made more flexible. A more expeditious appeal system is also provided in cases in which the customs service refuses the provision of guarantees.
• Any individual or legal entity may be an importer and exporter without the need to be registered in any special registry, meaning that any individuals may carry out the dispatch management and destination of the merchandise on their own. This amendment implies the elimination of the importers/exporters registry previously kept by the General Customs Office.
• It will be possible to declare to Customs and document imports to the Customs prior to the arrival of the transport.
• In another reform, the Government of Argentina may not establish export or import prohibitions for economic reasons, and the establishment of quotas is also prohibited.
• Finally, the intermediation of a customs broker will no longer be mandatory.

2. New foreign exchange regulations on payment for imports of goods and services

Access to FX markets to pay for imports of goods

The new presidential administration has declared its intent to lift import restrictions; despite this, however, restrictions to access to the FX market will continue.

Access to the FX market to make payments connected with imports performed before December 12, 2023 will require permission from the Central Bank, with certain exceptions.

Payments connected with the imports of goods as of December 13, 2023 should comply with the following payment terms:

• Immediate payment: Fuel and energy
• 30 days: Pharmaceutical products, fertilizers
• 180 days: Automobiles and items of certain HTS codes
• Everything else: 25 percent at day 30, 25 percent at day 60, 25 percent at day 90, 25 percent at day 120

Access to FX market to pay imports of services – notes on the blue-chip swap

Despite the proclaimed intention of facilitating payments, restrictions to access the FX market to pay for the import of services will continue.

Payments connected with the imports of services performed before December 12, 2023 will require permission from the Central Bank, with certain exceptions. A regularization plan is being defined.

Imports of services as of December 13, 2023 should comply with the following payment terms:

• Immediate payment: transport, travelling, government services, health assistance, payments through credit cards
• 30 days: Other services between nonrelated parties
• 180 days: Other services between related parties

Because the FX restrictions will continue, and there are no clear signs indicating when restrictions will be fully lifted, and because the gap between the official FX rate and the blue-chip swap rate has been reduced, the use of the blue-chip swap to pay for imports of goods and services presents itself as a viable option for paying new imports. The use of the blue-chip swap would allow (i) an easier authorization of the imports (in the case of goods) and (ii) avoiding accumulation of AR$ in Argentina.

Repatriation and settlement to AR$ of the export's proceeds

Under the FX regulations, local exporters are forced to repatriate and settle to AR$ at the official FX rate any proceeds from exports of goods and services. The repatriation and settlement should be made within a certain time frame following the export of the goods (the term depends on the tariff classification of the good), and within five days since the collection of the fee for services.

One of the first measures taken by the new administration was to devaluate the AR$, from AR$360 to AR$859 (January 12, 2024) for 1 USD.

Currently, as established by Decree 28/2023, exports can be repatriated and settled on an 80-20 basis, meaning 80 percent must be settled through the official FX market at the official exchange rate, while the remaining 20 percent can be settled through the blue-chip swap market (CCL) at the CCL exchange rate, resulting in an approximated effective exchange rate of 1USD = AR$ 917.

For the export of goods, if the new export duty rates are approved with a 15 percent rate applicable to most goods, the effective amount of AR$ that the exporter will receive for each 1USD exported would decrease to 1USD = AR$ 779.

3. PAIS tax

New differential tax rates have been established for the PAIS tax and a broader generalization of the taxable fact of the PAIS tax has been implemented.

The PAIS tax applies to the purchase of foreign currency when the purchase is made directly though a money conversion transaction, or when the purchase is made indirectly when requesting access to the official FX market or when using a credit or a payment processor, to make a payment to a non-resident, generally in connection with the import of goods and services.

The new PAIS tax rates will be the following:

Imports of goods:

• PAIS tax of 17.5 percent, applicable to payments connected with the importation of goods, except for the following: those goods destined directly for consumption and the introduction of goods to free trade zones.

Imports of services:

• PAIS tax on digital services: 8 percent
• PAIS tax on other services: 25 percent

4. New system for authorization of imports replaces SIRA and SIRASE – notes on the blue-chip swap

Until December 27, 2023, anyone intending to import goods or services needed to file an authorization request called SIRA (for goods) or SIRASE (for services)-. SIRA and SIRASE were used to block import authorizations; the authorization was subject to the survey and approval of multiple entities (among them the Tax Authority, Customs, and the Secretariat of Commerce).

To replace this system, the government has implemented the Statistical Import System (SEDI), which is effective from December 27, 2023.

Starting December 27, 2023, all goods may be imported into Argentina without the need for an import license.

SEDI consists of a report filed by the importer which, once approved, will be valid for 360 consecutive days.

Upon filing the SEDI, the Federal Tax Authority (hereinafter AFIP) will assess the request based on the information available in its records and the importer's tax status. The elimination of the evaluation of the economic and financial capacity (CEF for its acronym in Spanish) was abrogated by Resolution 5478/2024 AFIP.

Once the steps set out in the previous paragraph are cleared, the SEDI declaration will be approved and labeled under an “OFFICIAL” status, allowing the importation.

Operations exempt from the SEDI declarations include:

• Import destinations for consumption under sample, donation, and diplomatic franchise regimes
• Goods with duty and tax exemptions
• Goods entering under the Courier or postal shipment regime
• Items covered by the import regime for inputs intended for scientific and technological research
• Goods originating from the Special Customs Area, as well as import operations of goods from the mainland to this Special Customs Area, and
• All goods falling under General Resolution No. 3,628 (AFIP) – goods processed through specific files and/or particular summary assignments-..

Goods declared under the SEDI declaration will have a tolerance of 7 percent more or less in the unit FOB value and 7 percent more in quantity, with no restrictions set when discrepancies are lower than what is declared in the SEDI compared to the specified import destination requests for consumption.

Because the FX restrictions will continue, and there are no clear signs on when these restrictions will be fully lifted, and because the gap between the official FX rate and the blue-chip swap rate has been reduced, the use of the blue-chip swap to pay for imports of goods and services presents itself as a viable option for paying new imports. The use of the blue-chip swap would allow (i) an easier authorization of the imports and (ii) avoiding accumulation of AR$ in Argentina.

5. Debt of local entities with foreign providers – Registry of Commercial Debt for Imports from Foreign Suppliers. Deadline for reporting is January 24, 2024

On December 26, 2023, through Resolution No. 5466/2023, the AFIP implemented the Registry of Commercial Debt for Imports from Foreign Suppliers.

Local importers of goods and services which have accumulated debt with foreign suppliers for imports performed up to December 16, 2023 should register and file a sworn statement reporting all commercial debts for imports of goods and/or services.

The entities affected must report the debt registration in the SEDI within a mandatory period of 15 consecutive days, starting December 27, 2023 to January 10, 2024 inclusively. The term for reporting has been extended to January 24, 2024.

Entities that have commercial debts for imports and do not report them will not be able to access the official foreign exchange market to pay their debts under this new system.

Debts that can be reported include:

• Debts for imports of goods operations performed before December 13, 2023
• Debts incurred prior to December 13, 2023 from SIRA declarations marked as "Approved" (not yet imported) within certain exceptions for pharmaceutical products, goods essential for infrastructure works contracted by the public sector, petroleum oils and derivatives, capital goods, etc.
• Debts incurred prior to December 13, 2023, from specific import declarations as stipulated in General Resolution 3628/14 (AFIP) – goods processed through specific files and/or particular summary assignments
• All debts related to services performed before December 13, 2023.

6. Argentina issues BOPREAL bonds as a system to pay debt for imports

The National Treasury has issued “BOPREAL bonds as a first attempt to implement a system to regularize the private debt connected with imports performed before December 12th, 2023. The BOPREAL bonds can be subscribed by those individuals and legal entities that have outstanding debts with foreign creditors for imports of goods with customs clearance or registration as of December 12, 2023 and imports of services rendered prior to that date.

The issuance of these bonds was complemented with Resolution No. 5469/2023 of AFIP.

Although there are still doubts as to how these bonds will be used to pay previous debts, three series ( 1A, 1B, and 1C) will be issued with the power of cancelling tax and customs obligations, their interests, fines, and accessories, under the terms set forth in ,Executive Power Decree N° 72/2023.

BOPREAL bonds are denominated and payable in dollars but will be subscribed in pesos at the official exchange rate (A$3500). It should be noted that bondholders will have the option to redeem the bonds through early redemption, within the terms and in the proportions defined by the BCRA from time to time. The redemption may only be exercised against dollar-linked AR$.

The bonds will accrue interest at a maximum annual rate of 5 percent, payable quarterly or semi-annually and in USD.

A schedule for the computation of the instruments as payment in lieu of payment of overdue tax and customs obligations has been established.

Moreover, importers will be able to enter the primary bids and then sell them against CCL in the secondary market without losing access to the MULC, as no cross restriction applies between the MULC and CCL for these bonds.

On the other hand, it has been established that the exchange rate applicable to determine the cancellation power of the bonds shall be the highest value in pesos computed on each reference date between the average of the official dollar corresponding to the previous five working days; and the implicit official dollar rate that results from averaging the purchase and sale of eligible government securities.

7. Bill of reform and deregulation; tax amnesty; regularization plan; export duty rates; incentive regime for large investments

In addition to the issuance of the Decree, on December 28, 2023, the Executive Branch sent a bill to Congress intended to implement a large number of amendments to the Argentine legal landscape, aiming to deregulate the economy, eliminating much of the intervention of the state in private relationships.

With more than 600 sections, 300 pages, and 6 annexes of new legislation, the content of the bill is aimed to amend and abrogate regulations on the following matters: electoral reform, public works, tax matters, energy, environment, foreign investment, oil and gas, among many other topics.

From a tax perspective, we highlight the following:

Tax amnesty

The Bill contains a tax amnesty applicable to Argentine residents (individual and legal entities) with assets located in Argentina or abroad, and to those non-residents (individuals and legal entities) with assets located in Argentina. The tax amnesty regime will allow the reporting of assets, cash, real estate, or cryptocurrencies.

According to whether the person is an Argentine resident or a non-resident, the following assets may be included in the Tax Amnesty: being inside or outside the country (such as national or foreign currency); whether the asset is in cash or deposited in bank accounts or any other type of account; real estate; shares; participation in companies; bonds; negotiable obligations, certificates of deposit in custody; fund shares and other similar assets; and cryptocurrencies, among others.

The term to adhere to the Tax Amnesty is November 30, 2024. The Special Amnesty Tax rate is 5 percent, 10 percent, or 15 percent, depending on the regularization stage.

Regularization of up to USD 100,000 will be possible without payment of the Special Amnesty Tax.

The taxable base to determine the Special Amnesty Tax will be calculated and paid in dollars. In cases where the amount is expressed in pesos, they will be exchanged to dollars using the blue-chip swap rate.

Also, an advance payment will be mandatory for an amount not less than 75 percent of the Special Amnesty Tax.

Regularization plan

The Bill contains a new regularization plan under which taxpayers may apply for the tax, customs, and social security obligations due as of November 30, 2023. The regularization plan will be in force for 150 days after the entry into force of the Bill.

The application to and fulfillment of the conditions of the regularization plan will produce the suspension of all penalties or criminal prosecutions related to tax, customs and social security contributions.

The regularization plan contemplates the possibility of paying all tax liabilities in cash or in 36, 60, or 84 installments. Regularization by means of offset will not be allowed.

In addition, taking into consideration the payment method chosen, cash payment or payment plans, different tax benefits will be available in relation to forgiveness of the 50, 30, or 10 percent of the compensatory and punitive interests accrued as of the date of adherence to this regime.

Export duty rates

According to the Bill, the following import duty rates will be set based on the exported goods:

• 15 percent rate: for all goods covered by the tariff headings of the Common Nomenclature of Mercosur (NCM) that are currently not subject to export duties or that are subject to a rate lower than 15 percent, including all goods that are already subject to a 15 percent rate
• 33 percent rate: for all soybean byproducts
• 8 percent rate: for all goods corresponding to the wine industry and essential lemon oil.

In addition, the Bill proposes to set a 0 percent rate for all goods corresponding to the following economic sectors: olive, rice, bovine leather, dairy, fruit, vegetable, beans, lentils, peas, potatoes, garlic, chickpeas, honey, sugar, yerba mate, tea, horses, and wool.

Incentive Regime for Large Investments affects agroindustry, infrastructure, forestry, mining, oil and gas, energy, and technology sectors

The Bill contains an Incentive Regime for Large Investments (hereinafter RIGI) setting out a system to provide fiscal and tax incentives, legal security, certainty, and protection of the rights acquired by owners of project vehicles that comply with the requirements detailed below.

It will be applicable to entities in the Agroindustry, Infrastructure, Forestry, Mining, Oil and Gas, Energy, and Technology sectors that have a large investment project and are regulated by the requirements of the laws that establish them.

The term of adhesion to the RIGI is within 2 years, extendable for the same period, from the entry into force of the Bill.

In addition, single project-owner vehicles (VPU for its acronym in Spanish) that own a project may apply for RIGI membership, taking into consideration that it must be for the sole purpose of carrying out a RIGI investment project and may not engage in other activities or own assets unrelated to the project.

In this sense, VPUs, limited liability companies, public limited companies, joint ventures and dedicated branches may be subject to this regime.

Dedicated branches will be created for those LLCs or corporations that want to adhere to the RIGI and develop activities not just related to the investment project. Among the requirements for their adhesion, the dedicated branches must be registered in the public registries, have their own tax identification, and keep separate accounting records.

Some of the incentives established by the Project for the RIGI are the following:

Tax benefits: fixed income tax rate, under a system based on tax credit certificates to cancel obligations with respect to VAT tax depending on the type of taxpayer. This also foresees tax stability by which the taxes to be applied will be only those in force at the moment of adhesion without considering new or increased taxes.

Customs benefits: stability of the custom regime from the date of adherence for 30 years, exempting from any tax collection regime on imports for consumption of capital goods, spare parts, parts, components and inputs; it is proposed to guarantee the possibility of generating declarations and manual liquidations to safeguard customs stability.

Foreign exchange benefits: the proceeds from the exports of products of the adhered projects will be exempt from the obligation of entry and liquidation in the official FX market. Stability on the FX regulations is also established.

If you need more information or have any questions regarding doing business in Argentina, including the sweeping reforms being put in place, please contact Augusto Mancinelli.