Argentina enacts its Bases Law and Tax Measures Law: Top points

On June 28, 2024, Argentina’s Lower Chamber enacted the Law of Bases and Starting Points for the Freedom of Argentines (Bases Law) and the Tax Measures Law, bringing significant tax implications across industries.

The laws were the first Executive Branch-issued initiatives to be approved by Congress since the Branch’s election in 2023.

In this alert, we provide a brief summary of the main provisions of the Bases Law and Tax Measures Law and their implications for taxpayers.

Incentive Regime for Large Investments (RIGI)

RIGI sets forth a system of incentives and benefits for single project-owner vehicles. 

It applies to investments in the forestry-industrial, tourism, infrastructure, mining, technology, steel, energy, oil, and gas sectors and provides tax, customs, foreign exchange, and regulatory stability for 30 years. 

The RIGI adhesion period is two years from the Bases Law’s entry into force, with the possibility of a one-year extension.

To qualify under RIGI, an investment project must amount to at least USD200 million. At least 40 percent of the investment amount must be made within 2 years of the date on which the investment project is approved. Additionally, RIGI states that each project must propose at least 20 percent of the total investment amount to be allocated to local suppliers, provided that they are available and that they meet market conditions in terms of price and quality.

RIGI sets forth a guarantee against more burdensome future regulations. For more information on the regime, see our previous client alert.

Labor reform

The Bases Law represents the most significant change in Argentina labor legislation since the 1990s. Below, we outline key aspects of the law.

General amendments to the individual work regime

Provides for registration of employees that are unregistered or deficiently registered. The Bases Law eliminates criminal liability for employers and the elimination of fines corresponding to employee’s lack of registration. The law also provides for the condonation of up to 70 percent of social security debt due to the lack of payment of social contributions.

• According to the law, employee registration must be simple, immediate, and carried out through electronic means. Companies with 12 or more employees will pay a single amount for all obligations arising from legal labor relations and social security. From this amount, the collecting entity will then distribute the appropriate amounts to the relevant recipients.
  
  
• In case of a court judgment determining that a labor relationship has been classified as a work or service contract, any components already paid according to the respective regime will be deducted from the overall debt (eg, if the individual paid social security obligations through monotributo, a tax category for independent workers, those amounts will be deducted from the social security debt imposed on the employer).
  
  
• The single-registration system (Law 24.013) has been modified. The worker may choose a provider from the national health system and shall not be compelled to use the one imposed by the employer.

Amendments to the Labor Contract Law

The law initially excludes employees of the public administration, domestic workers, agricultural workers, and contracts for construction and other works, services, agencies, and those regulated by the National Civil and Commercial Code.

It removes the presumption of an employment contract in cases of work or professional services or trades, when corresponding receipts or invoices are issued with these forms of contracting or payment is made through the banking system.

• Workers will be considered the employees of those who register the employment relationship, even the workers were hired to provide services to third-party companies. These third parties will be jointly liable for labor and social security obligations regarding the services provided only for those obligations accrued during the actual provision of services to them.
  
  
• The probationary period has been extended to 6 months, which can be extended to 8 months by collective bargaining agreement for companies with 6 to 100 employees, and up to 1 year for companies with up to 5 employees. During this period, either party may terminate the employment relationship without entitlement to severance pay. Regarding the probationary period, the following should be noted:

1. The same worker cannot be hired using the probationary period more than once.
   
   
2. Abusive use of the probationary period to avoid the regularization of workers may be subject to penalties.
   
   
3. During the probationary period, both parties have rights and obligations inherent to the employment relationship, including the recognition of the employee's union rights.
   
   
4. Both parties are obliged to make social security contributions.
   
   
5. The worker is entitled to benefits for work-related accidents or illnesses.
   
   
6. The probationary period will be counted as service time.
   
   
7. The employer must register the employee at the beginning of the relationship and not after the probationary period ends; otherwise, the probationary period will be considered waived.

• Workers hired by contractors or intermediaries may request that the company for which they provide services withhold amounts owed to them by the contractor or intermediary, such as remuneration, severance, or other rights arising from the employment relationship.
  
  
• The prohibition of working due to maternity before childbirth must be at least 10 days; the remainder of the license period (80 days) may be accumulated after childbirth.
  
  
• Regarding fair cause for dismissal, the new law introduces as fair cause the participation in blockades or seizures of establishments. That may constitute a labor offense that justified a dismissal with no severance payment.
  
  
• Severance payments for dismissals motivated by discriminatory acts are increased. The increased severance payment can amount to up to 100 percent of the regular severance payment.
  
  
• Through a collective bargaining agreement, parties may agree to replace the severance payment (Section 245 LCT) with a fund or termination payment system. Employers may also choose to opt for a private system at their own cost to cover severance payments or agreed-upon sums in case of mutual termination.
  
  
• Independent workers may retain up to three additional independent workers to carry out their business. This relationship will be based on autonomous relations without creating dependency or an employment relationship between them or with the person hiring them.
  
  
• The system for labor fines, including those for lack of or incorrect registration and failure to deliver work certificates, among others, has been repealed.

Public emergency and delegated powers

As a general principle, the National Constitution prohibits the delegation of legislative powers to the Executive Branch. However, the Constitution establishes exceptions in cases of public emergency which must be set forth by law, and a determined period for the powers delegated must be specified.

The Bases Law declares a public emergency in administrative, economic, financial, and energy matters for a period of one year, including delegated powers to the Executive Branch, under the terms of Article 76 of the National Constitution. The Executive Branch must report monthly and in detail to the National Congress on the exercise of the delegated powers and the results obtained.

State reform

Administrative reorganization: The Executive Branch has been authorized, with regard to the central administration, decentralized agencies, social security institutions, state-owned enterprises and corporations, and trust funds, to modify or eliminate competencies, functions, or responsibilities, as well as to reorganize, modify, or transform legal structures; centralize; merge; split; totally or partially dissolve; or transfer to provinces or the Autonomous City of Buenos Aires. National universities, bodies, or agencies of the Judicial Branch, Legislative Branch, Public Prosecutor's Office, and all entities dependent on them have been excluded from such authorization. Dissolution of specific bodies such as CONICET, ANMAT, INCAA, INTA, and INTI, among others, is also excluded.

Privatizations: The law designates state-owned or majority-owned enterprises and corporations of the National State listed in its annexes as "subject to privatization," including Energía Argentina S.A., Intercargo S.A.U., Agua y Saneamientos Argentinos S.A. (AySA), Belgrano Cargas y Logística S.A., Sociedad Operadora Ferroviaria S.E., and Corredores Viales S.A. Additionally, Nucleoeléctrica Argentina S.A. and the Carbon, Railway, Port, and Energy Complex under Yacimientos Carboníferos Río Turbio (YCRT) will be subject to privatization under a program of participatory ownership with the National State maintaining control or majority participation in the share capital. Aerolíneas Argentinas S.A., Radio y Televisión Argentina S.E., and Correo Oficial de la República Argentina S.A. have been removed from the list of companies subject to privatization. 

For more information, see our previous client alert.

Administrative procedure, public employment, collective bargaining agreements: Modifications to Laws 19.549 (Administrative Procedures), 25.164 (Public Employment), and 24.185 (Collective Bargaining Agreements) have been made.

Public employment: Amendments to Law 25.164 (National Framework Law for the Regulation of Public Employment) have been introduced.

Public works

The Executive Branch is authorized, for emergency reasons, to renegotiate or terminate public works contracts, public works concession contracts, construction, or provision of goods and services contracts and their related and associated contracts exceeding certain thresholds and entered into prior to December 10, 2023. Bases Law also determines, from a public-interest standpoint, that it is economically and financially inconvenient to suspend or terminate public works contracts that have been, up to 80 percent, physically completed by the date of enactment of the Bases Law, or contracts that use international financing. In cases where such contracts have been suspended, their execution will resume according to the procedure provided by the law.

The National Gas and Electricity Regulatory Authority will be established to replace and assume the functions of the current National Electricity Regulatory Authority (ENRE) and National Gas Regulatory Authority (ENARGAS). The Executive Branch will be tasked with issuing the regulations and acts required to implement the consolidation of these entities. Until the new National Gas and Electricity Regulatory Authority is established, ENRE and ENARGAS will continue to exercise their respective functions. Bases Law amends Law No. 17.319 (Hydrocarbons) and Law No. 24.076 (Gas Regulations). 

Tax Measures Law

Income tax: Single workers will start paying taxes on gross earnings of ARS1.8 million, while taxes for married workers with children will start at ARS2.3 million. A progressive scale with rates ranging from 5 percent to 35 percent has been implemented. The minimum non-taxable threshold will be updated quarterly this year and semi-annually thereafter based on the Consumer Price Index (IPC). Deductions from the taxable base include minor children, prepaid health services, and school expenses, and other specified items with set limits. A special deduction was also introduced to exempt the year-end bonus. These changes will be effective once Fiscal Measures Law is enacted.

Personal assets tax: The minimum non-taxable threshold has been increased from ARS27 million ARS100 million, and dwellings valued up to ARS350 million are exempt, reducing the number of taxpayers. Tax rates have been reduced to a range of 0.5 percent to 1.5 percent, until the end of 2023. Between 2024 and 2026, only two rates will be in force – between 1.25 percent and 1.50 percent – and, from 2027, a single rate of 0.25 percent will be in force. Additionally, a prepayment regime with preferential rates and fiscal stability until 2038 and benefits for compliant taxpayers have been introduced. The Special Regime for Income from Personal Assets Tax (REIBP) has been created, allowing voluntary prepayment until fiscal year 2027, with a unified reduced rate of 0.45 percent. Participants adhering to the tax amnesty regime can apply for REIBP with a unified rate of 0.5 percent.

• As a note, this tax was issued by the federal government due to declaration of a fiscal emergency, which will initially expire on December 31, 2027. Therefore, the federal government does not have sufficient legal grounds to apply the tax for fiscal periods that exceeds fiscal year 2027. Moreover, it remains to be seen whether the federal government could grant tax stability going beyond 2027.
  
  
• Tax amnesty: Both domestic and international assets can be declared, including cash (in ARS or USD), real estate, stocks, and other securities. Progressive tax rates of 5 percent, 10 percent, and 15 percent have been proposed, with an exemption up to USD100,000 if kept within the Argentine financial system until December 2025. Larger amounts can also benefit but must be deposited into the financial system by December 31, 2025. Unreported assets up to USD100,000 can be regularized without paying taxes or fines. The law also offers an optional prepayment regime and benefits for compliant taxpayers. Argentine tax residents and non-residents of Argentina who were tax residents before December 31, 2023 can participate. Individuals who have held public office in the last ten years, along with their spouses, parents, children, or siblings, and major state contractors, are ineligible, and assets cannot be registered in the name of third parties. Participants in this capital regularization cannot enroll in similar programs before December 31, 2038.
  
  
• Simplified tax regime for small businesses: Both billing thresholds and monthly payments have been increased. The simplified tax regime for small businesses remains unchanged.

For more information, please contact the authors.