Who Is Liable For Income Taxes in Argentina
Residents are subject to tax on worldwide income. Nonresidents are taxed on Argentine-source income only.
The following individuals are deemed to be resident in Argentina:
- Native and naturalized Argentine citizens
- Foreign individuals who are granted permanent residence in Argentina
- Foreign individuals who remain in the country under temporary authorization for a period of 12 months or longer
Individuals in the third category who have not been granted permanent residence are deemed to be nonresident if they can prove that they do not intend to stay permanently in Argentina.
Foreign individuals who can prove that they are in Argentina because of their employment, and who remain in the country for a period not exceeding five years, are not considered to be resident in Argentina. This rule also applies to members of the individual’s family who accompany the individual to Argentina.
Income subject to tax. The taxability of various types of income is discussed below. For a table outlining the taxability of income.
Employment income. Taxable income from employment includes all salaries, regardless of the taxpayer’s nationality or the place where the compensation is paid or the contract is concluded. In general, taxable compensation also includes most employer-paid items, except moving expenses.
Educational allowances provided by employers to their local or expatriate employees’ children who are 18 years old or under are taxable for income tax and social security purposes.
Self-employment income. Self-employment and business income is taxable, regardless of the recipient’s nationality, the place of payment or where the contract was concluded.
Investment income. In general, dividends from Argentine corporations paid to residents or nonresidents are not taxable. However, if a company pays a dividend in excess of its accumulated taxable income, the excess is subject to a final withholding tax at a rate of 35%. Dividends from foreign corporations paid to residents are taxable. Royalties and income derived from renting real property are taxed as ordinary income. Interest is taxed as ordinary income, except interest from certain bank deposits in Argentina and Argentine government bonds, which is tax-exempt. Interest from bank deposits paid to nonresidents is exempt from Argentine tax only if the income is also exempt from foreign tax.
Directors’ fees. Directors’ fees are taxed as self-employment income to the extent that they are deducted by the payer company (allowable up to the greater of 25% of book profit or ARS 12,500 per director per year). The portion of fees not deductible at the corporate level is not taxable to the director if the amount of the company’s income tax increases by an amount equal to the tax attributable to the directors’ fees. Directors’ fees paid by Argentine companies are considered Argentine-source income, regardless of where the services are performed.
Taxation of employer-provided stock options. Stock options granted to employees are deemed to be payments in kind and are therefore subject to income tax and social security withholding.
Taxable income is recognized at the time the option is exercised in an amount equal to the difference between the strike price and the fair market value of the stock on the date of exercise.
Capital gains. In general, capital gains are exempt from income tax, with certain specific exceptions.
Deductions
Deductible expenses. For purposes of computing tax to be withheld from an employee’s salary, employers may deduct certain allowable expenses, including the following:
- Mandatory social security contributions
- Medical insurance payments for employees and their families, with certain limitations
- 40% of invoiced medical expenses up to a maximum of 5% of the taxpayer’s annual net income
- Expenses incurred by traveling salespeople based on estimates established by the tax authorities
- Donations to the government and certain charitable or nonprofit institutions, up to 5% of net taxable income
- Burial expenses, up to ARS 996.23 annually
- Life insurance premiums, up to ARS 996.23 annually
- Mortgage interest, up to ARS 20,000 annually, for the purchase of a dwelling destined to be a permanent abode
- Tax on Bank Debits and Credits, subject to certain limitations
- Contributions made to Mutual Guarantee Companies (SGRs; special companies that guarantee loans)
- Compensation and employer contributions related to domestic help personnel, up to ARS 12,960 annually Self-employed individuals may deduct expenses incurred in producing income, in addition to the expenses listed above.
Personal deductions and allowances. Employed and self-employed individuals are entitled to standard deductions in amounts established by law. The amounts for 2011 are ARS 14,400 for a spouse, ARS 7,200 for each child and ARS 5,400 for each other dependent. To qualify, dependents must reside in Argentina for more than six months in the tax year and may not have income in excess of ARS 12,960.
A deduction of ARS 12,960 is granted to taxpayers who are resident in Argentina for longer than six months during the calendar year.
A special deduction is available against compensation derived from personal services. The annual amount is ARS 62,208 for employees and ARS 12,960 for self-employed persons.
Nonresidents residing in Argentina longer than six months in a calendar year may claim the deductible expenses actually incurred and exemptions available to residents.
Nonresidents residing temporarily in Argentina, that is, for six months or less, are subject to final withholding tax. A standard deduction of 30% of compensation is allowed for expenses incurred in earning income. The remaining 70% of compensation is taxed at a flat rate of 35%, with no other allowable deductions or exemptions, resulting in an effective withholding tax rate of 24.5%.
Relief for losses. Business losses of self-employed persons may be carried forward for five years. Foreign-source business losses may offset foreign-source income only.
B. Other taxes
Transfer tax. Sales of real estate are subject to transfer tax at a rate of 1.5% on the sale price.
Personal assets tax. Individuals with total assets subject to tax of up to ARS 305,000 are exempt from the personal assets tax. Individuals domiciled in Argentina with assets totaling more than ARS 305,000 are required to pay the personal assets tax for 2011 at the rates listed in the following table.
Total value of taxable assets
Exceeding Not exceeding Rate
ARS ARS %
305,000 750,000 0.50
750,000 2,000,000 0.75
2,000,000 5,000,000 1.00
5,000,000 — 1.25
Under the Substitute Taxpayer Regime, individuals domiciled in foreign countries are subject to personal tax on Argentine assets only at a rate of 1.25%. In this case, the minimum of ARS 305,000 does not apply.
Liabilities, other than those incurred for the purchase, construction or improvement of a taxpayer’s home, are not deductible for purposes of the personal assets tax. A tax credit is allowed for similar taxes paid abroad.
Expatriates residing in Argentina on work assignments for a period not exceeding five years are considered to be domiciled in Argentina but they are taxed only on personal assets located in Argentina.
C. Social security
Contributions. Social security contributions are paid by employees, employers and self-employed persons.
Employees. Employees’ social security contributions are withheld from their monthly salary.
Employees make contributions to the Pension Fund at a rate of 11%, to the Retiree’s Fund at a rate of 3% and to the health-care system at a rate of 3%. The maximum monthly tax base for the calculation of these contributions is ARS 11,829.21 for January 2011 and February 2011 and ARS 13,879.25 from March 2011 through December 2011. Monthly salary that exceeds the maximum tax base is not subject to contributions. For this purpose, a year comprises 13 months.
Employers. Employers pay social security contributions at a rate of 21% or 17%, depending on the company’s activity and turnover (amount of sales). A 6% contribution for medical care is required in addition to the social security contributions. The tax base for employer social security contributions and health care contributions is not capped.
Other. No employee or employer social security taxes are payable with respect to directors’ fees. However, a director must pay fixed monthly amounts that are allocated to the social security’s Self-Employed System.
The social security tax law provides an exemption for all professionals, researchers, scientists, and technicians who are contracted outside of Argentina to render services in Argentina for a period of not more than two years. The individuals must have a temporary residence, be covered by the social security system of their countries, and provide evidence of their technical qualifications as well as of their coverage for death, disability and old age in their home countries or countries of residence. This exemption is
available only once and, after being granted, it is in force from the date of the application for as long as the conditions for the exemption are met.
Self-Employed System. The social security tax law provides an exemption for all professionals, researchers, scientists, and technicians who are contracted outside of Argentina to render services in Argentina for a period of not more than two years. The individuals must have a temporary residence, be covered by the social security system of their countries, and provide evidence of their technical qualifications as well as of their coverage for death, disability and old age in their home countries or countries of residence. This exemption is available only once and, after being granted, it is in force from the date of the application for as long as the conditions for the exemption are met.
Totalization agreements. Social security taxes for nonresidents are collected as outlined above. However, both the employer and the nonresident employee may be exempt from contributions to the Argentine pension fund if certain conditions are met. To provide relief from double social security taxes and to assure benefit coverage, Argentina has entered into totalization agreements with the following countries.
Brazil
Paraguay
Southern Common Market
Chile (a)
Peru (b)
(Mercado Común del Sur, or MERCOSUR) countries
Colombia (b)
Portugal
Greece
Slovenia (b)
Spain
Italy
Uruguay
(a) This treaty is partially in force.
(b) This treaty is not yet in force.
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We have been preparing US income tax returns for US Citizens and permanent residents living in Argentina for over 15 years. As a US Citizen or permanent resident (green card holder) you are required to file a US return each year regardless of the fact that you file and pay taxes in your residence country. The expatriate earned income exemption ($100,800 for 2015) can only be claimed if you file a timely tax return. It is not automatic if you fail to file.
We have scores of clients located in Argentina and know how to integrate your US taxes into the local income taxes you pay. Any income tax you pay there can be claimed as a dollar for dollar credit against the tax on your US return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the Argentina tax fiscal year for US tax purposes). You must pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these forms or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
There are certain times you may wish to make elections with respect to your Corporation or Investment Company which will give you US tax benefits. There are other situations where forming a US corporation to receive your business income may be more advantageous than using a corporation in your resident country. We can help you with these decisions.
If you are self-employed, you will have to pay US self-employment taxes (social security). If you are a bona-fide employee you do not have to worry about paying US social security on your wages earned in Argentina.
We have helped hundreds of expats around the world catch up because they have failed to file US returns for many years. Unfortunately, unlike India, Canada, UK, etc. you must also file so long as you are a US citizen or resident. You can if you follow proper IRS and State Department procedures surrender your US Citizenship and therefore cut off your obligation to pay US taxes in the future. You must surrender that Citizenship for non-tax avoidance reasons and then can usually not return to the US for more than 30 days per year for the subsequent ten years.
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