The second-largest economy in South America (behind Brazil), Argentina has experienced political and economic turbulence through most of its history, but still represents an exciting destination for international companies to do business. Famous for its beef production, the vast landscape means agriculture and energy are the cornerstones of the Argentinian economy.
Its population of around 36 million is highly literate and educated, and as Spanish speakers, enjoy strong linguistic links with Europe and the rest of the Americas. In recent years, businesses in the United States have taken a particular interest in Argentina: exports from the U.S. to Argentina rose by 46% between 2009 and 2018.
If your organization is exploring expansion into Argentina, it can be hard to know where to start from a payroll perspective. This guide explores the most important facts around payroll in Argentina.
The first step of the somewhat complex process of starting a business in Argentina is to decide which type of corporate entity to establish. There are four options: corporations (S.A.), limited-liability partnerships (S.R.L.), foreign branches and general partnerships, although the latter rarely applies to foreign businesses. The required start-up capital varies between each of these: foreign branches need no start-up capital, S.R.L.s require at least US$300 (approx. £215, €250) and corporations require at least US$7500 (approx. £5400; €6300).
The multitude of procedures that must be completed as part of the set-up process include:
- Company name verification with the Office of Corporation
- Certification of partner signatures
- Deposit of at least 25% of initial capital with National Bank of Argentina
- Publish company notice in Boletin Oficial
- Have company books ‘rubricated’ by General Inspection of Justice
- Obtain a Fiscal Code and a Tax Identification Number from the National Tax Office
- Register for local ‘turnover tax’ and with the Social Security System (SUSS)
- Take out employee insurance
- Rubricate wage books with the Ministry of Labor
While this is a complex process that can take a number of months, the good news is that the fees involved at each step are small, and so the process as a whole is not an expensive one.
Argentina is one of the few countries that gives a full scope of employee rights to all employees regardless of contract type. It also limits the tenure of fixed-term contract workers - they may be hired for a maximum of 5 years. Temporary workers have a 6-month maximum stay. Companies are often rewarded for hiring previous unemployed or disabled people.
Because the labor laws are so comprehensive, written contracts are not actually a legal requirement for full-time employees. To comply with the laws, employers should register employees in their labor books and for taxation, and conduct all salary, tax and social security requirements. Collective bargaining is common in Argentina and can even be applied to individual companies as well as whole industries.
Working hours are typically limited to eight hours per day (the afternoon ‘siesta’ is still generally observed outside Buenos Aires) and 48 hours a week. A number of exceptions apply to these rules, and reductions are in place for work deemed unhealthy or that takes place at night. Overtime is limited to three hours per day, 30 hours per month and 200 hours per year; overtime pay is 150% of normal rate, rising to 200% for work after 1pm on Saturdays or at any time on Sundays or public holidays.
Compensation, Bonuses and Severance
As of March 2021, Argentina maintains a minimum wage of 21,600 Argentine pesos per month (approx. £170; $235; €200) regardless of the age or experience of the worker. Full-time employees are also entitled to Annual Extra Pay (SAC) of one extra month of salary, paid in halves at the end of June and the end of December.
Bonuses are common in the tech and finance sectors of Argentina. Bonuses are initially given at the discretion of the employer; however, once established, they can become a mandate by law. Companies should be sure to detail exactly what bonus policy will be within a company in employee contracts, as bonus payouts have been the basis for many legal claims in Argentina.
Argentinian companies can terminate employment for any reason at any time, but are required to remit severance pay to anyone with at least three months of service. Severance should be paid at one month’s salary per year of employment, at the highest rate they earned during the course of their tenure.
Tax and Social Security
Income tax in Argentina is applied progressively across nine bands. The lowest of 5% applies to the first ARS 64,532.64 (approx. £500, $700, €600) of annual earnings. The highest of 35% applies to earnings in excess of ARS 1,032,522.30 (approx. £8,100; $11,300; €9,500). Non-residents are charged on their income sourced in Argentina at the same rates.
The corporation tax rate in Argentina has been cut from 30% to 25%, effective from new financial years starting after 1 January 2021. VAT, applicable on the sales or imports of most products and services, is currently 21%.
Social security contributions are made by both employers and employees in two areas:
- Pension/family allowance/social services: 19.5% employer, 14% employee
- Social health: 6% employer, 3% employee
Holidays and Leave
There are 16 days of public holidays in Argentina each year; when the days of these fall in midweek, the day off is often moved to the nearest Friday or Monday to make for longer weekends.
Paid leave entitlement starts at two weeks after six months of service, increasing to three weeks after five years, four weeks after ten years and five weeks after 20 years. Employees are also entitled to receive ten days of continuous leave after getting married. The death of an immediate family member entitles an employee to three days’ continuous leave, and one day for a sibling. If an employee has a school exam, employers are required to give two continuous days’ leave with a maximum of 10 days per year.
Maternity leave is 90 days for female employees. This is normally 45 days either side of the birth, although employees can choose to take 30 days pre-birth and 60 days post-birth if they wish. Maternity leave is paid by the Argentine social security system. Paternity leave is two days after birth, although an extension to this is being considered by the Argentine authorities at the time of writing.
Sick leave is generous in Argentina. If an employee has worked for a company for less than five years continuously, they are entitled to a maximum of three months paid leave. This extends to six months paid leave if they have been on the job for five continuous years or more. The employer must also keep the position open exclusive for that employee for up to 12 months, and that employee has the right of first refusal for the position. Severance pay rules apply if employers are unable to do this. The payment of sick pay is covered by the employer, although employment risk insurance (which is compulsory for employers to have) covers any treatment, sick pay or rehabilitation for accident, injury or illness that is work-related.
For the right businesses, the opportunities for a successful expansion into Argentina are exciting. However, a complex business set-up process and similarly complicated rules around income tax and paid leave can make it difficult to establish and maintain compliance with regulations. This is where an investment into a global payroll solution can pay off, helping to ensure that you have all paperwork properly filed and logistics handled from day one.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.