Argentina: New government eliminates restrictions on cross-border transfers, export duties

Argentina: Eliminates restrictions on export duties

Argentina’s newly elected government on 17 December 2015 adopted measures that are intended to stabilize and boost the Argentine economy. The new measures affect a policy introduced in 2011 by the former government that imposed strict currency controls, trade protectionism, and heavy taxation.

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Measures eliminating restrictions on cross-border transfers, revising export duties, unifying exchange rate

The new government’s measures provide for the following:

  • Export duties are eliminated, except for certain products. 
  • No prior approval from the tax authority is required to make cross-border transfers of funds.
  • Effective 17 December 2015, a single exchange rate applies to all cross-border transactions, allowing the Argentine peso to trade with a “managed float,” and with the Central Bank administering the exchange rate.
  • Restrictions on cross-border transfers to pay liabilities and investments abroad are reduced or eliminated. Corporate bonds accumulated over the past four years may be paid-off under a new program set forth by the Central Bank. In addition, the government announced that corporate bonds may also be cancelled through a bond, to be issued by the government.
  • Proceeds from new financial loans by non-residents to Argentine residents may be kept abroad. 
  • Principal loans, transferred to Argentina, may be repaid within a term of 120 days from the transfer.
  • The 30% mandatory deposit on foreign currency inflows rule is withdrawn.
  • Limits on repatriated amounts qualifying under the foreign portfolio investments are removed. Nevertheless, a minimum holding period is required. Beginning 17 December 2015, Argentine companies may purchase dollars on the foreign exchange market in order to settle future intercompany debts for imports of goods, services, and royalties. Intercompany payments of royalties and services no longer require prior authorization from the Central Bank. Access to the foreign exchange market to pay past imports of goods, services, and royalties is subject to quantitative limitations (to be released in June 2016). The possibility of making cross-border intercompany payments will allow Argentine companies to deduct the expenses for income tax purposes.
  • Debt owed to nonresidents (e.g., loans, bonds, lines of credit) is no longer subject to mandatory settlement in the official foreign exchange market (i.e., the borrower may choose to keep the funds disbursed by the lender in a foreign currency). However, if the borrower does not settle the funds in the official foreign exchange market, it will not have access to the official foreign exchange market to pay the interest and the principal on the indebtedness. In addition, debt is no longer subject to the 30% 365-day mandatory deposit (encaje) requirement.
  • Argentine companies and individuals will have access to the foreign exchange market to purchase foreign currency to fund foreign accounts (e.g., domestic savings in foreign currency, deposits in foreign bank accounts), up to U.S. $2 million per month.  

Reduction of export duties

Export (taxes) duties on crops, including corn and wheat, are eliminated. The soybean tariff was reduced by five percentage points. This policy change is expected to encourage farmers to release their crops and thus result in an increase in agricultural shipments.

Unification of exchange rate

Argentina will have one official currency rate, determined by the Central Bank in a “managed float” regime. This single exchange rate is expected to eliminate market distortions arising from the multiple rates over the past four years. While fluctuations in the exchange rate may be expected, it is also anticipated that the Central Bank will have the ability to manage effective currency stability. 

Cross-border transfers

Restrictions on outbound payments—dividends, royalties, services, imports of goods—are lifted. There are no limitations to acquire foreign currency to settle new liabilities. 

In paying off accumulated corporate bonds, Argentine residents will be subject to a program managed by the Central Bank, applicable until June 2016. Beginning June 2016, no limitation will apply to payments of corporate bonds.

Individuals and companies are allowed to purchase up to U.S. $2 million per month to make direct and portfolio investments abroad, as well as to keep such currency in foreign or domestic bank accounts.

Foreign currency from financial loans

Foreign currency proceeds from loans may be kept in a foreign bank account. Nevertheless, the borrower will not be allowed to make payments of interest and principal using the domestic exchange market.

Removal of 30% mandatory deposit on foreign currency inflows rule

The measures remove the required 30% 365-day bank deposit in an Argentine financial institution for foreign currency inflows applicable to financial loans and portfolio investment and to direct investment that did not comply with certain requirements. 

35% tax surcharge on purchases made abroad

The measures repeal the 35% tax that is imposed on Argentine residents who purchase goods or services from abroad or purchased online using a credit card. The 35% tax is also eliminated on the purchase of foreign travel services made through Argentine travel and tourism agencies.

 

For more information, contact a tax professional with KPMG’s Latin America Markets Tax practice or with the KPMG member firm in Argentina:

Devon M. Bodoh | +1 (202) 533-5681 | dbodoh@kpmg.com

Alfonso A-Pallete | +1 (305) 913 2789 | apallette@kpmg.com

Juan Martin Jovanovich | (5411) 4316 5810 | mjovanovich@kpmg.com.ar

Karina Castellano | (5411) 4316 5794 | kcastellano@kpmg.com.ar

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