This GMS Flash Alert reports that since coming into office just four weeks ago, the new Argentine government has eased the former government’s strict controls on currency, which may impact international assignees banking affair and cost allocation between Argentine and foreign employers.
The new government of Argentina, which took office on December 10, 2015, has adopted important measures to streamline and boost the country’s economy, among which, eased controls on foreign currency transactions.
According to new regulations1, not only foreigners working in Argentina will be able to buy foreign currency and wire funds outside the country, but also foreign entities that make payments on behalf of the host location will be able to invoice to Argentina the reimbursement of expenses, etc. This easing of financial restrictions could impact the structure of assignee compensation and compensation arrangements (allocation of costs) between home country and host country entities.
The former government had placed strict controls on currency and trade, and imposed heavy taxation beginning in November 2011, as means of protecting the country's low foreign currency reserves. (For prior coverage, see Flash International Executive Alert 2012-139 (July 23, 2012).)
In a move that complicated assignments of foreigners to Argentina, Argentina’s Central Bank issued a rule2 that prohibited individuals and companies from purchasing foreign currency (with some exceptions).
Payments of compensation made on behalf of Argentine entities by foreign entities were also considered as financial debt with the consequence that funds were subject to mandatory settlement in the foreign exchange market.
Furthermore, since payments representing expenses reimbursements were not allowed, foreign entities could not transfer costs into Argentina (allocation of costs were limited to only a few cases and specific situations).
This was an issue between entities. If the foreign company had made payments, on behalf of the Argentine entity, the charge could not be allocated because if an invoice were received by the Argentine entity, not only could it not be paid, but, in addition, there would be an infringement of the law with respect to the funds tied to the financial debt in Argentina.
Since coming into office just four weeks ago, the new government has eased the former government’s strict controls on currency. Below we highlight some of the main measures that will impact international assignments.
1 Communication “A” 5850 issued by the Argentine Central Bank.
2 Communication “A” 5318 issued by the Argentine Central Bank.
For further information or assistance, please contact your local GMS or People Services professional or Adriana Laurino (tel. +54 11 4316 5784 or email@example.com) with the KPMG International member firm in Argentina.
The information contained in this newsletter was submitted by the KPMG International member firm in Argentina.
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