Argentina

KEY COUNTRY FACTS
System of government:	Republic
Population:	42.0 million (July 2014 estimate)
Currency:	Argentine peso (ARS)
FX regime:	floating rate with central bank intervention
GDP:	$484.6 billion (2013 nominal estimate)
IGTA member:	no
FATF member:	yes
Treasury association:	Instituto Argentino de Ejecutivos de Finanzas
Other professional financial/banking associations:	Argentine Banks' Association

Financial regulatory framework

Bank supervision

The central bank, Banco Central de la República Argentina (BCRA), is charged with the regulation, inspection and supervision of all financial institutions. At the same time, it is responsible for controlling money supply and financial stability.

Foreign exchange policy and regulation

The central bank frequently intervenes in the currency market and maintains substantial foreign exchange and import/export controls.

Office of the Comptroller of the Currency (OCC)

The OCC is responsible for the regulation of nationally chartered banks, including internet-based banks. It issues the national charters and monitors bank performance as well as loan credit quality ratings.

Exchange controls

• Capital inflows - according to Executive Order 616/05, dated 9 June 2005, Communications A 4359, A 4377 and B 8599 of the Central Bank, some transactions will be subject to a 30% non-remunerated mandatory deposit at the central bank for a period of one year, according to central bank rules and regulations (statutory interest-free deposit).
• Capital outflows - the A5526 Central Bank Communication revoked Section II of Communications 5318, providing that, as of January 2014, individuals are allowed to buy foreign currency for savings, reversing a restriction imposed in July 2012. Individuals registered with the federal tax agency (AFIP) who earn a monthly salary of over ARS 7,200 are permitted to buy up to USD 2,000 a month in foreign currency for the purpose of saving. A 20% tax applies on these purchases. The tax is not charged if the currency is left in a bank account for at least 365 days.
• Exporters have the obligation to credit their account for the total amount of the export invoiced (100%). Depending on the goods, different deadlines have been defined (BCRA Communication A5300).
• Collections - resident providers have the obligation to credit into their account the total amount of services collected within 15 business days from the date of credit of the funds (locally or into accounts abroad).
• Import payments - all imports can be paid in advance, at sight or deferred, for all kinds of goods. For payments in advance, importers have 365 days to prove the import was made and 90 days for payments at sight (BCRA Communication A5274).
• Payments - there are some services transactions that require the Central Bank authorisation (BCRA Communication A5295).
• Funds related to financial income from abroad are “freely available” and there is no requirement for settling in the FX market.
• Financial services transfers abroad (e.g. dividends) require closed and audited financial statements (BCRA Comm. A5264), but there could be some informal obstacles. Financial debts with non-residents must be settled in the FX market within 10 days (previously: 30 days; BCRA Com. A5397).

Taxation framework

The main business taxes are:

• Corporate income tax - this is levied on worldwide income at 35%, and income tax on individuals at progressive rates between 9% and 35%.
• VAT - currently at 21%, this covers most goods with the exception of food and some services. Interest expense is taxed at 10.5%. Consumers paying by debit card get a rebate on VAT of 5% of the tax amount.
• Gross receipts tax - collected by provinces at rates varying between 1% and 8%.
• The stamp tax rate is 1% on average.
• Export taxes - levied from 5% to 45% on all exports. Certain cases may be subject to rates below or above the range. Petroleum (and oil industry products) has a rolling scale, which starts up from a reference price.
• Import tariffs - on most goods outside the Mercosur Trade Union Agreement.
• Tax on all cheque accounts debits/credits - currently at 0.6% (1.2% roundtrip). Law 25413, dated 24 March 2001.
• Withholding tax - currently 0% to 35% depending on the transaction (interest, dividends, royalties, etc) and the other party involved.

Argentina has signed several tax treaties with countries in Europe, the US and Latin America. Treaty provisions mitigate the effects of double taxation. Local tax authorities apply the “economic reality” principle in tax accounting. Thin capitalisation, aggressive transfer pricing and other tax avoidance strategies are covered and subject to reversal. Although there are no restrictions on offshore investment, tax treatment of interest expense deductions is dependent on jurisdiction, with differential treatment in the case of tax havens. There are some restrictions on operating with tax havens. Income derived from countries with low or no taxation will be normally considered unjustified increases in wealth. However, the Administración Federal de Ingresos Públicos, AFIP, (Domestic Public Revenue agency) will justify only the income that the person can prove conclusively:

• originated in activities effectively pursued by the taxpayer or by third parties in those countries, or
• coming from funds effectively declared.

Banking service provision

The banking system as a whole was hit hard in 2002 by the combination of dramatic economic downturn and adverse regulatory action. Many banks were on the brink of insolvency, and huge shifts in confidence and market share have resulted. In February 2014, there were 66 banks and 16 financial entities (non-banks) with around 4,340 branches in Argentina. The system as a whole has been recovering with sound fundamentals and has experienced high profits in 2013. Special accounts in $ are available for companies. Saving accounts in $ are only available for individuals.

Clearing and payment systems

The overhaul of the Argentine payment system

Argentina's payment system was overhauled, going from a fractured paper-based system to a complex array of low and high-value electronic money transmission vehicles. While most payments in Argentina are in cash, about eight million cheques are cleared through the clearing house every month. Clearing cheques takes 48 hours country-wide. The Central Bank has developed a payments infrastructure based on five initiatives:

• second-day cheque clearing;
• second-day debit automated clearing house (COELSA) for utilities and other collections;
• second-day credit ACH for bulk and retail payments;
• end-of-day net settlement inter-bank payment system; and real-time online gross settlement system.

Institutions for these initiatives have different structures. Two competing clearing houses process retail payments with an eye on cost, while a single bank-run net settlement system manages most interbank payments, focusing on systemic risk control. And finally, the Central Bank runs the gross settlement facility.

• Cheques - cheques are cleared through the Clearing Compensation process, which was updated during 2005 and 2006. The services of Clearing Compensation cover the entire country. This is now processed automatically across the country in 48 hours.
• ACH/COELSA - in October 1997, a new system consisting of two automated clearing houses and an electronic interbank payment system began operating. At present, this is limited to cheques issued in local currency. ACH is owned by Provincial and Co-operative Banks, with COELSA owned by a consortium headed by Banco Nacion. Apart from cheque clearing, this system also includes direct debits and direct transfers.
• Medio Electronico de Pagos (MEP) - MEP is a mechanism for transferring in $ in domestic transactions, from bank to bank, in addition to local currency transfers. Same as ACH/COELSA and Interbanking.
• Interbanking - created in 1997, this Interbank Payment System has been designed to convert payments to a more efficient system. Interbanking offers the following domestic functionality: Datanet, an electronic multi-banking system that, among other functions, allows local transfers to be made and account movements and balances viewed; “Pagos AFIP” to pay federal taxes; etc.
• SWIFT - an international interbank net that supports international transfers, foreign currency cheques and new options to interchange information between banks and companies.

In the face of the 2001/2002 crisis, the electronic clearing mechanisms by and large held up and helped to reduce the effect of the freeze on bank deposits; transaction volumes, slowly growing before December 2001, have soared since.

Use of deferred cheques

One peculiarity of the payments environment in Argentina is the widespread use of post-dated cheques. Endorsing cheques and transmitting them through a chain of commerce started the habit of writing them with a forward date, despite the absence of legal support for this practice. Finally, the government recognised the ubiquity of this mechanism, mandating the existence of a maturity field on cheques. Consequently, in Argentine business, deferred cheques are perfectly legal IOUs handled by the banking system. Companies of all sizes are using deferred cheques for payments, giving rise for the need to issue them on the payment side, and to receive, manage, discount and clear the cheques on the collection side.

Collections

Firms and individuals have a habit of paying at the bank and collecting at the customer's place of business. Until recently, banks had many teller windows and long teller lines. Businesses had waiting rooms where suppliers waited for a cheque (and were often told to come back the next day). The basic collection service consists of specialised collection slips that customers use when paying in cash or cheques at the teller window, in respect of their commercial or consumer purchases of merchandise or services. The bank will collect the funds, prepare detailed reports and provide them to their corporate customers in electronic files. Besides large banks with an operating services franchise still have in-branch collection windows for their corporate customers, cheaper alternatives based on electronic funds transfer or direct debit are also available. Proprietary direct debit has been used by utilities for many years. With the creation of an ACH interbank debit facility, direct debit services are available for periodic collections related to services of all kinds. Due to the growing popularity of deferred cheques, banks have developed services that outsource the chore of managing portfolios of collected deferred cheques. Depending on the treasury needs of the customers, banks may hold the cheques to maturity, deliver them or immediately credit the discounted proceeds. Other payment and collection methods popular in other countries (e.g. lockbox) are not available due to the unreliability and high cost of postal services. The local automated teller machine (ATM) switches, called Banelco and Link (associated with Cirrus and Maestro respectively), provide several payment services, such as bill payments.

Bank connectivity

• A common electronic banking platform - corporations in Argentina use a popular service called Datanet. Forty-seven banks, covering the vast majority of banking relationships, participate in the system. This service allows subscribers to perform basic cash management tasks such as balance and transaction inquiries and the transfer of funds between accounts.
• Bank proprietary systems - several large banks offer an array of proprietary electronic connection services. Since Datanet is standard for cash management information delivery, most proprietary electronic banking systems are geared to providing special services, such as payroll payments, direct debit services and other payment and collection instructions. Some foreign banks offer integrated electronic banking platforms that provide access to accounts throughout Latin America.
• SWIFT - the international banking net commonly used in foreign trade operates with corporate companies to interchange information and transactional orders between enterprises and banks.

Cash and bank account management

Account conditions

Banks offer the usual complement of current accounts, savings accounts, certificates of deposit, etc. Different arrangements, however, exist to allow customers to optimise their use of funds. Since the enactment of the tax on banking transactions in mid-2001, the central bank has made savings accounts exempt from the tax, but has limited such accounts to individuals, forcing the closure of all company interest-bearing savings accounts. Argentine tax rules do not allow for non-resident accounts. Special accounts denominated in ARS are available for companies.

Money laundering

The Financial Information Unit (UIF) and the Central Bank of Argentina (BCRA) are the institutions in charge of supervising compliance with Money Laundering Prevention and Terrorist Financing regulations. The UIF operates as a functionally independent unit under the jurisdiction of the national Justice and Human Rights Ministry; it receives Reports of Suspect Operations from the subjects obligated to report which it analyses, processes and then transmits to the public ministry. It is entitled to impose penalties on obligated subjects. The BCRA and all financial institutions are among subjects obligated to report and are required to own a Handbook, carry out internal controls, train their staff and inform of suspect operations. As Bank Superintendent, the Central Bank must perform specific on-site inspections to verify bank compliance with Money Laundering and Terrorist Financing rules.

Netting, sweeping and pooling

Banks offer sweep accounts, zero-balance accounts and other concentration arrangements. Other cash pooling arrangements have not developed, because banking and tax regulations make them disadvantageous in most cases. Cross-border pooling is not practical due to foreign exchange restrictions.

Benchmark rates

Short-term reference rates used locally are:

• BADLAR - average rate stemming from a Central Bank survey of fixed term deposit rates for amounts over 1 million pesos with a maturity of 30 to 35 days; and
• BAIBAR - average rate from a Central Bank survey of interbank overnight borrowing rates.

Corporate finance

The Stock Exchange has not been widely used as a vehicle to provide financing/capital to companies. Argentina remains open to foreign investment. However, certain legal uncertainties concerning contract and property rights in Argentina, and the changing regulatory environment, have diminished the country's attractiveness for investors.

Websites

Government

• http://www.presidencia.gov.ar
• http://www.argentina.gov.ar
• http://www.gobiernoelectronico.ar

Ministry of Economy

• http://www.mecon.gov.ar/default_english.htm
• http://www.indec.gov.ar

Central Bank Banco Central de la República Argentina

• http://www.bcra.gov.ar

Asociación de Marketing Bancario de Argentina

• http://www.ambanet.org