International taxation FX

International taxation in Argentina and FX

The ITL has a comprehensive domestic regime for dealing with FX fluctuations in the computation of the cost of property and services and the measurement of revenue and income. For tax purposes, foreign currency transactions follow the method of yearly balance revaluation, for any sort of asset or liability. FX gains or losses should also be recognized when they arise from the entry of foreign currency into the country or when they are disposed of in another way. In general, FX gains or losses are deemed a financial result of the fiscal year to which they belong, without affecting the cost or sale price of the transaction that originated them.

The taxation of Argentine residents on their foreign source income varies according to the type of outbound investment. There are specific rules depending on whether the investment was made in a foreign corporation, a partnership, or through a PE or if it was a direct investment. The ITL also has a set of rules to deal with FX of foreign source that are similar to the treatment of FX of Argentine source.

Argentina has a long tradition of regulations, controls and restrictions on foreign trade and financial transactions. The system was enforced by the BCRA. During the 1990s and the convertibility period, FX controls were abandoned. After the repeal of convertibility and following a short period when the official exchange rate (at a rate of USD1 = 1.40 peso) was combined with a free rate, in February 2002, the government established a single free exchange market. Since then, the exchange rate has fluctuated freely based on market forces, including purchases and sales by the BCRA.
As of today, FX restrictions on cross-border financial transactions that were enacted as a part of the original exchange controls have been eased considerably.

There are no restrictions on cross-border transfers for dividends and profit remittances. Principal and interest payments of financial obligations may be made freely, provided the debt has been reported to the BCRA, the debt proceeds have been transferred into Argentina and converted into pesos and payment occurs at least 365 days after those proceeds entered Argentina. A peculiarity of the foreign exchange regime is that a 30 per cent mandatory deposit with a bank in Argentina in a non-interest-bearing account for 365 calendar days is imposed on any income funds from abroad (i.e. loans granted by foreign residents).