Buenos Aires Technology District: An Interesting Option for Tech Companies

Today I met with Carlos Pirovano, the Undersecretary of Investments for the City of Buenos Aires to learn about the Buenos Aires Technology District. The district is a 200 hectare zone that circles Parque Patricios.

Objective of the Technology District
The goal of the district is to revitalize the area surrounding Parque Patricios, which is an area that the undersecretary said has been targeted by Macri's government as a zone they want to focus on. Although they said they are not in competition with the technology park in the Province of Buenos Aires, I'm sure that the city doesn't want to lose technology jobs to the Province.

Benefits
Tech companies that move into the district are given a 10 (multinationals) or 15 (small businesses) year exemption from payment of most city taxes, including municipal taxes (ABL), sales taxes (ingresos brutos), and stamp taxes (impuesto de sellos). In fact, the district's largest company, Iron Mountain, was able to take advantage of the benefits even though they didn't actually move into the district. The district was actually created around their preexisting offices.

Who Qualifies
Just about any technology company will qualify, but only technology companies. As long as 51% of the company's income is related to technology, the company will qualify for the benefits. This means -- software development firms, hardware companies, technology education companies, internet companies, and even retailers that sell online (as long as 51% of the company's income comes from a website and not a physical store location).

Every technology company qualifies, no matter its size. The district already has companies with as few as 4 employees and as many as 1400.

Progress
The law become active in June of 2009 and there are already 22 companies operating in the district, most notably TATA, Iron Mountain, and Clarin Global. There is a lot of interest, however. At today's meeting with the undersecretary there were 11 companies present, including Oracle. According to the Ministry of Economic Development, in addition to the 22 companies already in the district there are currently 35 companies looking for offices with the assistance of Ministry and they are receiving 150+ inquiries every week. So, it looks like 2010 will be an important year for the district.

My Impressions
I have to say that the project appears very intersting and I am going to consider it seriously. My software company's office rental contract expires soon and we need to either renew or move anyway, so it will be an interesting option for us to consider.

I was impressed with the representatives for the technology district and how they help the companies through the process of registering. Each company is assigned to a specific investor representative who has an email address and phone number and can help your company through the process. Anyone who knows anything about doing business in Buenos Aires knows that this is very rare. Usually interactions with a government entity mean going to some faraway office, standing in line for 2 hours and then being told that you're missing a paper and have to leave and come back later and repeat the process.

The undersecretary told me that after submitting the documentation, they will review it and give you a yes or no answer within 5 days as to whether your company will qualify. If you qualify, they put you on a "pre-approved" list. After you're on this list, you then just need to go and rent or buy a property within the district and submit your rental contract or title. After that, within 15-30 days you'll be given notification from the city tax office that you've been granted the exemption from city taxes.

Given that this is Argentina, I have to say that it is a very efficient process. The national software promotion law can take 9 months - 1 year to qualify for and it is much more difficult for the companies to prove that their activities fall within the scope of the law. How do you prove that your business qualifies for the city? Simple, you sign an affidavit stating your company's line of business. That's it. They review your statement and will decide whether your business fits within the law, but it all seemed very simple.

I would suggest anyone that is looking for more information to contact the City of Buenos Aires' Center for Investors to receive the details directly. They have representatives who speak English and are perfectly equipped to attend to international investors.

Buenos Aires Technology District: An Interesting Option for Tech Companies

Overview of the Monotributo System

Monotributo - An Excellent Tax System For Sole Proprietors
This post will cover the monotributo system, a special parallel tax system that frees the sole proprietor from having to comply with the complex federal tax system Argentina imposes on businesses. A business owner starting out as a sole proprietor in the general system needs to pay the following federal taxes: autónomos (a monthly social security tax for independent workers that covers health and retirement), VAT (on a monthly basis), and income tax.

Four Federal Taxes In One
The monotributo system allows self employed people to avoid the complications of paying these taxes each month and, instead, use an alternate system which requires the payment of a fixed monthly tax, which varies depending on three variables: gross annual receipts, the physical space occupied by the business, and annual electricity consumption. In almost all cases, the monotributo system will result in the sole proprietor paying less taxes.

Enrolling in Monotributo
To enroll in monotributo, the taxpayer will need a DNI, a CUIT, and will need to complete AFIP form 183/F. If you don't have a CUIT, you can apply for one at AFIP while you are there to enroll in monotributo. If you do not yet have your DNI, you will need to bring a certificate from the Dirección Nacional de Migraciones which has your file number and states your residency status. If you don't have a visa which gives you work authorization, you won't be able to enroll. So, the first step for expats looking to enroll is to make sure you have your visa in order.

Choosing a Category
The taxpayer will need to enroll in one of the 13 monotributo categories, depending on the type of business activity that he or she is engaging in and based on the three variables discussed above. Categories A-E are for service businesses, while cateogories F-M are for retail and manufacturing type businesses. The table is listed on this AFIP page. All values are listed in pesos.

Recategorizing
If you start a retail shop and, based on the size of your store, you fall into Category I, for example, you will need to recategorize if one of the variables listed in the table above is exceeded. For example, if your monthly sales exceed $4000 pesos, you will need to move up a category.

Recategorizing can be done three times per year between the first and the seventh of the month in January, May, and September. This can be done online through the AFIP web page.

Resigning from Monotributo
Make sure to resign from the monotributo system if you no lnoger operate your business. Stopping the monthly payments is not enough. If you don't resign, you will accumulate debt with AFIP and the interest rates and penalties for non-payment are rediculous. It is the equivilent of owing money to the mob.

If your business becomes successful and you start earning above and beyond what is permitted by the monotributo system, you will need to resign from the system and join the general system (VAT, income taxes, autónomos, etc).

Overview of the Monotributo System

Settling Employee Conflicts in SECLO

I sometimes think the employee/employer relationship in Argentina is set-up to deliberately generate conflicts. As an employer, you will find that it is only a matter of time until these labor conflicts rear their ugly head. When they do occur, the best option is to resolve them quickly, removing the employee and ensuring that the employee's legal options are limited.

As any employer in Argentina will tell you, labor conflicts are expensive. I know Argentines who have purchased apartments with the money they have won in labor disputes. Worse yet, every employee knows that the labor court judges are on their side and that employees win well over 90% of labor lawsuits.

After deciding to remove an employee, if you can come to an arrangement with him or her, a good option to use is the Labor Ministry's SECLO (Servicio de Conciliación Laboral Obligatoria) service. You will need to put the agreement in writing, fill out a form to request a date, and go personally with the employee to the Labor Ministry at Callao 110. Both the employee and the employer should be represented by council. In practice, two lawyers from the employer should be used to avoid complications. If you allow the employee to bring his own lawyer, you're just opening a door to further claims.

At the end of this process, the Labor Ministry will endorse the signed agreement and it becomes equivalent to a court judgment. The employer is obligated to pay the amount agreed upon and the employee gives up his or her right to any future legal remedies against the employer. It is important to note that the employer never admits to any kind of guilt or responsibility in these agreements, so they cannot be used as proof for other claims by third parties (i.e. the tax office, social security agency, other employees, etc).

Settling Employee Conflicts in SECLO