22 June 2009

Argentina Foreign Branch Offices (Sucursal de Compañía Extranjera)

The foreign branch office (Sucursal de compañía extranjera) is an attractive option to use for investing in Argentina, since it typically allows the head office to take advantage of foreign taxes paid in the form of direct foreign tax credits. Nevertheless, the procedure for nationalizing a foreign company so that it may operate in Argentina is complicated and requires quite a bit of paperwork, much of which must be updated annually. Once a company has been nationalized, it pays tax only on Argentina-source income. The procedures to nationalize a company are, in short:
  • Present the articles of incorporation, bylaws, and any amendments
  • Prove the company is valid by presenting the certificate of incorporation or certificate of formation in the company’s home country
  • Appoint a legal representative in Argentina (this must be a physical person legally resident in Argentina)
  • Prove to the IGJ that the company has no restrictions to operate in the country of origin (i.e. make sure the company isn’t an offshore company that isn’t allowed to operate in the country of incorporation)
  • Prove to the IGJ that the company has branches, fixed assets, and other business dealings outside of Argentina (i.e. no shell companies permitted)
  • Provide identifying information to the IGJ of all shareholders of the foreign company (i.e. no anonymous shareholders, bearer shares, etc.)
After the company has been registered, it may operate within Argentina, form an Argentine subsidiary, or invest in an Argentine company. Branch offices must have:
  • Capital: There is no specific capital requirement for branch offices. A few specific exceptions to this rule exist for financial services companies.
  • Directors: An Argentine resident must be appointed as the legal representative of the foreign company to operate the local branch.
  • Books: The branch must maintain separate books from its headquarters and file annual financial statements.
One huge benefit for US investors who invest in Argentina using branch offices is that due to the fact that these entities are not separate from the US head office, they file a consolidated tax return in the US using the same tax id number. It also saves investors from having to enter into the complicated Controlled Foreign Corporation tax rules that are designed to stop multinationals from shifting profits to tax haven countries.

Investors from other countries will likely avoid their home country's complex set of international tax rules by forming branch offices to operate in Argentina. On the downside, it is much more difficult and costly to register a branch office due to all the paperwork that must be sent from the home office, translated, certified (with apostilles), and presented to the IGJ.

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