24 August 2009

Careful About Buying From Monotributistas

Beginning in September, companies will be required to carefully control their purchases from monotributistas. A new retention regime put in place by AFIP, Argentina's tax agency, turns every company into agents for the tax man. The new requirements involve inspecting whether the monotributista has exceeded the limits of the category he has enrolled in and, that being the case, the company is required to prepare a tax retention certificate using SICORE (after having done the paperwork to join the retention system). Uggghhh!

And what happens if the company doesn't do the tax retention? It'll be on the hook and owe penalties for the amount they should have retained.

Practical Effects
After this change goes through (scheduled for 1 September 2009), it'll be even more difficult to deal with monotributistas. When buying from monotributistas, companies already have roadblocks placed in their path that prevent them from earning any VAT credit on the purchase (all monotributistas are treated as final consumers and thus don't manage VAT credit) but the expense also cannot be deducted from the company's income taxes unless certain conditions are met.

Now with this new regime in place, companies will have to control their payments and retain taxes. I can tell you from experience with the SICORE program, that it is not designed for regular users. It is made with accountants in mind and it is not easy to use. That means any kind of purchase from monotributistas will require a phone call to the company's accounting department or external accountant to verify whether a SICORE retention certificate will need to be prepared.

What Will Happen in Reality
The net effect of all of this is that small companies will not want to accumulate any more payments to monotributistas. They'll just stop asking for invoices and make payments in cash (en negro as they say here). Companies that make all their payments officially will only deal with monotributistas if they are key providers and cannot be replaced.

In the case of providers who are not key to the company's operation, they'll switch for providers who can emit "A" invoices.

Consequences for Monotributistas
The main consequences of this new change is that it makes it a lot more difficult for monotributistas to provide services to companies. Monotributo still remains an interesting option for small businesses selling to the public at large, but selling to companies just got a lot more difficult.


  1. Oh boy, they really do what they can to punish anyone working "en blanco".

    About the effect of IVA on Monotributistas (factura C) vs Inscriptos (factura A), I would say it depends on the type of business. A service provider with a large profit margin should be able to offer lower prices when working as Monotributista, compared to a Responsable Inscripto who needs to add IVA to his prices. Therefore he can still be competitive even if his clients cannot get any credit on IVA when dealing with him.

    On the other hand a retailer with small profit margin (i.e. significant purchasing costs) would not be able to offer lower prices when working as Monotributista, since he would not be able to get any IVA credit on his own purchases. So in that case working as a Responsable Inscripto is an advantage when many clients are companies (Responsables Inscriptos).

    But with the new retention regime you describe in your post, it seems that in the future even service providers with large profit margins will be better off working as Inscriptos when their clients are mainly companies.

  2. Do you know if this change will affect English teachers who submit facturas to institutes or their clients at the end of each month?