The Rules for Remote Working in Argentina
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Know Before They Go
The global tendency of remote working combined with Argentina’s current economic distress makes the City of Buenos Aires a tempting destination for those who can live distant from their employer. Clients frequently consult us on remote work arrangements, and we thought this primer would be a useful first step toward understanding and planning for certain risks that may not be evident at first glance.
Low living costs in a vibrant, cosmopolitan city in a privileged time zone tempt employees and employers alike. The individual freelancer—the so-called “digital nomad”—who receives payments in cash, crypto, or a foreign bank account and stays “under the radar” might not think about anything more than entering the country on a recently created “digital nomad visa,” allowing the holder to work from Argentina for up to 180 days (with the right to extend one time for a like number of days) and making sure to have international healthcare coverage. But for the multinational employer seeking global compliance, the remote working arrangement for its employees becomes more complex. This article speaks to just such an employer.
Employment Considerations for Remote Working in Argentina
Argentina’s employment laws and interpretation are largely protectionist and slanted to favour the employee, presumed to be the weaker party. If a plaintiff says they were an Argentine employee, the defendant must prove they were not. As a result, failing to payroll an employee locally can prove a costly mistake.
Long-Term Remote Working
Whether one is an Argentine employee is a question of fact. If the employee worked for a sustained period in Argentina, the law generally finds a de facto Argentine employment that should have been registered. The failure to register exposes the employer to potentially significant penalties.
Generally, no remote employee wants to be an Argentine employee, which would mean paying Argentine income tax and, potentially, social security charges, and likely earning in local currency. That sentiment, however, often quickly changes once employment is terminated. At that point, Argentina’s statutory rules of severance (one full month of wages for each year of service) and fines payable to the litigant offer strong incentive to sue. This often comes as a surprise to foreign employers accustomed to the rules of at-will employment.
Short-Term Remote Working
For a short-term remote arrangement, the risk of a de facto Argentine employment relationship is negligible to non-existent. Employees coming for a week or two to work for their employer do not pose issues of non-compliance with Argentine employment law nor a credible basis for the employee to assert termination and other employment benefits under Argentine employment law. These persons do not need to register employment in Argentina or obtain a work visa for an employee looking to work for a couple of weeks in Argentina. The analysis becomes much more nuanced if the arrangement extends longer. Unfortunately, there is no statutory guidance to provide a bright line as to when, temporally, an arrangement would default to Argentine law. More than a month and at least some hypothetical exposure begins to accrue.
Tax Considerations for Remote Working in Argentina
Under current tax rules, foreign residents are subject to a 35% tax on their Argentine income. Suppose that person renders services for more than six months from Argentina for the benefit of a non-Argentine employer. In that case, this exposes the foreign employer to an increasingly significant risk of being considered a permanent establishment in Argentina. In that case, the employer’s net income from both Argentine and foreign sources should be taxed in Argentina.
Let us return for a moment to the remote employee in Argentina. Upon acquiring permanent residency or after a 12-month stay uninterrupted by absences of 90 days or less, that person becomes a tax resident. Upon becoming a tax resident, the remote employee becomes subject to Argentine income tax on worldwide income—subject to any applicable double-tax treaty—and to a wealth (“personal assets”) tax on all worldwide asset holdings.[1]
Once the remote employee stays long enough to be deemed an “Argentine” employee (which is not defined by the tax residency criteria of the preceding paragraph), that person (and that person’s employer) should be paying income taxes and, most likely, social security contributions to Argentina. The employer must withhold Income tax on wages at a progressive rate ranging from 5% to 35% plus an ascending sum.
Employers Beware
The Argentine government faces a complex challenge regarding the tax consequences of offshore employers and remote employees. Unless the foreign employee is assigned a government ID and a federal tax number, regulating and collecting taxes from that arrangement is difficult. Nonetheless, governments are catching up with the digital world in many respects.
To encourage local payrolling of employees in the tech industry, the Argentine Government is currently pushing a legislative initiative to create a “Technology Flat Tax” (Monotributo Tech). This tax would specifically target technology professionals and gamers in software development, professional services, biotechnology, nanotechnology, and the audiovisual industry. The initiative seeks to place domestic companies on a higher level footing with foreign competitors offering higher wages. The initiative proposes a special tax system on the salaries of individuals working for these foreign companies within Argentina.
In the meantime, foreign employers must be careful to avoid creating a de facto Argentine employment relationship, which could represent significant—often unknowing—exposure to the employer.
Footnotes
[1] The personal assets tax is levied as of December 31st of each year at a progressive rate ranging from 0.5% to 1.75% (0.7% to 2.25% for financial holdings) plus an ascending sum on total assets exceeding a specified sum. For 2022, that sum was AR$ 11,282,141.08.
Know More
For more information on Argentine employment law, contact analvanti@wsclegal.com; for questions on Argentine tax law, contact areyes@wsclegal.com. Special thanks to Camilla Russo, a law student at the University of Indiana Mauer School of Law, for her assistance in preparing this article.
The preceding article is a description of publicly available information. The report does not provide legal advice or a comprehensive analysis of the abovementioned matters.
Source: WSC
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