Expat Options to move to Argentina

[Texan]

Hey guys, nice to meet y'all...possible new expat for BA in a couple of months.

I'm in the midst of seeing if my company will move me down there from the US, had a few questions hopefully someone can help me with.

I work for a small UK company with a US local entity, which is for whom I currently work for. We do not have a local Argentine entity, so I would have to be hired locally by an HR firm I'd be working for if I obtain a work visa.

The main problem lies in the fact that the HR firm claims that even though my employer would pay for my benefits in Argentina through them, I would actually receive my salary outside Argentina in US dollars. The HR firm claims that my salary paid outside the US would incur income taxes in Argentina, which is non-ideal as Argentina and the US do not have a double tax treaty, so I'd end up paying taxes twice.

I am a dual citizen (US / Bolivia), so I've been told that the above problem can be circumvented if I emigrate to Argentina with a MERCOSUR visa and set up a monotributo, which would allow me to only pay taxes on just the portion of compensation that my company would pay inside Argentina (could be called salary, but would actually just be housing/school expat benefits).

Is this explanation correct? I don't want to get there and end up in any legal problems due to tax evasion. Then again, my company is not willing to pay taxes on the whole of my salary in Argentina and I wouldn't want to pay taxes twice, which risks my expat move from not happening at all.

Any suggestions, tips, or recommendations are highly welcome.

cheers,

IF

 

[Quilombo]

I'll give you a clear answer so you can decide whether you'd be comfortable doing this in either case:

Both scenarios mentioned require a form of tax evasion and violation of BCRA comunicación "A" 6770/19 which is illegal. Also if you make over $2,466.66 USD/month you can't be a monotributista, so you'd have to be lying about that too.

That being said, this happens all the time, and tens of thousands of Argentines are doing this. Doing things by the book in Argentina is not what smart people do here; only you can decide your comfort level for fraud/tax evasion, but keep in mind the entire economy of Argentina is underpinned by fraud, tax evasion, lying, over/underbilling, etc.

I don't condone nor condemn this behavior, I'm just stating the facts, the choice is up to you.

 

[Texan]

I'll give you a clear answer so you can decide whether you'd be comfortable doing this in either case:

Both scenarios mentioned require a form of tax evasion and violation of BCRA comunicación "A" 6770/19 which is illegal. Also if you make over $2,466.66 USD/month you can't be a monotributista, so you'd have to be lying about that too.

That being said, this happens all the time, and tens of thousands of Argentines are doing this. Doing things by the book in Argentina is not what smart people do here; only you can decide your comfort level for fraud/tax evasion, but keep in mind the entire economy of Argentina is underpinned by fraud, tax evasion, lying, over/underbilling, etc.

I don't condone nor condemn this behavior, I'm just stating the facts, the choice is up to you.

Appreciate the comments Quilombo, definitely a few things we'll need to iron out with the HR company. I did go through the BCRA memo you mentioned and wasn't quite sure what part did you refer to that we'd be breaking the law. The monotributo limit is crystal-clear however...

Any suggestions over how to approach a potencial setup for my expatriation?

 

[Quilombo]

Appreciate the comments Quilombo, definitely a few things we'll need to iron out with the HR company. I did go through the BCRA memo you mentioned and wasn't quite sure what part did you refer to that we'd be breaking the law. The monotributo limit is crystal-clear however...

Any suggestions over how to approach a potencial setup for my expatriation?

All people (physical or judicial) must pesify their income generated from sales abroad of both tangible and intangible goods via the MULC (official exchange rate) within 5 days of payment, si o si. This means that while being a tax resident of Argentina, you are legally obligated to convert your dollars you'd receive from your employer in to pesos, and if you didn't, you'd be breaking the law simply by having the dollars abroad and not converting them.

Like I said, tens of thousands of Argentines are doing this each month, almost all of the devs and programmers working remotely for US companies, so you'd have to be comfortable doing this too.

 

[Alpinista]

All people (physical or judicial) must pesify their income generated from sales abroad of both tangible and intangible goods via the MULC (official exchange rate) within 5 days of payment, si o si. This means that while being a tax resident of Argentina, you are legally obligated to convert your dollars you'd receive from your employer in to pesos, and if you didn't, you'd be breaking the law simply by having the dollars abroad and not converting them.

Like I said, tens of thousands of Argentines are doing this each month, almost all of the devs and programmers working remotely for US companies, so you'd have to be comfortable doing this too.

if he sets up a legal entity in the US, there would - also legally - no need to pecify the income. Or am i wrong?

 

[Quilombo]

if he sets up a legal entity in the US, there would - also legally - no need to pecify the income. Or am i wrong?

That's a form of tax evasion in itself if it's just to avoid pesification, but again, AFIP would need to prove it.

 

[Alby]

Any suggestions over how to approach a potencial setup for my expatriation?

In the absence of a double taxation treaty between the US and Argentina (and possibly even with the Bolivia/MERCOSUR angle), there is really no way of legally not paying the taxation liability that comes with being a tax resident of Argentina, that in turn comes with having completed 12 months of a temporary migraciones residency. As Quilombo is saying, lots of individuals evade tax. They seem to do it via one of the following strategies:

1. Living in denial by finding a way to keep the problem out of mind.
2. Convincing themselves that AFIP is not currently interested in (either now or in the future), or capable of (either now or in the future) chasing down the taxes they believe foreigners should be paying.
3. Acknowledging that AFIP may currently be interested in (or may become so in the future), or may currently be capable of (or may become so in the future) chasing down the taxes they believe foreigners should be paying, while doing a personal risk assessment (which may be well researched or poorly researched) that in their particular case the chances (and penalities) are worth taking a punt on if they can set the paper trail up in such as way that, in the worst case, there is plausible deniability.

The point Quilombo is, I think, making is that it's a psychological game you will have to play with yourself. Can you live with the uncertainty that comes from operating at the margins of the taxation law? If you are risk-averse, you either abandon your plan to migrate to Argentina or simply pay double taxation. If you have some tolerance for risk, you might opt to operate at the margins while finding ways to create plausible deniability. But there is probably no way to set up the expatriation in a way that gives the risk-averse peace of mind. Unfortunately.

 

[bdk1]

Both what the HR firm explained and Quilombo's explanations are correct. I'd say the most important part is this one:

Like I said, tens of thousands of Argentines are doing this each month, almost all of the devs and programmers working remotely for US companies, so you'd have to be comfortable doing this too.

I know plenty of people (Argentines and expats) whose salaries and income are 100% foreign sourced, and all of them are doing exactly what the local HR firm recommend you do.

Is it illegal? Yes. But "illegal" in Argentina is not the same as "illegal" in the US or Europe. A lot of illegal things are tolerated. If businesses here paid 100% of the taxes they were supposed to pay, there would be no businesses.

In particular, if you are being paid in the US, I think the risk is very low. I will tell you what a high-end tax advisor in Argentina told me: the US government demands information be sent to them on income US citizens and residents keep or make abroad, but it's not a two-way street. They are not sending any information to Argentina and likely never will be. From the perspective of an Argentinean resident, the US is a tax haven. Most Argentines who had declared they had an account in the US during Macri's "blanqueo" in 2015 just closed these accounts and opened a new one at the same bank when the K's returned to government.

Anyway, what most people do is they just send themselves the maximum amount allowed under the monotributo scheme via Western Union, because that is the amount you can justify. That is generally enough to live off of for most single people, but if you need more you can just bring cash and spend the rest in cash. Just make sure you don't spend more than the monotributo-limited amount you transfer electronically (credit cards, bank transfers, MP) - anything above that monthly limit should be spent in cash.

I think the risk in your situation is extremely low. I honestly don't see how AFIP could ever know or trace you are actually making more money in the US than you declare in Argentina. And to be honest, even if they did, what are they going to come after? You don't have any properties in Argentina and you're not a citizen; you can just leave anytime.

Of course, it's up to you if you feel comfortable doing something "illegal" and that's 100% personal. But again, everyone does it and you'll just have to do a few illegal things while you're living here if you want to make your day-to-day liveable. There's a reason the HR firm suggested you do this.

 

[SecretShopper]

Does the pesification technically apply to anyone living in Argentina and is a tax resident? Thought there was some other kind of stipulation that eliminated the need for more people to have to pesify. I looked at that as a completely separate thing than being a tax resident and simply owing taxes. Am I looking at that wrong?

Also, although there is no tax treaty between Argentina and US, isn't the first 100k or so protected?

 

[Alby]

A timely article following a meeting between Cristina and the US Ambassador. If Cristina has her way, the bienes personales tax on assets held outside Argentina will rise to 20% (or 35%), payable in dollars, with jail penalties for evasion (which the law currently includes anyway), and a financial reward to those who dob the evaders in. And she wants the ambassador's help to implement the program.

The government won't have the votes in Congress, of course.

Cristina Kirchner recibió al embajador de Estados Unidos, Marc Stanley: hablaron del impuesto para pagarle al FMI

La vicepresidenta mostró la foto en sus redes sociales; informó que además abordaron “temas de interés común: lavado de dinero, trata de personas y derechos humanos”

www.lanacion.com.ar