Argentina is widely renowned as one of the largest South American economies. Hence, you’ll find that several startups visit this region to supplement their workforce. Are you one of those foreign tech companies and startups interested in hiring from Argentina’s skilled workforce? It’s crucial to note that the hiring process in Argentina may differ considerably from what you’re used to, especially in terms of payroll taxes and expenses.
Argentina payroll taxes are levied on payments to employees and contractors. However, both cases are handled differently. Employee payroll tax is handled by the employer, while contractors are expected to file the tax themselves. Before hiring employees or contractors, it makes sense to find out the effective income tax in Argentina, employer contributions, and any other associated conditions.
An Overview of Mandatory Payroll Contributions for Employers
Argentina payroll taxes for employees and contractors are split into two main categories: employer and employee contributions. The total employer contributions for payroll are estimated at between 26.91% and 29.91% of the employee salary in Argentina. Oftentimes, this payment is added on top of the employee’s base salary. Here’s a breakdown of employer payroll contributions and their respective income taxes in Argentina:
- Pension fund: 16%
- Health insurance: 6%
- Labor risk insurance: 2.41%
- Life insurance: 0.5%
- Occupational Disease Trust Fund: 100 ARS
Further reading: Employee Leave Policies in Argentina and Work Hours in Argentina
The Employee Side of Payroll Taxes
All legally employed individuals in Argentina are expected to settle their income tax, whether they are full-time employees or independent contractors. The Argentine income tax rate ranges between 5% and 35% and is calculated progressively. However, other supplementary factors, such as the number of dependents, household status, civil status, and geographical residence location, can affect the overall Argentine payroll taxes.
The following table shows a breakdown of income tax rates along with their salary requirements:
| AnnualIncome (ARS) | Tax Rate |
| 0 – 173,834.61 | 5% |
| 173,834.61 – 347,669.23 | 9% |
| 347,669.23 – 521,503.84 | 12% |
| 521,503.84 – 695,338.47 | 15% |
| 695,338.47 – 1,043,007.68 | 19% |
| 1,043,007.68 – 1,390,676.90 | 23% |
| 1,390,676.90 – 2,086,015.35 | 27% |
| 2,086,015.35 – 2,781,353.85 | 31% |
| 2,781,353.85 and above | 35% |
Aside from payroll tax and employer payments, employees and contractors file their taxes differently. However, the same Argentina income tax rate applies to both of them.
Employees also contribute to payroll taxes in Argentina. The total estimate of employee payroll contribution equals 17%. However, employee contributions for the Argentina tax rate are only applicable for salaries between 7,003.68 ARS and 776,478.32 ARS. Here’s a breakdown of these contributions:
- Pension Fund – 11%
- Social Security – 3%
- Health Insurance – 3%
Comparative Analysis of Full-Time Employee vs. Contractor Expenses
If you wish to hire employees in Argentina, you may either opt for full-time employees or contractors. While both types of workers have similar roles or functions, their economic impact on your business may vary.
Hiring full-time employees in Argentina is complex. You’ll need to establish a legal entity or partner with an employer of record. Employees in Argentina are protected by law. As a result, they are entitled to several benefits that may incur expenses. Here’s a list of expenses involved in hiring full-time employees:
- Salary: The minimum wage in Argentina is 67,743 ARS per month. However, collective bargaining agreements may highlight industry-specific minimum wages but don’t expect figures less than the national minimum wage.
- Overtime: The overtime pay in Argentina is set at 150% of employee pay unless stated otherwise in the contract. Overtime on weekends and public holidays is paid at 200% of the employee’s salary. However, employees are limited to 30 hours per month.
- Paid Vacation: Employees are entitled to an annual leave depending on the length of their service. During this period, employees are to be paid. The vacation pay is calculated by dividing the employee salary by 25 and multiplying it by the number of days off.
- Paid maternity leave
- Paid sick leave
- Severance pay
While hiring contractors may seem quicker and more beneficial for your business, their costs can tend to stack up quickly. Before hiring them, you should note that these experts will request flexible working hours and a project-by-project work schedule. However, you may also have to cater for the following expenses:
- Salary: While independent contractors are not supposed to be on the employer’s payroll platform, they are expected to submit monthly invoices to get payment for their services. However, contractors can also submit requirements daily, biweekly, monthly, and biannually, depending on the terms of the agreement between both parties.
- Taxes: As mentioned earlier, independent contractors are expected to file their taxes individually. But are expected to have completed filing by June each year. However, they must register your organization’s Documento Nacional de Identidad (DNI) with the Registro Nacional de las Personas. Aside from social security contributions, independent contractors are supposed to pay gross income tax, value-added tax, and withholding tax.
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Strategic Considerations for Payroll Setup
We’ve highlighted the expenses of hiring both employees and independent contractors. After deciding the number of employees and independent contractors to hire for your organization, the next thing to do is to set up an effective payroll system. Follow these steps to set up an effective payroll:
- Register your business with the Public Register of Commerce of Argentina to validate the business name.
- Register the company with the Justice Minister (IGJ), Tax and Social Security Authority (AFIP), and Municipal Authority.
- Register all new employees on the AFIP website. Ensure this step is done on the same day they start a new job.
- Collect employee information, such as a social security number, a health insurance number, a national ID number, a tax number, and an offer letter from the employer.
- Create a legal entity with the capacity to process payroll in Argentina and get a tax identification number from AFIP.
- Register for social security in Argentina.
- Open a local bank account to process all payroll-related payments to workers and government authorities, and deposit 25% of the initial capital with the National Bank of Argentina.
- Process employee insurance.
- Sign the wage books at the Ministry of Labor.
- Determine the overall employee payroll amount and the frequency of payments.
- Pay employees through a local entity or hire an employer of record to help you.
Simplifying Compliance: Strategies for Employees
When handling employee payroll in Argentina, it’s crucial to stay compliant with local laws to avoid any legal sanctions. The payroll manager of your organization should ensure statutory compliance during payroll processing. To stay compliant, all personal, business, and social security deductions should be done during payroll processing. All payroll tax payments must also be made on time by June 15 of the following year. Late tax payments are subject to a 4.25% interest rate.
Ensure to inform the appropriate regulatory authorities about all deductions made. It’s also crucial to track all payroll payments to meet payroll reporting and compliance regulations. Ensure your payroll manager fills out all reporting forms and sends them to the local authorities.
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Navigating Tax-Free Allowances and Deductions
Let’s discuss the exemptions to payroll tax in Argentina. They include:
- Employers are exempt from social security payments for the first 7,003.68 ARS paid per employee.
- Salary and pension fund payments are exempt from any deductions.
A Practical Guide to Payroll Calculation in Argentina
It’s not uncommon to find several companies struggling with their payroll calculations, especially due to the complexities of Argentine local laws. Argentine payroll policies consider important factors like tracking employee hours and payment distribution.
To correctly calculate employee payroll in Argentina, it’s crucial to maintain updated records of any due and past payments. It’s crucial to also calculate social security contributions as well as other applicable deductions. Depending on the nature of your workforce, ensure to keep separate records for employees and independent contractors.
Further reading: Employee Termination and Severance Pay in Argentina and Employee Benefits in Argentina
FAQs
Payroll tax in Argentina refers to the taxes imposed on employers and employees based on their salaries or wages. These taxes fund social security programs, health care, and other benefits for workers.
The amount of payroll tax paid in Argentina varies between 5% – 35% depending on factors such as income level, employment status, and specific tax rates. However, what remains constant is the government’s commitment to providing social benefits and support for workers. Workers who earn up to 2,781,353.85 ARS are subject to a 35% tax rate.
Argentina payroll tax of 5% – 35% is relatively higher than some other countries. For instance, Mexico charges payroll tax between 1.92%- 35%, while Nicaragua workers pay between 0% – 30% depending on income level.
Yes, expats living and working in Argentina are generally subject to Argentine taxation on their worldwide income. However, tax treaties and agreements may provide exemptions or reductions for certain types of income or expatriates from specific countries.
The highest payroll tax rates in Argentina are typically reserved for higher-income earners and may vary depending on factors such as salary levels, employment status, and specific tax laws. This tax rate is currently capped at 35% and is charged on those who earn 2,781,353.85 or more. These taxes contribute to social welfare programs and support the country’s workforce.
