Argentine Central Bank’s New Regulations Concerning Services, Interest and Dividends

Communication “A” 5295 includes novelties on the inflow and outflow of foreign currency. However, the most important changes are regarding the outflow of foreign currency through the local foreign exchange market (Mercado Único y Libre de Cambio or MULC).

The following are some of the most important changes:

Payment of services

When the service rendered has no direct connection with the activity that is developed by whoever will pay the service, a legalized copy of the underlying contracts and an external auditor’s report must be filed with the entity performing the foreign exchange transaction.

Communication “A” 5295 clarifies the content of the external auditor’s report and requires, for example, that it evidences the rendering of services by a non-Argentine resident and that it proves the existence of the foreign debt.

Moreover, the Communication strengthens the foreign exchange entity’s right to request any necessary documentation to comply with its obligation as supervising entity.

Central Bank’s prior authorization to access the MULC under certain items

The Central Bank’s prior authorization to purchase foreign currency in the MULC will be required to pay, among others: (i) information and computing services, (ii) business, professional and technical services, (iii) royalties, (iv) patents and trademarks, (v) payment of commercial guarantees for exports of goods and services, (vi) exploitation rights of foreign movies, videos and audios, (vii) services of technology transfer, except for patents and trademarks, and (viii) renting or leasing of local real estate owned by non-Argentine residents and other rents paid abroad; when:

(a) the payee is “related” (direct or indirectly) with the local debtor; or when the payee resides or is domiciled in “tax haven” countries, or when the payment is made to an account of a “tax haven” jurisdiction; and

(b) the service contracts generate payments or debts higher than US$ 100.000 during a calendar year.

In all of these circumstances, prior filing of the relevant contracts with the corresponding registry must be fulfilled.

Payment of Interest

The period of time to purchase foreign currency in advance was reduced from 15 to 5 days to access the MULC for the payment of interest (due to unpaid obligations or cancellation of debts together with the payment of interest),.

Payment of Dividends

Regarding payment of profits and dividends abroad to non-Argentine resident shareholders and ADRs (American Depositary Receipts) and holders of BDRs (Brazilian Depositary Receipts), Communication “A” 5295 states that, in all of the cases: (i) the filing of the declaration of foreign indebtedness (that gives rise to the payment of interest) shall be verified; and (ii) the validation of the reported data must be fulfilled, if the foreign creditor belongs to the same economic group. It is worth noting that, although Communication “A” 5295 does not introduce substantial changes in this matter, it does rephrase the previous wording.

Sale of foreign currency under the item of services and income

The sale of foreign currency to Argentine residents under the item of services and income must be executed through a client’s check or charged to the client’s account at sight in a local financial institution. It is worth mentioning that Communication “A” 5295 only clarifies that the sale of foreign currency may only be made to “Argentine residents”, which was omitted by previous regulations.

Purchase of non-financial assets

Lastly, the Central Bank’s prior authorization is required to access the MULC to purchase un-produced non-financial assets (activos no financieros no producidos), given that:

(a) the payee is “related” (directly or indirectly) to the local debtor;

(b) the payee resides or is domiciled in a “tax haven” country; or

(c) the payment abroad is made to an account of a “tax haven” jurisdiction.

Moreover, in all the circumstances described above, the relevant contracts (filed with the corresponding national registry) shall be submitted.