This is a high-level summary of issues likely to be relevant to international groups with operations in Argentina or that are considering transactions in Argentina. The following overview was prepared by VRG member firm R. Biasca & Asociados.
Argentina has five main valuation practice characteristics:
1. High inflation (in fact, measured at more than 40% in 2018) creates a periodical need to revalue physical assets
2. The existence of a governmental organization that is in charge of valuations related to the Government and has defined some valuation methodologies
3. A very limited amount of Argentine companies offer stocks in Buenos Aires or New York
4. Small financial markets
5. A “valuation profession” does not necessarily exist, instead, valuation engagements are considered by a wide range of registered professionals in different fields.
Private Company Valuations in Argentina
The Inspección General de Justicia is the Argentine government agency that regulates private, commercial companies. Between its regulations, there are some that relate to the valuation of assets and liabilities.
There are two standard methodologies approved by the Federación de Consejos Profesionales de Ciencias Económicas (FACPCE; Argentine Federation of Professional Councils of Economic Sciences), which is a professional association for accountants, economists, and actuaries: (a) technical revaluation and (b) revaluation based on IFRS.
The Comisión Nacional de Valores is another institution that regulates companies in the Buenos Aires Stock Exchange. It indicates that the Board of Directors should hire independent valuation experts and it is responsible for the process. The experts hired cannot be managers, employees, partners, directors, or auditors.
Certain firms, such as banks and insurance companies, have their own control agencies.
Tax Reform in Argentina
The government of Argentina enacted comprehensive tax reform (Law No. 27,430, Decree 1112/2017 – 29 December 2017) that became effective on January 1, 2018. The changes aimed at promoting investment and competitiveness, moving Argentina towards a more equitable, efficient, modern tax system, and is intended to create opportunities for multinationals or companies looking to invest in Argentina. The Law amends the Argentine income tax law (for both corporations and individuals) and introduces a revaluation regime meant to address the distortions caused by the high inflation experienced in Argentina over the last decade.
The tax reform changes impact:
- Corporate income tax rates
- Dividend withholding tax
- Taxation of certain financial investments
- Indirect capital gains taxation
- Thin capitalization rules
- The definition of a permanent establishment
- Transfer pricing
- Fiscal transparency rules
- Value-added tax (VAT) on digital services
- Refund of VAT credit balances
- Revaluation of assets
- Social security contributions
Multinational entities conducting business activities, investing, or planning to invest in Argentina need to be aware of the impact of these changes. We encourage you to review the complete overview of the reform including valuation impacts and the introduction of RARTP, which resulted in new tax value of assets determined by a “revaluation factor.”
A dedicated section on the IFRS website exists for the IFRS standards’ limited application in Argentina.
Government Related Companies, Organizations, or Legal Conflicts
Created in 1944, the Tribunal de Tasaciones de la Nación (Court of Appraisals of the Nation) is a technical organization and part of the Argentine Government; its role is defined by Law No. 21.626. As stated on its website:
“The National Appraisal Tribunal is a permanent technical body directed by professionals proposed by both the State and private professional entities, whose primary mission is to establish the objective values of the assets whose acquisition, disposal, lease or book value, be required by the Judicial Power of the Nation and by national, binational or multinational organizations of which the National State is a party, as well as by provincial or municipal States, for themselves or for those entities to which they supervise, control or audit. Likewise, it carries out the appraisals that are required by any natural or legal person.”
The Central Government, the provinces, and municipalities create bonds to finance projects or to cover the budget deficit. They are in local currency (with fixed or variable interest) or in foreign currency (normally U.S. dollars).
Firms create company bonds (called “Obligaciones Negociables”) that allow them to obtain additional financing.
Argentina does not have a relevant derivative market, local hedge funds, or pension funds. Future markets are small and related to agricultural commodities and the dollar.
In this environment, VRG and R. Biasca & Asociados have worked since 1996, mostly with private companies in the valuation of physical assets, intangibles, and comprehensive valuations of private companies. To learn more about how VRG and R. Biasca & Asociados can work with your company, we welcome you to visit us online or contact Rodolfo Biasca at firstname.lastname@example.org.
For more information about VRG’s full scope of international valuation and value-related services, contact Bill Hughes.
More Perspectives: International Valuation Issues
Valuation Issues In Australia
Australian financial reporting is based on IFRS. The Australian Accounting Standards Board (AASB) has issued AASB standards mirroring IVS with a few very minor changes.
Valuation Issues in Brazil
When it comes to business combinations and asset acquisitions, Brazilian standards require the determination of the fair value assets and liabilities at their acquisition date.
Valuation Issues in Canada
In Canada, expert valuation analysis and reports contribute to the resolution of legal and financial disputes, matters before arbitration boards, securities commissions, and other regulatory bodies.
Valuation Issues in Japan
Financial reporting in Japan is mostly based on Japanese Generally Accepted Accounting Principles (JGAAP) and International Financial Reporting Standards (IFRS).
Valuation Issues in the UK and Europe
When acquiring a business with operations in multiple countries it may be necessary to value the entities by country in order to determine their tax basis as well as the appropriate level of deferred taxes.
Valuation Issues in the U.S.
Valuations in the U.S. are generally required around a transaction and can be grouped by needs for financial reporting, tax, or legal purposes, as well as for compliance or recurring regulatory purposes outside of a transaction.
International Business Combinations
The continued globalization of business drives an undeniable need for independent valuations delivered by a firm offering local experts and global reach.
International Economic Snapshots
U.S. domestic & global tax laws require valuation experts who understand the intricacies of tax reporting.
Download any one of 16 country-by-country economic update snapshots, each designed to provide a succinct yet comprehensive view of current economic and financial developments.
Transaction-Related Valuation Issues
The deal teams at multi-national firms need valuations more than ever because every M&A transaction faces financial or tax reporting issues throughout the deal process.
The Value of Valuation Research Group
When clients have an international valuation need, VRG’s international reach allows us to provide our multinational clients with a single source for support.
VRG: Our International Capabilities
[Video] We invite you to meet our international leadership team and learn more about the depth of our capabilities and expertise.