In this series, we’ve been taking a look at LATAM’s Fintech boom, recently focusing on Brazil. Continuing the series, let’s take a dive into Argentina’s Fintech sector.
The number of Fintech companies in Argentina more than doubled between 2018 and 2020 (which ended with 268 locally registered Fintechs), and the majority are focused on digital payments. In fact, according to data from the Central Bank, the number of entities of this type is almost three times that of traditional banking.
Argentina hosts a Fintech industry body, Camara Argentina de Fintech (Argentine Chamber of Fintech, or CAF). The industry hosts over 300 companies employing almost 15,000 people, with Buenos Aires being the local hotspot, followed by Mendoza.
The number of Fintech companies in Argentina more than doubled between 2018 and 2020
No doubt biggest success story for Argentinian Fintech, unicorn digital banking firm Ualá offers Mastercard-branded prepaid bank cards and its app allows users to access a range of financial services, including sending and receiving money, online shopping, cash withdrawal at ATMs and loans. Launched in Argentina in 2017 with the goal of financial inclusion, Ualá has over 2 million users. The firm expanded into Mexico in September 2020 and had issued 350,000 cards in the country by November 2021. At the time of writing (February 2022), Ualá has launched in Colombia, has a valuation of over US$1 billion, and has plans to expand in Paraguay, Peru, Colombia and Chile – and eventually into the U.S. and Europe.
In its continued effort to attract FDI to the country (among the main investors are the United States, Spain and the Netherlands) the Argentine government has created favourable conditions for the Fintech sector, but has instigated a new tax on electronic wallet (e-wallet) transactions, which is intensifying competition between banks and Fintechs. While Fintechs have come out against the levy on transfers to and from e-wallets, banks say the new levy helps level the playing field by imposing regulations on the Fintech space.
And competition is fierce, with over 30 digital wallets on the market – one of which is MODO, a digital banking system jointly launched by around 30 public and private banking entities.
Here are the main aspects of the Argentinian tax regime that affects Fintechs.
Tax framework
Fintechs are governed by the Income Tax Law 27630, published on 16 June 2021, which modifies the first paragraph of Art. 73 of the Income Tax Law (T.O. 2019, the LIG).
This new law replaces the fixed rate paid by capital companies for their profits in the third category (also known as corporate profits) and is effective as of 1 January 2022.
Corporate income tax
Fintech is taxed at a rate of 30% of the general rate, with the following scale:
| Cumulative net taxable profit (More than $) | Pays | Charged % | On the surplus of | |
| More than $ | To A $ | |||
| $0 | $ 5,000,000 | $0 | 25% | $0 |
| $ 5,000,000 | $ 50,000,000 | $ 1,250,000 | 30% | $ 5,000,000 |
| $ 50,000,000 | Upwards | $ 14,750,000 | 35% | $ 50,000,000 |
Deductions
Those provided for in the law (the expenses necessary to maintain the profits from Argentine sources).
Depreciation
The linear depreciation method is applied: 33% hardware, 20% rolled, 10% installations, machinery and furniture and tools, 2% real estate.
VAT
General allocation of 21%.
Argentina has one of the richest e-wallet environments in LATAM. Over 30 different services on the market and, according to CAF, over 6.5 million Argentines downloaded one or more Fintech payment apps in the year to February 2021.
Argentina is ripe for further Fintech development, with support from the government and regulators. If you’d like to know how Auxadi can help with your Argentinian operations, simply get in touch.
This article was prepared in collaboration with Estudio Eidelstein.
Local Knowledge – International Coverage
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