As we anticipated, reality is often more complex and it evolves faster than our
legal frameworks. The cases we will discuss below are not provided for in the
Argentine legal system, which is in turn not adapted to reality.
As the ruling is similar in both cases, we will analyze them under the same title.
The first case involves an Argentine employee of a foreign company providing
services from home in Argentina. The second case often happens in companies
that have several branches in different countries and/or several companies that
are part of their economic group and some of their employees provide services
for different countries.
In order not to complicate this discussion any further with casuistry and
explanations of each case, we will assume that it is not an employee of another
nationality or living in another country. Real cases are usually much more
complex, for example: an Argentine employee hired as a remote telecommuter
for a German company to provide coordination services for sales groups in
As we have already seen, there are some cases in which the jurisdiction can be
agreed upon; an approach may be the nationality of the parties (although in this
case, the employer’s nationality may be unclear if there are several branches).
What should always prevail is the “seat” of the legal relationship, which would
be “the place where the work is carried out”. In both cases, there are two
doctrinal tendencies and both would be valid: the place where the employees
provide their services (in the case of telecommuting, it would be the employee’s
home; in the case of an employee that has several employers, but works only in
one office, it would be this office), or the headquarters where the work is
exploited and materialized (domicile of the company receiving the services). As
we have seen, this is of vital importance because the applicable law and the
judge with competent jurisdiction will depend on the mentioned "seat”.
As every decision taken in this regard has multiple legal and fiscal implications
for both parties, we always recommend full legal and accounting advice from
specialists in all jurisdictions involved before making a decision. Ideally, it will be
possible to register the employment relationship in one country, being valid in
the other country too and paying social security contributions and taxes only
once, avoiding double taxation.
Another focal point is the payroll in which the employee will be included. In
cases of foreign telecommuting under an employment contract, it is clear that
the employee must appear on the payroll of the foreign employer, but this
triggers the need for all the immigration procedures already analyzed before.
Moreover, the employee on the German company’s payroll, for example, will not
be able to justify the income of his or her salary in Argentina (at least not in a
simple way, and it will probably result in a tax investigation), so salaries should
preferably be paid in offshore accounts and the employee will have no way of
justifying ongoing costs. In this sense, the situation for employees who are hired
under service contracts is simpler, since once they have fiscal authorization to
invoice the foreign company, they can justify all their income to the country
(which shall be included in their tax returns later) and all their expenses
A very important aspect for Argentine labor laws is that employees must always
be covered by a Workers' Compensation Insurance Company (ART in
Argentina). The problem is that the employee has to be registered locally. In the
cases we have analyzed (companies that are not registered in Argentina), this
is impossible, except that a local company hires the employee and then this
worker is transferred as a casual employee (this scheme is very complex and it
comes with certain joint and several liabilities; in this case, we do not
recommend it). Some companies opt to take out a personal accident insurance
for the employees performing remote tasks with a coverage similar to the one
provided by ART, which in no way meets local legal requirements.
The reality is that, to this day, there is no legal way to cover labor accidents of
an employee who provides services for a foreign company from Argentina
(unless that company registers in the country for the sole purpose of registering
There is the most correct legal alternative for local law for an employee under
an employment contract living in Argentina. In order to be properly registered as
an employee according to Argentine law, it is necessary to take a series of
precautions which I will try to enumerate as briefly as possible. In the first place,
an Argentine legal entity has to be set up to employ the worker (a branch of the
foreign company or a new company controlled by it). For this, you must obtain
the Identification Code CDI at AFIP, establish the company or branch, and then
request the Individual Taxpayer Identification Number (CUIT). From that
moment, the Argentine company is in a position to add the new employee to the
payroll before AFIP and, thus, is enabled to make the corresponding
contributions provided by law (35% + 17% of the salary). The funds of the local
branch (if not produced by it) must be transferred by the parent company at
official exchange rates through the Single Free Foreign Exchange Market
(MULC). Initial establishment, registration, and maintenance expenses and
transfer of funds must be included.
The great advantage of this alternative is that it discards any hypothesis and
possibility of a future conflict due to unregistered work for the parent company
(the Argentine branch could even take responsibility for all legal issues,
contributions and other expenses that could arise). However, this alternative is
so expensive and complex for the parent company (unless it has other
businesses in the country) that it is usually discarded.
For Argentine law, an employment relationship registered outside this system is
considered not registered (due to the lack of integration of systems); the same
happens in the case of employment relationships disguised as hiring of
services. Therefore, it will be considered non-existent or informal work. The
payment of salaries and registration by the parent company are not recognized
as sufficient registration by the Argentine law, at least not without an
International Treaty establishing this (and this is not the case). For the
Argentine legal system, the “non-existence” situation (which is relative, by the
way) of the employer makes it unlikely that it can be summoned locally and/or (if
convicted) that there are assets from which to pay a compensation. It is my
understanding that the legal risk assumed in this case by the parent company is
minor, but it is still an irregularity according to the local law.
Another important point is contributions and social security taxes (only in the
case of employment relationships). They must be paid by the employer at the
headquarters in which the hiring takes place, but this will not necessarily make
the other countries where services are provided understand that they do not
have to pay the taxes there too. Again, the lack of integration is a serious
problem, but I hold that the employment relationship fully registered in Europe
with the agreement of both parties and multiple extraterritorial actions of the
employee, and without a real seat of the company in Argentina, is a minor risk.
Contributions made in a country without existing Treaties would be equivalent to
not paying the contributions to an employee (the situation is different in Brazil),
entailing all the consequences of unregistered work.
It is true, however, that the legal consequences of having unregistered
employees in Argentina are serious (especially, the compensations) if a judge
determines this is true. Since the employer does not have seizable assets or
domicile to notify the claims, this would not be a major concern.
To summarize, if the employee is registered in Germany, the employment
relationship will not exist for the Argentine legal system, considering it an
informal employment relationship. If the employment relationship is registered in
Brazil, the relationship exists for the Argentine law and the contributions are
duly made; if the employment relationship is registered in Argentina, through the
creation of a new legal entity, it is also registered and does not entail problems
(although it is the most burdensome option).
Diego J. Nunes
Attorney at Law
Estudio Nunes & Asoc.