Due to some misinformation we detected among clients and the public in general regarding the hiring of autonomous providers included in the simplified tax regime known as “monotax” in Argentina, we decided to make this post addressing this issue. The labor reform package of the Ley Bases included relevant changes in this matter but not as deep as some of the local media lead to believe. We’d like to note that, even though the hiring of independent providers through commercial agreements is still legal, this does not mean that any relationship with a natural person that provides services can be governed by a Service Provider Agreement under the monotax regime.
The Ley Bases has brought some innovations regarding the burden of proof connected to the presumption of a labor relation. If an independent worker who invoices the company for his or her services is under service provider agreements (of commercial nature, not labour) for the provision of work, services or specific trades, the burden of proof lies with the party invoking the grounds, i.e., —– that such relationship is framed within a labor contract and not a commercial one. However, in case of litigation, if a technical and legal subordination is proven, this fact will be conclusive to prove an unregistered labour relation. For a better comprehension, we recommend reading our post on Ley Bases and on Regularization of Labor Relations.
Continuing with the provisions of this new labor regime and aiming to boost the development of small productive ventures of autonomous workers, the National Government has passed General Resolution 5599/2024 allowing self-employed workers to organize themselves with self-employed collaborators. This regulation, governed by Law Nº 27.742 and Decree Nº 847/24, introduces the “Registry for Independent Workers with Collaborators” (PADIC), a binding registry for those individuals seeking to operate under this new system as an alternative to the traditional employment relationship and to the incorporation of companies such as corporations or partnerships.
What does the new regime entail?
According to the new system, self-employed workers can “hire” up to three self-employed collaborators excluding any type of employment relationship and enabling such co-workers to comply with registration with the general tax system and social security or with the Simplified Regime for Small Taxpayers (RS). This structure offers greater autonomy to entrepreneurs and collaborators, allowing a smooth cooperation in different projects without the need of a traditional employment relationship.
Registration with PADIC: Steps and Requirements
This new regime requires that both parties (self-employed coordinators and self-employed collaborators) comply with registration with PADIC before starting their joint activities. Registration is essential to meet the requirements of the new regime. For greater legal security, proof of said registration should be requested before hiring any entrepreneur under this regime.
In order to register, collaborators must enter the web site of the Customs Collection and Control Agency (ARCA) with his or her Tax Code and furnish some basic information: project or venture name, domicile where activities will be held, starting date and CUIT (Individual Taxpayer Identification Number) of each collaborator. Once data is processed, collaborators shall receive a notification for accepting or rejecting the venture within a 72 hours’ term.
Flexibility for Entrepreneurs and Collaborators
The key aspect of this new system lies on flexibility, allowing self-employed workers to manage their co-workers’ relations. Any of the parties (entrepreneurs and collaborators) may leave the project at any time through the PADIC with no need to justify such decision and totally free to join other ventures.
With the dissolution of AFIP (Tax Authority in Argentina), a new and similar agency has been created, the Tax Collection and Customs Control Agency (ARCA), vested with the power to supervise tax compliance by workers and collaborators. ARCA shall also monitor and control customs matters, replacing AFIP in all procedures.
This new regime is part of the deregulation program aiming to simplify business structures with a view to strengthen the autonomous economy in Argentina. Within a more simple -but formal- legal framework, entrepreneurs are encouraged to expand their activities while keeping their independence. The government expects to boost the development of productive ventures facilitating cooperation between autonomous workers for a more flexible and dynamic labour / commercial market.
This Resolution is effective as from September 26th, 2024 and the PADIC is in full operation.
