Learn about the importance of a entity health check in Argentina in order to keep your company structured and compliant against the requirements of government authorities. They are increasingly important due to the set of local regulations. When you decide to incorporate a company in Argentina, you should bear in mind that at least once a year you must carry out an entity health check for your company or branch in Argentina. This process is also known as ‘corporate status verification’.
Key Takeaways
| Types of entity health check in Argentina | There are two main types of entity health checks. They typically focus on either the fiscal or legal condition of the company. |
| Reasons for an entity health check in Argentina | To enable executives to know how the business is being managed To reduce risks of penalties and negative reputation To reduce transaction risks To comply with local regulations |
| Necessity of entity health checks in Argentina | A legal requirement, known as ‘corporate status verification’. |
| Who conducts an entity health check in Argentina | It should be done by a fully independent auditor to ensure total neutrality. The auditor should also be well aware of Argentinian company law. |
What is an entity health check in Argentina?
In general terms, an entity health check is an evaluation of the company where the legal, fiscal and corporate status is evaluated. In order to ensure that the corporate due diligence of your company in Argentina complies with the local laws.
Sometimes the directors of a company cannot accurately assess the overall status of compliance or do not have the legal or financial knowledge to understand what the corporate compliance requirements are in Argentina. For this reason, they decide to work with a professional external partner to conduct this review on behalf of the company.
The entity health check in Argentina seeks to review all the fiscal, legal, and other operating activities of a company; and raise any discrepancy or problem that needs to be resolved. This generally includes:
- Assess the business context of the company: Are there specific requirements that the company must meet regarding your industry or activity?
- Review of records, meeting minutes and legal records
- Evaluation of finances, social security payments, and other taxes
Corporate compliance in Argentina
Conducting an entity health check on a regular basis is also a useful tool to confirm the status of a company before buying or merging with it. In other cases, it is a way for you to demonstrate to potential partners and clients that they are working with a company that is fully compliant with Argentine regulations. In Argentina, a company must comply with two main vital areas for the proper functioning of a company: Legal and tax compliance.
Legal compliance in Argentina
It is crucial to regularly review the legal corporate activity of your company in Argentina. The documentation to be included in this part of the entity health check in Argentina includes:
- Evaluation and review of contracts signed with third parties
- Corporate books and accounting books (including minutes of the Assemblies)
- Shareholders meeting
- Rental agreements or leases
- Other key legal documents for the company
Tax compliance in Argentina
The company must make periodic reviews of its finances and accounting. The tax review is one of the most important and delicate parts of the compliance control of an entity in Argentina.
In Argentina, the Government Administration of Public Revenue of the Government of the Autonomous City of Buenos Aires (AGIP) continuously carries out inspection actions in shops and companies; and carries out controls on vehicles at different points of the City in order to verify the degree of compliance with tax obligations by taxpayers and/or those responsible.
In addition, there is AGIP Electronic Inspection. This is a scheme where inconsistencies in the fulfillment of tax obligations are exhibited, allowing the taxpayer, in this case companies, to recognize and/or clarify their tax situation and regularize it immediately.
Likewise, the Public Revenue Administration Agency (AFIP) issues the Fiscal Certificate to Hire, a document that enables companies to act as suppliers to the state only if they have complied with their tax, customs and social security obligations. A negative certification can affect a company’s credit score and result in visits from tax authorities, fines, surcharges, and other complications.
For the review of corporate compliance in tax matters in Argentina, it is important to bear in mind that, for any legal activity such as liquidation, dissolution, and merger, the company must fully comply with its tax obligations in order to continue with its process.
FAQs on an entity health check in Argentina
1. Why should you get an entity health check?
The main advantages of conducting an entity health check include:
To enable executives to know how the business is being managed
To reduce risks of penalties and negative reputation
To reduce transaction risks
2. What steps are there to an entity health check?
Carrying out a successful entity health check involves the following 3 key steps:
1. Information collection
When carrying out an entity health check, a large amount of information will have to be gathered. This will include collecting data from your company’s operations, legal, accounting, and administrative departments.
Note that a best practice many companies are adopting is the creation of a compliance or audit department, in charge of centralizing important company information, which eases this first step.
2. Information validation
Once gathered, the information goes through a validation process. In this step, an entity health check agent will review all the data and documents obtained, cross-reference it against primary sources where necessary, and otherwise seek to prove the veracity of all records being audited.
3. Record Keeping
Records of all the documents and evaluations made during your entity health check will not only be valuable for presenting to tax authorities in case of an inspection, but also during future entity health checks. In some cases, keeping such records is a legal obligation, due to laws desiged to prevent money laundering.
3. What happens in an entity health check?
Generally, an entity health check includes:
Evaluation of finances, social security payments, and other fiscal obligations
Examination and review of contracts signed with third parties
Review of corporate and accounting books
Review of monthly tax returns and tax statements
Review of upcoming renewals of certificates and policies
Preparation of financial statements
Review of balance sheets submitted at the closure of the fiscal period
4. Who can perform an entity health check in Argentina?
It should be done by a fully independent auditor to ensure total neutrality and make sure everything is in accordance with the authorities.
Contact Biz Latin Hub to conduct your entity health check in Argentina
You should interact with experienced and reliable partners to carry out entity health check in Argentina. Carrying out routine compliance checks will protect your business and operations from potential penalties imposed by government authorities.
At Biz Latin Hub, our team of experts perform entity healths checks for companies in Argentina and throughout Latin America. Our team of local and expatriate professionals offer support and advice to improve your company’s corporate compliance, increase its value and manage the risk of default.
Learn more about our team and expert authors.
Contact our team of multilingual accounting and legal experts today for personalized assistance and the support you need to successfully run your operations in Argentina.
