The government on Thursday removed the PAIS tax on imported items for use in manufacturing products destined for export.
Created during the Alberto Fernández administration, the PAIS tax (currently 17.5%) is applied when companies buy U.S. dollars in order to import goods and services.
On July 24, the previous government broadened the reach of the tax so that it applied to all imported goods, including industrial inputs and raw materials. The tax is levied by banks when importers exchange pesos for dollars from the Central Bank. It does not apply if companies pay with dollars they already have.
The PAIS tax rate has been 17.5% since the Economy Ministry raised it from 7.5% on December 13, a hike Economy Minister Luis Caputo described as “provisional” at the time.
In the 14/2024 decree, which eliminates the tax for companies importing goods to manufacture products for export, the government said that the measure was taken to stimulate exports.
The Argentine Confederation of Medium-Sized Companies (CAME) welcomed the government’s decision. “We welcome the elimination of any tax that makes us less competitive with companies abroad,” José Lopetegui, CAME’s head of international trade, told the Herald. He added that imported input materials used for exports were taxed twice. “The PAIS tax was also paid when the product is exported,” he said.
The tax exemption also applies to imports under the so-called Tierra del Fuego industrial promotion regime, a series of tax and customs benefits for companies that manufacture products in that province. Lopetegui added that CAME is not “that happy” with that part of the new norm, since it could make companies in Tierra del Fuego more competitive than those from other provinces.
However, a source from Tierra del Fuego’s government told the Télam news agency that this was not the case. “Most of the products manufactured by the industry in Tierra del Fuego (especially televisions, cell phones, and household appliances) are for domestic consumption and are not exported to other countries,” said the source.
Lopetegui said that since Argentina is currently facing an international reserve scarcity crisis, it should export “anything, furiously, to any market, at any volume” and that, together with the elimination of the PAIS tax, a new import promotion law should be considered, although he was not optimistic that the government would do so.
“This government doesn’t have any money, so it will not eliminate more taxes or increase any subsidies,” Lopetegui said.
The PAIS tax was the tax with the highest growth in 2023, with an increase of 335.5% compared to last year. Its rate is 30% for the purchase of foreign currency for savings, luxury goods, tourist services abroad, and foreign-currency expenditures with debit and credit cards, 25% for certain services, and 8% for digital services, including streaming platforms such as Spotify and Netflix.