Being the last issue on the subject of workers providing their services outside their country of origin (under any of the modalities mentioned in previous articles), we will now focus on the situation of freelancers who do not work under an employment contract. In this case, it may be possible that commercial contracts be validly entered into between the parties (according to the legislations of the countries involved), and that the legal relationship fall outside the scope of Labor Law.

If the relationship could be framed as “service contract” (commercial contract applicable in some cases), the “worker” would actually be an independent supplier providing services for international companies. The validity requirements for this type of contracts vary in each jurisdiction. For instance, in Argentina, our labor case law is extremely severe against practices that are considered abusive, condemning companies (and their directors) that hire employees under this modality and have certain features of an employment contract in their relationships, and considering it labor fraud.

How does it work? The professional will invoice the company for the services provided and must be registered with the corresponding Tax Agency in the appropriate category according to the invoice amount. In the case of Argentine workers wanting to provide services abroad, they must be registered with AFIP as “registered payer” and complete a series of accounting procedures that enable them to issue export invoices; this scenario should be analyzed with an accountant.

Continuing with the process from Argentina to other countries, the hired professional will have to carry out important procedures before the Central Bank of Argentina (BCRA) and all the money entering the country will have to enter though the Single Free Foreign Exchange Market (MULC) if the destination are Argentine accounts. Nowadays, this is not a major problem, since the currency exchange control is no longer imposed, but it has been a serious concern for parties in negotiating this type of contract in the past. A complication in this regard is that to authorize a flow of money entering the country, the BCRA requires that the payment of each invoice registered be complete, and, thus, the amounts of a single invoice cannot be split. In any case, this point should be consulted in depth with an accountant, since it is a very technical and specific topic.

Through the mentioned procedure, service providers can justify their income and pay taxes in Argentina (the local law states that this must be done if the provider spends more than 180 days a year in Argentine territory). Many companies tend to push for this type of procurement because tax expenses are lower than social security contributions and do not require any migration procedure for the employee to work. Please note this is not legal or applicable to all cases. In this scheme, only amounts corresponding to VAT (21%) and Income Tax must be taxed.

With regard to the payment of Income Tax, there are several International Treaties that avoid double taxation (this should be analyzed in each particular case); this tax may be taxed directly in one of the countries, which represents an advantage for the parties. According to Subsection (b) of Section 1 of the VAT Act (Argentina), it may be considered that this service provision is exempt (visit this link for further information:, but this must be validated with the accountant involved.

From a legal point of view, a very specific service contract should be entered into between the parties to avoid irregular situations. It is a unanimous requirement for this type of contract that the parties are really independent, because, otherwise, the employer would abuse this position to avoid the payment of social security contributions, causing a serious labor and social security fraud. In Argentina, judicial sentences for this type of cases entail personal, joint and several liabilities of the company’s directors. Moreover, the company —in addition to paying compensations and severe fines— will be listed in the Public Registry of Employers with Labor Sanctions (REPSAL) (see:

Furthermore, this type of procurement is often more practical for employers, especially for freelance agents (worldwide trend) or independent professionals who provide services to many companies of an economic group, with fluctuations in their workload, since the services are paid only according to the works required and without Social Security obligations. The counterpart is that the price for the independent provision of services is usually higher per hour than for a worker under an employment contract, so it is not convenient in relationships with regular work required (especially considering the high risk of adverse judicial sentences).

Comparison between the Employment Contract and the Service Contract

To enter into an employment contract with a worker in Argentina, the foreign employer should register with AFIP (with a CDI or CUIT), make social security contributions (35% of the employer + 17% of the gross salary of the worker) and pay the salary in pesos (depending on the salary negotiations and the exchange rate situation, the worker may not want or not adjust to the negotiations).

In the case of provision of services, only taxes according to the agreed invoicing must be included (depending on the amount, it may be the Regime for Small Taxpayers or VAT and Income Tax; all this plus Turnover Tax, if applicable). These taxes are the responsibility of the service provider, since this only applies to independent professionals. This should be taken into account (and clarified) when negotiating remuneration.

It is important to consider (especially for the worker and in contrast to the employment contract) the financial position, the past international activity and the income of the last years so that this type of invoice does not constitute a suspicious operation. For instance, if a person who did not have income registered for several years (or the income was low) decides to register with AFIP for an important invoicing (Registered Payer), he or she may be subject of tax inspections (a very uncomfortable situation).

Furthermore, the situation of a worker registered in another country under a foreign employer, but actually living more than 180 days in Argentina deserves special mention. For our legal system, this relationship (whether it is considered an employment or commercial relationship) is obliged to be registered in Argentina and to pay the corresponding taxes. Failure to register the commercial relationship may lead to tax investigations; failure to register the employment relationship determines the application of aggravated compensations according to our legal system (see:, and As long as there is no International Treaty recognizing the validity of registration of legal relationships registered and taxed in another country, such registration does not exist for our legal system.

Finally, we want to clarify that in the present article we tried to provide a general overview on the legal concept and discussed fiscal and accounting issues, but these lines should not be considered as a complete and final advice. It would be prudent to consult a specialist accountant on this issue.