FOREIGN INVESTMENT IN LATIN AMERICA – MAIN RISKS (HIGHLIGHTS)
Based on a private report of a meeting of the members of Vivacqua Advogados Law Firm with a group of representatives of a Foreign Investment Fund, we summarize below some conclusions about the main risks of investing in Latin America in 2019:
Argentina
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Unclear position of government on tax reform in an incoming election year.
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Tax policy related to high inflation rates.
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Foreign exchange effects
Brazil
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President elected Jair Bolsonaro’s proposal to Impose a 20% tax on dividends (currently zero).
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Brazilian authorities plan to undertake a prolonged fiscal consolidation, which includes an ambitious reform of social security.
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Tax reform proposal to substitute IPI, PIS,COFINS, ICMS, ISS by one federal “VAT” tax.
Chile
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Tax reform is expected to be introduced in 2019. Major changes on this reform are:
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Creation of integrated corporate tax system in which double taxation of business profits (shareholders & entities) would be eliminated
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Reduced income tax rate (from 28% to 25%)
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Implement a withholding tax of 10% applicable to digital services
Mexico
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Newly-minted United States-Mexico-Canada Agreement (USMCA) is replacing NAFTA. This new document includes strong and effective protection of intellectual property rights
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New government administration is expected to implement solid tax collection procedures (increase on the government tax audits)
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Mexico (OECD and G20 member) has implemented BEPS framework into its local laws and it is expected to continue to enforce BEPS action plan.
Peru and Ecuador
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Consistent changes in tax policy
Venezuela
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Tax policy related to high inflation rates.
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Foreign exchange effects