FOREIGN INVESTMENT IN LATIN AMERICA – MAIN RISKS (HIGHLIGHTS)

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

  • Unclear position of government on tax reform in an incoming election year.

  • Tax policy related to high inflation rates.

  • Foreign exchange effects

Brazil

  • President elected Jair Bolsonaro’s proposal to Impose a 20% tax on dividends (currently zero).

  • Brazilian authorities plan to undertake a prolonged fiscal consolidation, which includes an ambitious reform of social security.

  • Tax reform proposal to substitute IPI, PIS,COFINS, ICMS, ISS by one federal “VAT” tax.

 

Chile

  • Tax reform is expected to be introduced in 2019. Major changes on this reform are:

  1. Creation of integrated corporate tax system in which double taxation of business profits (shareholders & entities) would be eliminated

  1. Reduced income tax rate (from 28% to 25%)

  1. Implement a withholding tax of 10% applicable to digital services

Mexico

  • Newly-minted United States-Mexico-Canada Agreement (USMCA) is replacing NAFTA. This new document includes strong and effective protection of intellectual property rights

  • New government administration is expected to implement solid tax collection procedures (increase on the government tax audits)

  • 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

  • Consistent changes in tax policy

Venezuela

  • Tax policy related to high inflation rates.

  • Foreign exchange effects