Allende & Brea – Estudio Jurídico

This report cannot be considered as legal or any other kind of advice by Allende & Brea. For any questions, do not hesitate to contact us.

Central Bank announcement: Subscription of BOPREAL (Series 3) Now Open for Dividend and Profit Payments

Banco Central - Bono bopreal

On April 30, 2024, the Central Bank of Argentina (“the Central Bank“) issued Communication “A” 7999 (“the Communication“), which permits the subscription of Bonds for the Reconstruction of a Free Argentina – Series 3 (“BOPREALs“) by: (i) domestic companies, up to the amount equivalent to outstanding dividends and profits payable to non-resident shareholders, and (ii) non-resident companies, for profits and dividends collected in pesos by non-residents within the country as of September 1, 2019, and not remitted abroad.

(i) Outstanding profits and dividends to non-resident shareholders

Local companies may subscribe to BOPREALs up to the equivalent amount in local currency of the outstanding dividends and profits payable to non-resident shareholders. The entity making the subscription offer must verify that:

  1. The client has documentation to support that the outstanding debt specifically corresponds to profits and dividends from closed and audited balance sheets.
  2. The transaction is declared, if applicable, in the last overdue submission of the “Survey of external assets and liabilities.”
  3. The complementary requirements for disbursements through the Single Free Exchange Market (“MULC“) are met.
  4. The subscriber has made a sworn statement indicating that:

a. The profits and dividends for which subscription is requested are outstanding;

b. They have not requested the use of this mechanism in another entity for this debt; and

c. They acknowledge that they will not have access to the MULC to pay the equivalent of the debt for which BOPREALs were subscribed, except if the payment is made through an exchange and arbitration with funds deposited in a local account and originated from foreign-currency principal and interest collections from BOPREALs.

Additionally, the Communication establishes that local companies may sell BOPREALs in the secondary market for up to the amount acquired in the primary subscription, also enabling the possibility of direct sales via wire transfer to an overseas third-party account.

(ii) Profits and dividends collected in pesos by non-resident shareholders in the country as of 9.1.19, not remitted abroad

On the other hand, non-resident shareholders may subscribe to BOPREAL for the equivalent of profits and dividends collected in pesos in Argentina from September 1, 2019, provided they have not been remitted abroad. In this regard, the distribution made in pesos will be adjusted by the last available Consumer Price Index on the subscription date.

To do this, the entity making the subscription offer must verify that:

  1. The amount in pesos collected by the non-resident shareholder originates from the collection in the country of profits and dividends from closed and audited balance sheets;
  2. The non-resident shareholder meets the complementary requirements for disbursements through the MULC;
  3. The non-resident shareholder has executed a sworn statement stating that:

a. The amount for which subscription is requested comes from funds received for profits and dividends collected in the country, and that such funds have not been remitted abroad from their collection date until the subscription date of BOPREALs;

b. They have not requested the use of this mechanism in another entity for these funds collected in the country; and

c. They acknowledge that they will not have access to the MULC to repatriate the equivalent of these funds collected in the country, for which they subscribed to BOPREALs, except if the repatriation is made through an exchange and/or arbitration with funds deposited in a local account and originated from foreign-currency principal and interest collections from BOPREALs.

Finally, the Communication states that non-resident shareholders may access the MULC to repatriate portfolio investments generated from profit and dividend collections in the country due to the allocation of BOPREALs by means of an exchange and/or arbitration with funds deposited in a local account, originating from foreign-currency principal and interest collections from BOPREALs.

(iii) Implementation of PAIS Tax

On May 6, 2024, Decree No. 385/2024 was issued, introducing new transactions subject to the PAIS Tax.

In accordance with the recent regulations, the PAIS Tax now applies, at a reduced rate of 17.5%, to the subscription in pesos of BOPREAL, or any bonds or securities subsequently issued by the BCRA for the same purpose, by those who acquire them as:

(i) Payment of profits and dividends, as per the conditions specified by the BCRA within the framework of the MULC access regulations, and/or

(ii) Repatriation of non-resident portfolio investments arising from earnings and dividends received in the country from September 1, 2019, onwards, as outlined by the BCRA within the MULC access regulations.

The tax will be levied on the total value of the transaction used for subscribing to the bonds or securities, and, although the subscriber is liable for payment, the financial institution facilitating the BOPREAL subscription will bear the responsibility for collecting and settling the tax.

In addition, please note that access to the MULC for the payment of dividends was already subject to the PAIS Tax at a rate of 30%, and the aforementioned Decree 385/2024 reduced such rate to 17.5%, including the payment of dividends expressly as a transaction subject to this tax.

This report cannot be considered as legal or any other kind of advice by Allende & Brea. For any questions, do not hesitate to contact us.

Related areas