In Argentina, startups scramble to adjust to new dollar tax

Contxto – The government of Argentina is doing all it can to get a grip. In Argentina’s case, as of late December, transactions made with foreign currencies, such as US dollars, come with a 30 percent tax.

This has hit many startups throughout the country as it must be factored into their fares, which of course, affects the end-users themselves.

30 percent tax

The basic premise is that for every transaction made in a foreign currency, the government will charge a 30 percent rate over the net value of the purchase in the foreign currency. The referential conversion rate at which it’ll be charged is based on the value of that currency specified by Argentina’s national bank, the previous working day.  

Users will see this tax already converted into Argentine pesos on their credit or debit card bill.

So for example, let’s say a user pre-orders Resident Evil 3 on Amazon and covers it with their Ualá pre-paid card. The game itself costs US$60 and over that amount, the government will charge its 30 percent duty. That’s an additional US$18. 

Then, these US$18 are converted into Argentine pesos at the exchange rate of the previous working day. This additional charge will be shown on their Ualá bill, along with the shipping cost and other taxes.

Nonetheless, variations are expected, as fintechs, digital banks, and other financial institutions scramble to offer more attractive exchange rates than the official referral given by the national bank.

Who it affects

Any fintech or payment-application that handles foreign currencies had to find strategies to approach this new regulation. This resulted in some, such as Naranja X, temporarily suspending their service to adjust their systems. 

Others, like Ualá, were updating their app but also taking the time to illustrate how the tax would be charged.

This “solidarity” tax was established with tourists in mind and is set to apply for the next five years. 

However, it’s wound up hitting digital streaming services in the country such as Spotify. Users don’t pay these businesses in dollars, mind you. But, the subscription plans they sell are originally in dollars. The amount is converted, and then shown on the user’s bill in the local currency.

So, binge-watching Netflix paints to be a more costly affair.

-ML