The race for digital transformation, set to hit $2.6 trillion in 10 years, has revealed a burning tech talent shortage. The US alone risks facing revenue losses of $162 billion annually, with high employee turnover, long hiring process, and rising salary demands adding fuel to the fire. No wonder 75% of US tech companies are turning to nearshoring their software development teams in Argentina. But what makes this destination so attractive?
I’m Dmytro Ovcharenko, CEO of Alcor. We help product tech companies from the US expand to LATAM by building their development centers in Argentina, Mexico, Colombia, and Chile. With our legal entities across the region, we scale engineering teams from 0 to 100 talents within a year, providing full compliance and 360-degree operational assistance.
In this article, I’ll delve into the reasons why Argentina is an attractive hub for tech companies, unravel the challenges associated with nearshoring software development to Argentina, provide an overview of the country’s laws and taxes, and suggest better solutions to help you thrive in this burgeoning business landscape. So, stay tuned!
Software Development Industry in Argentina
The IT market in Argentina is on a dynamic ascent. Its size was estimated at over $22 billion in 2023 and will likely soar to $45.3 billion by 2028—a value that surpasses Paraguay’s entire GDP, showing its immense growth potential! This makes Argentina the third largest tech market in LATAM after Mexico and Brazil.
Thanks to a swift cloud migration and high broadband penetration, the ICT services in Argentina, particularly, SaaS, IoT Hardware, and Systems Design, are on the rise. The revenue in the local IT services market is now around $3 billion and is expected to reach almost $4 billion by 2029. Sounds like a promising reason for those considering IT nearshoring in Argentina, doesn’t it?
But that’s not all. The country proudly stands as a hub for IT ventures with 19 commercial structures, 3,800 tech enterprises, 1,107 startups, and 11 unicorns. The Argentinian market also houses 453 IT companies which specialize in custom web development, IT strategy consulting, mobile app development, and UX/UI design projects. Beyond sheer numbers, Argentina distinguishes itself as an innovation leader in the Latin American region as it clinches the 8th spot on the 2024 Global Innovation Index, particularly exceling in human capital, business sophistication, and technology and creative outputs.
Even better, the country’s ranking as the 4th largest e-commerce market in Latin America and 2nd in the region for cryptocurrency adoption—impressive! This vibrant landscape extends by adopting booming tech trends in sectors like BFSI, telecom, healthcare, IoT, cloud computing, AI, and agtech, making nearshore software development in Argentina a win-win for any business!
The Advantages of Nearshoring Software Development to Argentina
Now, let’s dive into the strategic advantages of nearshoring software development to Argentina’s tech prowess for your business:
Large Pool of Skilled Talents
Over 115,000 software developers were in the Argentine tech talent pool as of 2023. This talent pool is fueled by the annual production of around 27,000 graduates, currently hitting around 150,000 technical specialists. Argentine software engineers are in the top 40 worldwide on Coursera, ranking #4 for data science and #7 for technology skills. They excel in mobile development, programming, databases, and showcase expertise in Python, TensorFlow, Cloud APIs, SQL, R, and NLP.
Cost Efficiency
US-based tech companies can save a pretty penny on building a software development team in Argentina. With senior software developers earning around $132,000 annually in the US versus $60,000 in Argentina, employers can pocket up to 60% in savings and redirect these funds to strategic activities. When it comes to other LATAM locations, nearshore outsourcing in Argentina is about 10% cheaper than in Mexico and 5% cheaper than in Chile—small savings that snowball over time!
|
Gross Annual Salary Ranges for Senior Software Developers |
|||||||||||
| Argentina | Mexico | Colombia | Chile | USA | |||||||
| JavaScript Developer |
$58,000 | $66,000 | $60,000 | $61,000 | $114,000 | ||||||
| Python Developer |
$57,600 | $63,000 | $60,000 | $61,000 | $126,000 | ||||||
| React.JS Developer |
$56,000 | $60,000 | $62,000 | $60,000 | $120,000 | ||||||
| Golang Developer |
$54,000 | $62,000 | $58,500 | $61,000 | $117,000 | ||||||
| AI Developer |
$60,000 | $63,200 | $60,000 | $62,000 | $132,000 | ||||||
| Cloud Developer |
$68,000 | $69,000 | $55,500 | $65,000 | $132,000 | ||||||
| DevOps Engineer |
$63,500 | $72,400 | $70,000 | $75000 | $138,000 | ||||||
| Blockchain Developer |
$60,000 | $68,000 | $62,000 | $61,000 | $132,000 | ||||||
High Level of Education
Argentina provides solid tech education that future software developers receive in top national universities like the University of Buenos Aires, Pontificia Universidad Católica Argentina, and Universidad Austral featured in QS World University Rankings. Zealous coders can secure scholarships for equipment and further pursue Bachelor’s or Master’s degrees. The education quality is pretty good, with three Argentine universities mentioned in the top 50 in Latin America and seven globally. There are also STEM initiatives supported by organizations such as OECD and Siemens.
Language & Cultural Compatibility
Argentine developers stand out for their impressive English proficiency, as they rank #1 in the LATAM region and 28th globally in the EF English Proficiency Index 2023. This guarantees a perfect grasp of development requirements, full integration of client feedback, and smooth written and verbal communication with their international colleagues.
And these are not the only benefits of nearshoring to Argentina. Argentinian coders also bridge cultures seamlessly — they share Western values like teamwork, creativity, and proactive decision-making. This makes them adaptable and dedicated to growth. They sound like perfect team players, don’t they?
Haven for Startup Development
Argentina’s vibrant startup ecosystem secures 4th place in the LATAM region, with an estimated total venture capital funding of nearly $700 million. The country alone concentrated 45% of the startup ecosystem value in LATAM 4 years ago.
The thriving heart of Argentina’s tech scene, Buenos Aires, houses 436 startups, with about143 new additions since 2023. Among its stars are Ualá, Gobant, Despegar, Auth0, Fudo, Workana, Lemon Cash, Coderhouse, Pomelo, Bitfarms, and Mercado Libre, currently the e-commerce king in Latin America. It’s already achieved a staggering $18.5 billion in net revenue—a 34,9% growth since 2023.
Córdoba is the second-largest Argentinian startup hub after Buenos Aires. It hosts 200 startup companies (8 added since 2023) and an ecosystem rich in resources: 22 incubators, 8 venture capital institutions, 2 angel investment clubs with almost 70 investors, and over 20 entrepreneurial support organizations, which highlights Argentina’s dynamic role in the global startup scene. Other cities like Mendoza, Río Cuarto, and Rosario together have 58 startups.
Curious about other LATAM locations? Unveil the pros of nearshore software development to Uruguay!
Time Zone and Proximity
Argentina is in GMT-3, just a one-hour time difference from New York, Washington D.C., Miami, and Atlanta. This proximity makes nearshore outsourcing to Argentina a smooth experience that streamlines communication and ensures timely feedback and efficient project management.
Government incentives
Through Law 27,506, the Argentine government offers tax incentives for various activities, including information technology. To qualify for the incentives, legal entities must register in a National Registry of Beneficiaries and demonstrate that a minimum of 70% of their recent annual revenue originates from one or more promoted activities.
Employers may also benefit from a non-transferable fiscal credit certificate, equivalent to 70% of the SSC paid on behalf of their employees engaged in promoted activities. This credit can be utilized to offset specified taxes, with the potential to increase to 80% for SSC related to new hires that fall within special interest groups, such as individuals with disabilities or residents in disadvantaged areas.
Moreover, Argentina has been improving its bureaucratic system for online business establishment. Now companies can be fully set up within 24 hours. This reflects the government’s desire to create an appealing environment for foreign businesses that are nearshoring in Argentina.
When It’s Better to Nearshore to Argentina
1) When you experience the lack of software developers in your local IT talent pool.
66% of the U.S. tech companies are struggling to find and hire skilled employees with in-demand skills. The situation is expected to worsen by 2030, as the global talent shortage will likely reach 85 million. If you’re one of the companies facing challenges in finding the right people for your team, looking for nearshore developers in less heated tech markets like Argentina’s is a good idea. After all, the number and quality of local developers meet the expectations of giants like Google, Oracle, IBM, Microsoft, and Accenture.
2) When hiring costs and developer salaries are overwhelming in your home country.
Emerging from economic challenges that resulted in numerous layoffs, many businesses require cost-effective solutions to build their teams. Nearshoring to Argentina offers significant savings – up to 60% compared to the U.S. market. That makes it a smart option for businesses that don’t have the extra resources to compete for tech talents in the expensive U.S. market.
3) When you need to expand your business abroad.
Lastly, once you’ve set your eyes on business expansion to other countries and continents, why not start with LATAM, particularly with nearshore to Argentina? Its tech industry growth constitutes 8.3% CAGR since 2022, according to Technavio, and new companies are more than welcome to enter the local business environment and create new jobs. A bonus for you: the local talents stay with foreign employers who pay the salaries in USD more eagerly. For the last year, talent turnover has reduced by 5%.
Or maybe you need to offshore/nearshore in Poland? That’s more than possible with Alcor!
Legislation on Nearshoring Software Development to Argentina
And now, let’s uncover the legal framework for nearshoring software outsourcing or creating a tech team in Argentina:
General legal framework
Contractual relations in the country are governed by the Civil and Commercial Codes. Additionally, the Commercial Companies Law oversees the incorporation and corporate relations within a company. The Fiscal Code sets the fundamental rules for business taxation, while the Intellectual Property Law regulates intellectual property protection and transfer, including computer software. Together, these legal components form the comprehensive framework that guides various aspects of business operations in Argentina.
Specific legislation tailored for the IT business sector
Law No. 27,506 implements the ‘Promotion Regime’ with tax incentives and deductions. Additionally, Law No. 6,392 provides deferred payment options and/or exemptions from the Gross Receipt Tax for IT businesses that operate in the Buenos Aires area. Notably, no significant legislative challenges impact the operation of IT businesses in Argentina.
IT Nearshoring to Argentina: Taxes, Accounting, and Payroll
Corporate Income Tax (CIT) and Withholding Tax (WHT)
Argentina’s corporate income tax (CIT) applies to resident companies and Argentine branches of foreign companies, with rates ranging from 25% to 35% on adjustable income bands. Small companies benefit from a 60% CIT reduction, medium-sized companies receive a 40% reduction, and large companies get a 20% reduction. Additionally, a 7% withholding tax is imposed on dividends paid by Argentine companies to resident individuals and nonresidents, as well as on funds transfers by Argentine branches of foreign entities to their head offices.
Payroll taxes:
Personal Income Tax (PIT)
PIT in Argentina is levied on the worldwide income of Argentine residents, with a progressive rate ranging from 5% to 35%. For instance, with an annual income of $60,000, the effective PIT rate would be approximately 31.5% or $18,900. A standard personal allowance applies to taxpayers (both employees and self-employed) who have resided in Argentina for over six months in the relevant tax year and have not earned income over ARS 451,683.19 (~$1,252) within the same period.
Starting from January 1, 2024, Argentina implemented updated regulations for PIT. Under which employees* with a gross annual income of less than 180 minimum wages (approximately $66,000 per annum) are exempt from paying income tax. Those who exceed this threshold face a progressive PIT rate, that ranges from 27% to 35%. However, this reform does not cover top-management occupations like directors of public limited companies, CEOs, and assistant managers. They will continue to pay taxes under the progressive PIT rate, ranging from 5% to 35%.
Social Security Contributions
Employers in Argentina are required to pay Social Security contributions (SSC) on employees’ monthly compensation, which varies from 24% to 26.4% (for companies primarily involved in the provision of services or trade).
Typically, SSC consists of 18%-20.4% for the Pension Fund, with 6% allocated to Health Insurance. Additionally, employers must contribute a fixed amount of ARS 173 ($0.5) for labor risk insurance (plus a percentage of the employee’s salary based on the profession) and a fixed amount of ARS 37.21 ($0.1) to the life insurance fund per each employee.
Argentine employers are exempt from paying SSC for the first ARS 7,003.68 ($19.5) of the employee’s monthly compensation. Meanwhile, employers with no more than 25 workers get a single additional allowance of ARS 10,000 ($28).
Employees are also subject to a comprehensive social security tax rate of 17%, where:
- 11% allocated to pension funds,
- 3% for health insurance, and
- 3% to social services.
As of September 1, 2023, Argentina has established the minimum and maximum bases for SSCs, pegged to a monthly salary of ARS 29,456.43 (approximately $82) and ARS 957,320.12 (around $2,654), respectively.
Additionally, SSC withheld by the employer is deductible from the employee’s income for Personal Income Tax (PIT) purposes.
| Pension System | Healthcare | Professional Risks | |||
| Employer | Employee | Employer | Employee | Employer | Employee |
| 18%-20.4% | 11% | 6% | 3% | ARS 173 — $0.5 (to labor risk insurance) ARS 37.21 — $0.1 (to the life insurance) | 3% (to social services) |
Capital Gains Tax
Capital gains are generally taxed as income under Argentina’s progressive Corporate Income Tax (CIT) system, with 25% to 35% variable rates. However, Argentine residents are liable for a tax of 15% on gains arising from the sale of shares, bonds, and other securities not listed on a stock exchange or authorized for the public.
Value-Added Tax (VAT)
All transactions that involve goods or services in Argentina are subject to VAT, a standard rate of which is 21% unless specifically exempted. Legal entities that carry out export operations to the promoted activities are exempted from VAT withholdings and additional withholdings.
Is There a Better Option than Nearshoring Software Development to Argentina?
There are different ways to team up with talented Argentinian developers, the most common of which include:
Software R&D Accelerator
It’s a new solution that disrupts traditional outsourcing models, allowing tech companies like yours to enter new markets with ease. No more buy-out fees, markups, indifferent development teams, indirect communication, IP threatening, and other outsourcing risks and pitfalls. A tech R&D accelerator combines a perfect mix of services—full-cycle tech recruitment, Employer of Record, and operational support—everything for a hassle-free expansion to Latin America.
This game-changing model has already proven effective for US tech companies like Sift. Aiming to hire 30-35 Silicon Valley-caliber talents swiftly, they partnered with Alcor to build their R&D center abroad. We engaged 13 tech recruiters who wowed them by filling 2 Infrastructure Engineer and a Ruby on Rails Developer roles in under 7 days. Beyond recruitment, we provided legal and compliance support, managed tax payments, stock options, visa processes, and handled procurements. As a result, Sift not only hit their hiring goals but also got a fully backed development team in a new location.
Tech Recruitment Agencies
Another good alternative to nearshore software outsourcing to Argentina is cooperation with hiring companies. They will handle the entire recruitment process from crafting EVP and applicant sourcing to pre-screening candidates and job interviewing. The best are those agencies who specialize in the tech industry and know the ins and outs of how to hire developers in Argentina of different skills tacks and expertise levels.
However, IT recruitment in Argentina doesn’t presuppose any employment contract management, onboarding/offboarding of developers, payroll, and operational assistance. Tohandle these tasks, you have two options: do it in-house or delegate them to a vendor. Managing in-house can strain your internal team and requires significant effort to navigate the nuances of a new market. The latter can put at risk personal information of your hires if you would be outsourcing payroll to Argentina, for instance.
Freelance Powerhouse
If you need to get some small tech tasks or projects done, you might consider hiring remote Argentinian developers on a freelance basis. This offers flexibility and on-demand expertise and suits quite well for short-term needs. However, it might not be sufficient for tech companies eager to create a whole new product with advanced features.
IT Outsourcing Companies
Cooperation with an Argentinian software development outsourcing vendor shifts full responsibility over the project supervision, quality control, and team management to them. While such nearshore software development companies in Argentina independently handle development end-to-end, your limited control can lead to unexpected results.
Another concern is the poor dedication of outsourced developers as they do not engage in projects long-term and might even handle multiple projects simultaneously. Nearshore outsourcing in Argentina may also bring hidden costs, like unexpected fees and markups. Plus, there’s the risk of data exposure as you entrust your sensitive information to a third party that will also own the intellectual property of your project until you make sure it’s transferred to you.
IT Outstaffing Vendors
A similar model to traditional IT outsourcing is outstaffing in Argentina. It serves as a temporary fix for companies that experience talent gaps due to new projects or seasonal workflow spikes. Instead of spending resources on recruitment and a legal entity abroad, these businesses can engage external talents on project basis without a hassle. With IT outstaffing, you can replace developers on the fly and maintain control over team management.
However, it’s vital to remember that these programmers remain official employees of the outstaffing vendor, meaning limited dedication and effort to your product development. Retaining them can lead to hefty buy-out fees, usually reaching tens of thousands of dollars per talent, along with potential integration challenges and risks to intellectual property rights.
Nearshoring Software Development to Argentina Can be Easier with Alcor
As you can see, nearshore software outsourcing in Argentina is only about the process, not potential. Real growth happens with your own development team which you can build within a nearshore software development center in LATAM or Eastern Europe.
Here is what you’ll get with our turnkey solution:
- Access to top 10% Silicon Valley-caliber talent;
- Possibility to cut expenses by 40% compared to outsourcing;
- Transparent pricing, without any markups and hidden costs;
- Zero buy-out fees, as the development team is yours from day 1;
- Direct management & full integration into your corporate culture;
- Freedom from setting up a legal entity and managing compliance.
Not sure if it’s the right fit? 96% of our clients are satisfied with our services. See what tech leaders like People.ai, Sift, ThredUP, BiScience, Dotmatics, and others say about expanding into new markets with Alcor’s R&D center solution.
Let’s chat about your team scaling plans—book a call today!