04 Sep 24 Regulation of the Incentive Regime for Large Investments (RIGI)

On August 23, 2024, Decree No. 749/2024 (the «Decree») was published in the Official Gazette, through which the regulation of Title VII – INCENTIVE REGIME FOR LARGE INVESTMENTS (RIGI)- of the Bases Law No. 27,742 («Bases Law») was approved. Specifically, the Decree seeks to guarantee the transparency, equality and effectiveness of the RIGI through this regulation, which defines the requirements, benefits and procedures for its application.

In this regard, we provide a summary of the key points below:

Creation and scope of application

The RIGI covers vehicles holding a Single Project that comply with the requirements set forth in the Bases Law, this regulation and other complementary and explanatory regulations that may be issued in the future.

It creates:

• the Registry of Single Project Vehicles (“VPU” for its acronym in Spanish),
• the “Registry of Long-Term Strategic Export Projects”, and
• the “Registry of Suppliers of the Incentive Regime for Large Investments”.

 

The operating rules will be established by the Enforcement Authority.

Enforcement Authority

The Enforcement Authority will be the Ministry of Economy, which must form a Project Evaluation Committee that will analyze the applications for joining the RIGI presented by the VPUs and Local Suppliers.

Said Committee will rule taking into consideration the technical reports of the intervening areas and will recommend the approval or rejection of the applications presented, and will be made up of the heads of the Secretariats of the National Executive Branch (the “PEN” for its acronym in Spanish) or officials with rank and/or or higher hierarchy or equivalent.

Eligible entities

To request entering the RIGI, the VPUs may use companies, branches, temporary unions and other associative contracts already existing on the date of the approval of the Bases Law.

Corporations, single-member corporations, limited liability companies, branches established by companies incorporated abroad that carry out regular activity in the country, and temporary unions and other associative contracts that were developing activities that involve more than one project. and that intend to enter the RIGI, must:

• adopt all necessary measures to ensure that, at the time of submitting the request to the Enforcement Authority, the VPU: (i) is executing a Single Project, and (ii) is not engaged in activities or holding assets unrelated to the aforementioned Single Project; or

 

• alternatively, establish a Dedicated Branch and transfer, assign or make available in an unrestricted manner the assets corresponding to the Single Project to be developed, which must comply with additional requirements.

Minimum Investment Amounts

The Minimum Investment Amounts (“MMI”) are established in eligible assets by productive sector or subsector, net of VAT. For most sectors the MMI remains at USD 200,000,000, with the exception of the oil and gas transportation and storage subsector, which is USD 300,000,000, and exploitation and production of both offshore and gas for export, which is established at USD 600,000,000.

When a Single Project involves activities from various sectors, the minimum investment amount for the sector to which the main object of said project corresponds will be considered.

Meanwhile, the MMI for Long-Term Strategic Export Projects will be USD 2,000,000,000.

Eligible Assets

Investments in eligible assets will be those expressly contemplated in the Bases Law that are made after the entry into force of the RIGI.

The acquisitions of quotas, shares and/or participations will take effect from the date on which the notification provided for in articles 159 or 215 of Law No. 19,550, depending on the type of company, is sent to the company involved.

It is established that the 15% limit for the calculation of investments, as provided in Article 174 of the Ley Bases, applies to the acquisition of equity interests in a VPU, assets assigned to Dedicated Branches, real estate, usufruct over real estate, and concessions for the exploitation of mining, oil, and gas.

Other investments in eligible assets not included in the previous section may be counted up to 100%, to the extent that they are intended for the acquisition, production, construction and/or development of a Single Project.

Long-Term Strategic Exports

In order for a Single Project to qualify as a Long-Term Strategic Export, the following must be accredited at the time of submitting the application for entering the RIGI:

• prove that the Single Project will be able to position the country as a new long-term supplier in a global market in which the country does not yet have a relevant participation;
• detail the temporal extension of each stage of the Single Project, and the investment amount of each one, which shall not be less than USD 1,000,000,000;
• comply during the first and second year with a minimum investment in eligible assets equal to or greater than 20% of USD 2,000,000,000;
• the corporate data of each of the VPUs in charge, and a commitment of joint and several liability for all obligations required within the framework of the RIGI.

Adherence procedure

The application for adherence to the RIGI, which includes the investment plan, must be submitted to the Application Authority and signed by the legal representative of the VPU.

The adherence application must contain:

• description of the Single Project in charge of the VPU, including the details of the investment plan, its location and the Sector to which it corresponds.
• corporate data of the VPU (certificate of existence and corporate documentation, single project in charge of the VPU, sworn statement signed by the legal representative, address and legal representative, total amount, among others).

The Enforcement Authority must issue a decision regarding the adherence application and the investment plan within a maximum period of 45 business days. In the event that the Enforcement Authority requests additional information, the aforementioned period will be suspended.

Once the period is resumed, the Enforcement Authority will issue its decision within the remaining period of 45 days, or within the following 15 business days, whichever is longer.

In the event of rejection, a readjusted investment plan may be submitted up to 2 times during the same calendar year in which notification of the first rejection of the application was received.

The lack of a statement cannot be interpreted as an acceptance.

Project Expansion

In cases in which adherence to the RIGI is requested for the execution of a Single Project whose purpose is the Expansion of a Pre-existing Project not adhered to the RIGI, the Expansion project may qualify as a Single Project beneficiary of the RIGI when:

• complies with all the requirements provided for in the RIGI and equals or exceeds the MMI provided for the corresponding sector; and
• a plan that demonstrates and commits that the RIGI incentives will be applied exclusively to the Expansion of the Preexisting Project is accompanied.

For this purpose, the respective corporate vehicle of the Pre-existing Project must have a separate accounting system or establish a dedicated branch whose sole purpose is the expansion.

Tax and customs incentives

Income Tax

The 25% rate will be applicable with respect to the net taxable profit that arises, in a certain fiscal period, as a consequence of the activities carried out by the VPUs adhered to the RIGI. This rate will be applicable to any profit generated from the adherence of the VPU to the RIGI.

The provisions applicable to the special amortization regime are established.

The 7% rate for dividends and profits is reduced to 3.5% in fiscal years whose closing occurs after 7 years of the adherence to the RIGI.

Regarding the transfer of losses, when they are transferred to a third party, the latter may apply them in the fiscal period in which they were received, while the process of transfer of losses not absorbed after 5 years to third parties will be regulated by the Federal Administration of Public Revenues (“AFIP” for its acronym in Spanish) following certain guidelines.

Value Added Tax (“VAT”)

Regarding Tax Credit Certificates, the amount of VAT that has been invoiced to the holder of a VPU —in the invoice or equivalent document— or that they were required to pay for the purchase and/or final import of goods, execution of works, or provision of services, will be settled with a tax credit certificate without prior authorization from the AFIP.

On a monthly basis, the VPU must inform the tax authority the Tax Credit Certificates submitted, detailing the transaction to which they refer and providing the information required by the authority.

Unions or other Associative Contracts that adhere to the RIGI as VPU

They will be considered subject to income tax under the terms of the second section of subsection a) of article 73 of the Income Tax Law.

Imports

At the time of approval of adherence of the VPU’s to the RIGI, the list of merchandise subject to the incentives and rights provided for in article 190 of the Bases Law will be defined.

The new capital goods, spare parts, parts and components to which the exemption provided for in said article is applicable, correspond to the products identified as BK and BIT according to Annex I of Decree No. 557/23 – or the one that in the future replaces it-. Imported merchandise will be subject to verification of destination. In case of non-compliance with the destination, the offender will be obliged to pay the corresponding duties, taxes, fees or other charges.

Exchange Incentives

It is established that for the purposes of the provisions of article 198 of the Bases Law, the “start-up date” of the VPU will be the first that occurs between the date of the first export of the product that constitutes the main object of the Single Project and the date on which 40% of the minimum investment amount in eligible assets is completed. The “start-up date” must be reported by the VPU to the Enforcement Authority as a sworn declaration.

The percentage of the incentive to be applied under the provisions of the aforementioned article will be calculated on the value received according to the agreed sales condition of the exports of goods.

Collections for exports of goods and/or services provided and/or accrued by a VPU under the terms and conditions provided for in the aforementioned article 198 are exempt from the obligation to enter and settle in the exchange market. Likewise, the free availability of currencies referred to therein will not be subject to restrictions or limitations of any kind.

The incentives will be applicable to export advances, pre-financing and post-financing of exports, both local and foreign, linked to the VPU adhered to the RIGI to the same extent, terms and conditions, in which the incentive applies to the financed export. The free availability of foreign currency will not be subject to restrictions or limitations of any kind.

With regard to access to the exchange market, local financing in foreign currency refers to financial indebtedness with local financial institutions, issuances of securities with local registration, or negotiable promissory notes and/or other instruments approved by the Central Bank of the Argentine Republic (“BCRA” for its acronym in Spanish).

Access to the foreign exchange market by VPUs for early repayment or repatriation may occur at any time prior to the due date of the relevant financial service in the case of financial indebtedness, provided that such financing and/or direct investments have been entered and settled, and without meeting the minimum holding period in the case of direct investments.

Stability

Tax and customs stability extends to all taxes and implies that even if Title VII of the Bases Law is modified and/or repealed, the adhered VPUs will have the right, for 30 years, to pay only:

• the taxes with the incentives that arise from the RIGI; and
• taxes not provided for in the RIGI that were in force on the date of adherence to the RIGI, until their elimination from the general regime.

This will give the VPU the right to reject any imposition of additional taxes or rates higher than those established.

Without prejudice to the foregoing, the VPU will have the right to benefit from any elimination or exemption of taxes in the general regime, as well as the eventual reduction of its rates.

Jurisdiction and arbitration

In the application to enter the RIGI, the VPU may establish, together with the Enforcement Authority, the forms, procedures and other requirements that must be observed to communicate the existence of a dispute.

A dispute may only be submitted to an arbitration or judicial claim if the VPU has previously attempted to resolve it through consultations and friendly negotiations.

Arbitration Contract  →  In the application to enter the RIGI, the VPU adhered to the RIGI must express in writing its acceptance that both the VPU and its partners or shareholders will resolve disputes through the mechanisms provided for in the Bases Law.

If the dispute cannot be resolved through consultations and friendly negotiations between the national State and the VPU adhered to the RIGI after the expiration of the 60-day period, the VPU adhered to the RIGI will submit the dispute to arbitration.

The RIGI Panel is created—as an additional option for the VPU—made up of three professionals from the areas of engineering, economic sciences, and at least one legal professional. The decisions of the RIGI Panel must be issued within a period of 60 calendar days, with the possibility of extension for another 60 days if necessary.