28 Jun 24 Ley Bases: Incentive Regime for Large Investments

The «Incentive Regime for Large Investments» («RIGI» for its acronym in Spanish) is established to provide a regulatory framework aimed at promoting investment in productive projects in Argentina. This regime will provide incentives, legal certainty, and protection of acquired rights for project-holding entities that meet the established requirements.

Creation and Scope of the RIGI. Creation and Scope of the Incentive Regime for Large Investments («IRLI»). This regime will provide incentives, legal certainty, and protection of acquired rights for project-holding entities («VPU» for its acronym in Spanish) that meet the established requirements. It applies throughout the country and will be governed by regulatory rules issued by the National Executive Power («PEN» for its acronym in Spanish). The main objectives of the RIGI include encouraging large national and foreign investments, promoting economic development, enhancing competitiveness, increasing exports of goods and services abroad, creating jobs, providing stability to investments and coordinating responsibilities between the National Government, provinces, and natural resource authorities.

Furthermore, any regulation or act by which the Nation, provinces, including their municipalities, and the Autonomous City of Buenos Aires, which have adhered to the RIGI, restricts, hinders, or distorts what is established in this regime, will be null and void.

Term and eligible participants. The RIGI applies to Large Investments in projects in the agroforestry, infrastructure, mining, energy, and technology sectors that meet the established requirements. The period to enroll will be 2 (two) years, with the possibility of a one-time extension for an additional period of up to 1 (one) year. VPU holding one or more phases of a project that qualifies as a Large Investment may apply for enrollment to the RIGI. For this purpose, the following will be considered VPU: i) corporations, including Sole Member Corporations (SAU) and limited liability companies; ii) Dedicated Branches, meaning those branches that, for the purpose of enrolling the RIGI, establish corporations or branches of a foreign corporation engaged in one or more activities not part of the investment project or having one or more assets not affected by the project, provided they meet the requirements established in the RIGI; and iv) branches established by foreign corporations in accordance with Article 118 of Law No. 19,550; iii) temporary associations and other associative contracts.

Additionally, providers of goods or services with imported merchandise may apply for registration under the RIGI solely for the purpose of exempting themselves from import duties, fees, or tax withholding on goods they import for the provision intended for a VPU.

Furthermore, the regime establishes who may not enroll in the RIGI.

Large Investments. Projects involving the acquisition, production, construction, and/or development of assets to be used in activities meeting certain requirements will be considered Large Investments, such as involving an investment amount per project in computable assets equal to or exceeding USD 200,000,000, and providing for the first and the second year the fulfillment of a minimum investment in computable assets.

Investments in computable assets include all those made from the entry into force of the Ley Bases (the “Law”) and intended for the acquisition, production, construction, and/or development of assets used in activities included in the RIGI.

Projects that may result in positioning the Argentine Republic as a new long-term supplier in global markets involving successive disbursements with a minimum investment equal to or exceeding USD 1,000,000,000 may be qualified as Long-Term Strategic Exportation.

As a condition to remain in the RIGI, the VPU undertakes to comply with all essential conditions and requirements of the regime.

Tax and customs incentives for VPU adhering to the RIGI.

1. Income Tax:

• A rate of 25% is established, without applying the scale provided for in the Income Tax Law («LIG»).
• Depreciation of investments is allowed according to the rules established in the LIG or under the following regime: i) for depreciable movable property acquired, manufactured, fabricated, or imported: at least in 2 annual installments, equal and consecutive; ii) for infrastructure works, at least in the number of annual installments, equal and consecutive, which arises from considering their useful life reduced to 60% of the estimated one.
• The tax loss suffered by the VPU in a fiscal period, which cannot be absorbed with taxed gains of the same period, may be deducted from taxed gains obtained in the immediate following years and without time limit. After five years without such losses being absorbed by taxed gains, they may be transferred to third parties.
• The updates provided for in the LIG will be made based on the percentage variations of the General Consumer Price Index (IPC), with Article 93 of said law not applicable.

2. Dividends and profits:

• A rate of 7% is set on the profits derived from dividends and profits of VPU adhering to the RIGI.
• After 7 years from the date of enrollment to the RIGI, profits derived from dividends and profits will be subject to a rate of 3.5%.

3. Value Added Tax (“IVA”):

• For VPU enrolling the RIGI, under certain assumptions, a regime is established for the payment of VAT to their suppliers, or to the AFIP in the case of imports of goods, by delivering Tax Credit Certificates.
• Tax Credit Certificates will have the nature of credit balances in the tax for suppliers. In the event that the supplier requests the refund or transfer to a third party of balances arising from Tax Credit Certificates, and the AFIP does not make the refund within 3 months, the beneficiary may transfer the remnants of such balances to third parties without the need for approval by the AFIP.

4. Treatment of temporary associations and associative contracts:

• distributions of profits of the VPU to its members will not be computable for their beneficiaries to determine their net gain.
• No local tax may be levied on the operations, transfers, sales, leases, services, or any other economic relationship between the VPU and its members.

5. Tax on debits and credits:

• 100% of the amounts paid and/or received as tax on debits and credits in bank accounts may be computed as a credit against income tax.
• Exemption from import duties is established for imports of new capital goods, spare parts, components, and consumer goods, as well as temporary imports made by VPU adhering to the RIGI.

6. Other provisions:

• Se regulan aspectos contables y financieros, como la opción para los VPU de llevar registros contables y estados financieros en dólares estadounidenses y utilizar las Normas Internacionales de Información Financiera (NIIF). Accounting and financial aspects are regulated, such as the option for VPU to keep accounting records and financial statements in US dollars and use International Financial Reporting Standards (NIIF)
• Free importation and exportation of goods for the construction, operation, and development of projects are guaranteed without prohibitions or restrictions.
• Specific provisions are established for Dedicated Branches.
• The treatment of corporate reorganizations to establish a VPU or make investments in computable assets is contemplated, which may be carried out in accordance with the provisions of Article 80 of the LIG, with certain modifications.

A comprehensive framework of tax and customs incentives is provided to promote investment and project development under the RIGI.

Exchange incentives for VPU adhering to the RIGI. Key points:

1. The export proceeds of products from projects adhering to the RIGI made by the VPU are exempted from the obligation of entry and/or negotiation and settlement in the exchange market in certain percentages, depending on the time elapsed since the date of enrollment.
2. Currencies exempted from the obligation of entry and settlement in the exchange market are freely available to the VPU.
3. Currencies from local or external financing obtained by the VPU adhering to the RIGI are not subject to restrictions on their free availability abroad or in the country. Such funds are freely available by the VPU and/or the Adhered Project.
4. VPU adhering to the RIGI shall not be subject to any limitation on holding liquid or non-liquid external assets imposed by exchange regulations.

Stability and compatibility with other regimes and assignments.

1. VPU adhering to the RIGI will enjoy regulatory stability in tax, customs, and exchange matters. The incentives granted shall not be affected by future regulations that are more burdensome or restrictive. This stability is valid for the 30 years following the date of enrollment by the VPU, after which the general regime shall apply.
2. Long-Term Strategic Export: If projects are executed in successive stages, regulatory stability will extend up to 30 years after the estimated start date of each stage, subject to certain requirements.
3. Current taxes applicable at the time of enrollment will apply to the VPU, with certain favorable modifications contemplated in the regime. No new taxes or increases to existing ones will be applied.
4. VPU will be exempt from more onerous exchange restrictions than those provided in the RIGI. They will have the right to reject the application of more onerous changing rules and benefit from reductions or eliminations of future exchange restrictions.
5. Transfer of shares: Shares of VPUs may be transferred without prior authorization, but notification to the Enforcement Authority must be provided. They may be subject to pledge or assignment as collateral without prior authorization from the enforcement authority.
6. Enrollment to the RIGI does not imply waiver or incompatibility with other promotional regimes. Incentives may be combined with those of other non-overlapping regimes.

Termination of Incentives under this Regime.

1. Incentives and rights of a VPU adhering to the RIGI will cease without retroactive effect due to the following reasons:

• Completion of the project due to the end of its useful life.
• Bankruptcy of the VPU.
• Voluntary withdrawal requested by the VPU, effective from the date of approval by the Enforcement Authority.
• Cessation as a penalty for violation of the RIGI.

2. VPUs may voluntarily withdraw from the RIGI under the following conditions:

• Once the obligations set forth in sections a) and b) of Article 170 have been fulfilled.
• If they voluntarily pay the minimum fine set forth in section e) of Article 211, and such payment is made within the period established by the regulations.

The request for withdrawal must be submitted by the VPU as established by the regulations and must be accepted by the Enforcement Authority through the issuance of the corresponding administrative act. Once approved, the applicant for withdrawal will be released from obligations and incentives provided under the RIGI from the date of the withdrawal request.

Infractional and Recourse Regime Applicable to VPUs. Penalties are established for certain non-compliances with the regime and its regulatory provisions. In case of non-compliance, the Enforcement Authority must instruct the VPU to remedy it within a specified period. If the non-compliance is not remedied or cannot be remedied, a summary procedure will be initiated that guarantees the VPU’s right to defense. Penalties for non-compliance may include warnings, fines of varying amounts depending on the severity of the infringement, cessation of the RIGI benefits, disqualification from applying for enrollment to new projects, and the return of tax, customs, and exchange franchises, among others.

Provisions on the enforcement authority of the law. The PEN will designate the Enforcement Authority, which will be empowered to perform different tasks such as evaluating and approving applications for enrollment to the regime, overseeing and monitoring compliance with the law, verifying compliance with obligations by VPUs, among others.

1. The Enforcement Authority may delegate its powers to Government Secretariats according to the corresponding sector of activity.
2. Beneficiary entities must submit to the Enforcement Authority the required information about the project status and VPUs.