AFIP Regulates Procedure for Using Benefits of “Modern Biotechnology Development and Production Promotional Regime”

Law No. 26,270 (the “BPL” after its acronym in Spanish), passed in 2007, established the Modern Biotechnology Development and Production Promotional Regime (the “Regime”) for individuals or entities incorporated in Argentina who submit the following projects:

1. Research and development projects, based on the use of modern biotechnology, or
2. Application or execution of modern biotechnology projects, intended for the production of goods and/or services or the optimization of processes or goods.

 

The promoted tax benefits included in the Regime (articles 6 and 7 of the BPL) are as follows:

1. Accelerated depreciation of all new capital goods, special equipment, or parts or components of such goods that were acquired for the promoted project (the “Goods”) for income tax purposes.
2. Anticipated Value Added Tax (“VAT”) refund for the acquisition of Goods that were duly invoiced to the project owners.
3. Tax Credit Bonds for an amount equivalent to 50% of the paid payroll taxes for employees affected to the promoted project.
4. Tax Credit Bonds for an amount equivalent to 50% of all expenses destined to hiring research and development services from institutions that belong to the Argentine science, technology and innovation system (only for research and development projects).

 

Although it was approved in 2007, the BPL was only regulated in 2018, by means of Decree No. 50/2018, which formalized the tax benefits provided by subsections a) and b) described above.

On the other hand, on August 2019, the Entrepreneurs and Small and Medium-Sized Enterprises Secretary (“SEPyME” after its Spanish acronym) approved the terms and conditions pursuant to the call for projects in 2019.

In this scenario, provided that the Regime was already in force, further regulation was needed from the Argentine Tax Authority (the “AFIP” after its acronym in Spanish) to apply the tax benefits provided by the BPL

Thus, on February 3, 2020, the Official Gazette published the General Resolution, which regulates the terms and conditions to be comply by all beneficiaries. Please find below a summary of the main topics of this new regulation.

 

Requirements to request the tax benefits

 

First, the SEPyME must properly notify AFIP of the project’s approval.

 

Furthermore, the taxpayer must comply with the following requirements:

1. Have its Tax ID (“CUIT” after its acronym inSpanish) activated.
2. Be registered in both Income Tax and VAT.
3. Declare its tax domicile, e-address and Activity Code (“CLAE” after its acronym in Spanish) and keep them updated.
4. Submit its income tax, tax on presumed minimum income , VAT, personal assets tax (for individuals only) and payroll taxes returns, since the initiation of activities or, if longer, all the limitation period, if applicable.
5. Comply with the applicable reporting regimes, if any.
6. Submit the warranty determined by Resolution (SEPyME) 368/19, if applicable.

 

Procedure

 

Taxpayers who wish to apply for the tax benefits of the Regime must file a presentation through the AFIP website, by entering to the “Presentaciones Digitales” section with their “Tax Password” and pressing on the “Promoción del Desarrollo y Producción de la Biotecnología Moderna” button, where they should file the following information:

1. Declare if they were declared in bankruptcy, or if they have been formally accused of tax crimes, or any other crime in connection with the avoidance of tax obligations (of their own part or third parties). This requirement is extended to shareholders, directors, syndics, administrators, members of the board, or all those who have similar positions of the taxpaying entity.
2. Declare that the Goods are not currently being benefited by other national promotion regimes, excluding the Knowledge-Economy Promotional Regime.
3. If requesting the anticipated VAT refund: Indicate the amount to be refunded and submit a report signed by and accountant and certified by the competent Accountants Bar, which features the existence and legitimacy of the accumulated tax balance. One presentation must be done per VAT fiscal period. 
4. If requesting the accelerated depreciation of Goods for income tax purposes: Indicate the applicable amount, date of acquisition of the Goods and the fiscal years in which the advantage will be applied. This presentation must be filed once, before the filing of the tax return’s due date.
5. Submit all the invoices for the acquired Goods.

 

Those who request the VAT refund must also comply with the following requirements:

1. Declare its Bank Account Key (“CBU”, after its acronym in Spanish) with AFIP.
2. Not have any debts, or non-compliances with the filing of tax returns or reporting affidavits for all fiscal years until the statute of limitation.

 

The VAT refund will proceed provided that its fiscal credits should not have been absorbed by the corresponding fiscal debits.

Once the presentation is submitted, an AFIP official will verify the information. AFIP will be able to ask the taxpayer to correct any formal error.

Once the presentation is formally admissible, AFIP has 20 business days to approve or reject the requested VAT refund.

 

Effects of the loss of benefits

 

Finally, the loss of the benefits gives place to the following, if applicable:

1. Obligation to reimburse all the refunded amounts, plus its corresponding interests and fines.
2. Obligation to repay all the avoided taxes, plus its costs.
3. Obligation to rectify the corresponding tax returns.
4. Archive of the pending petition.