Changes in the Modern Biotechnology Development and Production Promotional Regime

Law No. 26270, published in the Official Gazette on July 27, 2007, had established the Promotional Regime for the Development and Production of Modern Biotechnology, which was in force until July 25, 2022 (for further details, see our article).

Now, through Decree No. 644/2022, published in the Official Gazette on September 16, 2022, the Argentine Executive Branch enacted Law No. 27685, published in the Official Gazette on July 16, 2022, extending the term of the regime until December 31, 2034. The law also expands its scope to include the nanotechnology sector.

This new law does not repeal the previous law; it modifies it in several substantial aspects. For this reason, it was renamed "Law for the Promotion of the Development and Production of Modern Biotechnology and Nanotechnology". Its purpose is to promote the development and production of modern biotechnology and nanotechnology by granting tax benefits to those investing in innovative projects in such sectors. Article 2 of the law defines the terms "modern biotechnology" and "nanotechnology".

 

Eligibility Requirements

 

Law No. 27685 states that individuals and legal entities incorporated in Argentina will be eligible for this regime if they submit: (i) research and development projects applying modern biotechnology and/or nanotechnology, and/or (ii) projects for applying or executing modern biotechnology and/or nanotechnology, aimed at producing goods and/or services, or at improving processes and/or products.

The regime excludes projects whose main objective involves products obtained and/or processes carried out through conventional and widely known production uses, and those focused on the obtention of new varieties using conventional genetic cross-breeding or conventional multiplication. In this sense, the law clarifies that the only projects that will be approved are those implying a "reliable technological impact", owned by persons able to demonstrate technical solvency and economic and/or financial capacity to carry them out, and complying with the biosafety requirements established by the regulations in force. Eligible beneficiaries will be entitled to submit more than one project and receive benefits for each of them. To receive and maintain the benefits, the beneficiaries must carry out the activities on their own behalf in Argentina and be up to date with their tax and social security obligations.
 

Once the tax amount has been established, the enforcement authority will grant the approved projects the benefits described below, in accordance with the priority order arising from the merit and convenience of the projects and based on the parameters established in article 9 of the law.
 

Creation of the National Registry for the Promotion of Nanotechnology

The law states as well that a National Registry for the Promotion of Nanotechnology must be created, to register the projects approved by the enforcement authority. This registry will co-exist with the National Registry for the Promotion of Modern Biotechnology. The enforcement authority will issue a certificate of registration granting the owner of the project the status of regime beneficiary, once the project is registered in the corresponding registry.
 

Tax Benefits

Beneficiaries of the regime will obtain the following tax benefits, depending on the type of project submitted:

Benefit	Owners of research and/or development projects	Owners of projects to produce goods and/or services
Accelerated amortization in the income tax paid for all new capital goods, special equipment, or parts or components of such goods  acquired for the project.	YES	YES
Advance refund of the VAT corresponding to the acquisition of goods listed in paragraph a), billed to the owners of the project and not absorbed by the respective tax debits originating in the development of the activity.	YES	YES
Conversion of 50% of the expenses destined to the hiring of technical assistance, research, and/or development services with relevant entities of the National Science, Technology, and Innovation System into a Tax Credit Bond. These bonds will be valid for 10 years from the date of issuance and will be nominative and transferable only once.	YES	NO

 

Failure to Comply with the Requirements and Conditions

 

Failure to comply with the provisions of the Law and its regulations will result in the following penalties:

1. Revocation of the project registration in the relevant registry.
2. Obligation to pay all unpaid taxes, and/or to reimburse all tax credited or refunded, and/or the tax credit bonds, if applicable, plus the corresponding interests and accessories.
3. Exclusion of the project holder from re-registration in the registry.
4. Likewise, the penalties stated in Law No. 11683 (Tax Procedure Law), Law No. 18820 (Social Security Regime), Law No. 22415 (Customs Code), Law No. 24769, and Title IX of Law No. 27430 (Criminal Tax Regime) will apply.
    

Enforcement Authority

 

The appointed authority for the enforcement of this regime is the Ministry of Productive Development.

Information Exchange Between the Enforcement Authority and the Argentine Tax Authority

 

The law states that the Argentine Tax Authority will provide the enforcement authority the information it requires to verify and control the status of each application and how the beneficiaries are using the tax benefits. The information required, as well as its disclosure by the Tax Authority, will not be subject to the tax secrecy regulations. The approval of tax benefits for the beneficiaries will imply they full consent, and authorize the Argentine Tax Authority to give such information to the enforcement authority, and the enforcement authority to process it.

Entry into Force
 

The provisions in Law No. 27685 became effective on September 17, 2022 and will be applicable to applications filed on or after that date.

 

Regulation

 

It is worth noting that the regime created by Law No. 26270 in 2007 was regulated in 2018, through Decree No. 50/2018, later amended by Decree No. 289/2021, and by General Resolution No. 4934 (as amended), issued by the Argentine Tax Authority. These regulations, which detail the scope of the regime and the benefits originally granted, were not repealed or rendered ineffective. Therefore, they are still in force and apply to the current regime. However, considering the amendments introduced by Law 27865, new regulations are expected to be issued.