Promotion of the software industry

On September 9, 2004 Law No 25,922 on tax promotion measures for the incentive of the software industry was published in the Official Gazette.

The regime is available for individuals and entities incorporated under the laws of Argentina involved in the software industry as their main activity, including the creation, design, development, production and implementation and conditioning of software systems and any activity that, in general terms, leads to the progress of the software industry. Notwithstanding, activities such as maintenance, conversion and/or translation of information languages, routine data collection, market research for the sale of software, etc. are excluded.

Those interested in enjoying the regime will have to register in a record created for such purpose, and will have the following benefits:

(i) Will enjoy fiscal stability (“estabilidad fiscal”) for a ten-year term. Said stability includes national direct taxes, duties and special contributions and implies that their aggregate national tax liability could not be increased as of the date they are incorporated to the regime.

(ii) Will be able to turn into a nontransferable fiscal credit bond up to 70% of the social security contributions effectively paid, to the extent they are beneficiaries carrying out research and development of software or exportation of software. Said bonds could be used to cancel national taxes and their advance payments originated in the software industry, except for the income tax.

(iii) Will have a reduction of 60% of their income tax liability of each fiscal period, to the extent they can prove they have incurred in expenses related to research and development and/or quality certification processes and/or exportation of software in the terms and conditions to be set forth by the applicable regulations.

(iv) Must comply, as of the third year of the applicability of the law, with any known quality standard applicable to the software industry, in order to continue enjoying the benefits of the regime.

(v) The import of products necessary for the production of software made by the beneficiaries are free from any present or future restriction applicable to the remittance of currency abroad.

Furthermore, the law creates the Fiduciary Fund for the Promotion of the Software Industry (“Fondo Fiduciario de Promoción de la Industria del Software” – “FONSOFT”) and sets forth an initial budget of AR$ 2,000,000. The law provides that said funds should be used for the development of human resources and the economic support to universities and small and medium companies in order to promote the investment in research and development.

The lack of compliance with any of the terms and conditions of the regime will cause the revocatory of the benefits and the obligation to pay any unpaid taxes, together with the applicable interest.

The law invites the provinces, municipalities and the City of Buenos Aires to adhere to the regime creating similar promotion regimes.