Regime for Large Investments: Tax Incentives

The RIGI provides tax incentives for strategic, high-impact economic projects, including special benefits for the so-called Long-term Strategic Export Projects (PEELP).

The key aspects of the tax incentives include:

1)    Income tax 

Single project entities (VPU) adhered to the regime may be subject to a special tax treatment.

•    The tax rate will be 25%, and the progressive scale of Income Tax Law (ITL) will not apply. 

•    VPUs may, for the investments they make, choose to carry out the corresponding asset depreciation, in accordance with an accelerated depreciation scheme specially established in the RIGI regulations.

•    VPUs’ net operating losses in a tax period that cannot be offset by taxable profits of the same period may be computed updated against taxable profits realized in the immediately following years, without time limit. After five years without having offset such losses against taxable profits, they may be transferred to third parties. Dedicated branches may also be used to offset taxable profits of the incorporating company.

•    Update by inflation of all the assets for tax purposes would be automatic (based on percentage variations of the CPI), and article 93 of the Income Tax Law will not apply.

•    Rules regarding the limit on the deduction of interest and negative exchange differences in the case of financing will not apply for the first five years as of the date of accession.

2)    Dividends and profits 

After seven years of having adhered to the RIGI, when VPUs dividends and profits are distributed, they will be subject to a 3.50% Income Tax rate (instead the 7% Income Tax rate currently applicable).

3)     Additional benefit for PEELPs for payments abroad

In addition to the above benefits, VPUs holding PEELPs will enjoy the following benefits:

•    Payments made to non-residents related to maritime leases or charters; to international transport services for exports; and to services included in engineering, procurement, and construction contracts, are exempt from income tax.

•    All other payments made by these VPUs to beneficiaries abroad will be subject to income tax at an effective withholding rate of 10.5%, unless there is a provision for more favorable treatment.

•    If the VPU bears the tax (under a grossing up clause), the grossing up rules provided in the general regulations will not apply, and the corresponding effective withholding rate must be applied to the agreed payment amount without any increase.

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4)    Value Added Tax (VAT). 

A system based on Tax Credit Certificates is established to pay obligations, based on these considerations:
 
Under certain conditions, VPUs may pay VAT to their suppliers, or to the Argentine Tax Authority in the case of imports of goods, by issuing Tax Credit Certificates. Suppliers will consider the favorable VAT balance resulting from applying the Tax Credit Certificates as freely disposable. When the supplier requests the refund or transfer to third parties of balances derived from the use of such certificates, and the Argentine tax authorities do not refund or approve the transfer within three months, the beneficiary may transfer said Tax Credit Certificates to third parties without needing the tax authorities’ prior approval. Beneficiaries may not compute current tax credits paid with Tax Credit Certificates.

5)    Tax on debits and credits on bank accounts

SPVs may compute 100% of the amounts paid and/or received for the tax as a credit for income tax.

6)    Accounting records in USD 

VPUs may choose to keep their accounting records and financial statements in USD, using International Financial Reporting Standards.

Limit to benefits. Tax incentives granted through RIGI will not produce effects if they result in a transfer of income to foreign tax authorities by applying a global minimum tax under the second pillar of the Inclusive Framework of the Organization for Economic Co-operation and Development (OECD).