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Argentina Introduces New Incentives for the Promotion of the Automotive and Auto Parts Industry — Orbitax Tax News & Alerts

Argentina has published Law 27.686 of 19 September 2022, which establishes a new incentives regime for the promotion of the automotive and auto parts industry and its value chain. The law provides for the creation of the program for the promotion of new investments in the automotive and auto parts industry, providing incentives for investments in new capital goods and infrastructure projects carried out by industrial companies located in Argentina and destined directly for the production of the certain goods and/or the development of related activities.

The program covers investments in the production of:

  • Automobiles;
  • Utility vehicles with up to 1,500 kg load capacity;
  • Light commercial vehicles exceeding 1,500 kg load capacity up to 5,000 kg load capacity; and
  • Trucks, chassis with and without cabs, and buses.

The program also covers investments in the production of the following goods for the above vehicles:

  • Engines, including internal combustion, hybrids, electric, and alternative fuel (natural gas, biofuel, and others);
  • Transmissions and their components;
  • Axles with differentials and their components; and
  • Other parts and systems.

Lastly, the program covers investments in industrial processes for the vehicles and goods listed above, including painting, machining, forging, and casting, among others. The enforcement authority will specify the scope of the other systems and parts, as well as other rules, including the application of national minimum content requirements.

Beneficiaries of the regime include legal persons incorporated in Argentina or authorized to operate in Argentina that have investment projects approved by the enforcement authority within the framework of the regime. The start-up period of qualifying projects may not exceed 3 years from the date of approval, although this may be extended if justified. In any case, the start-up period, including any extensions, must be completed no later than 31 December 2029.

Benefits of the program include:

  • Input VAT on the purchase of assets for an approved project will be reimbursed to the extent it cannot be offset against output VAT obligations or offset against other federal tax obligations for three fiscal (monthly) periods;
  • New capital assets acquired for an approved project may be amortized/depreciated in three annual, equal installments from the time the asset is put into service;
  • The estimated useful life for infrastructure works for an approved project is reduced by 50% for amortization/depreciation purposes; and
  • An export duty rate of 0% is provided on the export of goods produced under an approved project until 31 December 2031.

The new regime entered into force on 19 September 2022.