On 11 October 2022, the Argentine Government published in the Official Gazette, Decree 679/2022 (the Decree) which establishes an investment promotional regime for exports of knowledge-based economy activities.
The Decree also incorporates new exemptions on foreign exchange controls for taxpayers registered in the Promotional Regime for the Knowledge-Based Economy and modifies the terms of the tax credit bonds granted under said promotional regime.
On 1 September 2019, the Argentine Government published in the Official Gazette Decree 609/2019, which implemented foreign exchange regulations. The Decree requires individuals and legal entities to convert into Argentine pesos (ARS) in the local financial system, the value of goods and services exported, in accordance with the conditions and terms to be established by the BCRA.
Under those rules, the proceeds derived from exports of services (with a few exemptions) must be entered and settled through the official foreign exchange market within five business days from collection.1
Investment promotional regime for exports of knowledge-based economy activities
The Decree creates an investment promotional regime for exports of knowledge-based economy activities (investment promotional regime).
Legal entities incorporated in Argentina or abroad (registered or not in the National Registry of Beneficiaries of the Promotional Regime for the Knowledge-Based Economy established by Law 27,506 -“the Registry”-), may adhere to the investment promotional regime by presenting in the Ministry of Economy one or more investment projects in infrastructure, capital goods and working capital aimed at increasing the exports of the activities of the Promotional Regime for the Knowledge-Based Economy created by Law 27,506, provided that such projects imply the realization of a direct investment of no less than US$3,000,000.
The beneficiaries of the investment promotional regime shall be exempted from the requirement of settling in the official foreign exchange market up to 20% of the foreign currency that may be received as foreign direct investment. This free available foreign currency is to be deposited in a special bank account in Argentina, and may be applied to the payment of the principal and interest of commercial or financial liabilities abroad, dividends and/or to the repatriation of foreign currency of nonresidents.
The beneficiaries of the investment promotional regime are obliged to comply with the investment plans within 24 months as from the first investment, this period can be extended by decision of the Ministry of Economy for up to another 24 months.
The deadline to adhere to the investment promotional regime is 30 June 2023.
Promotion of exports for taxpayers registered in the Registry
The Decree establishes that taxpayers registered in the Registry may have access to free availability US dollars equal to 30% of the foreign currency entered in Argentina from the net incremental exports on a quarterly basis, taking as comparative base period the same quarter of the year 2021. The free available US dollars are to be deposited in a special bank account in Argentina and shall only be applied by the taxpayers to the payment of the remunerations of employees whose work relates to the promoted activities.
Tax credit bonds
Taxpayers registered in the Registry are entitled to a non-transferable tax credit bond that equals 70% of the amount payable as Social Security contributions on employees working in the promoted activities, which can be used to offset federal taxes.
The Decree incorporates an exception to that rule, establishing that those beneficiaries that export at least 70% of its annual sales originated in the promoted activities, will be allowed to transfer for one time those bonds, up to an amount equivalent to the percentage of exports for each period.
Additionally, the Decree eliminates the limits originally established in the Law 27,506 for granting the tax credits bonds. The Ministry of Economy is now entrusted with establishing the limits and parameters for the purpose of granting this benefit.
For additional information with respect to this Alert, please contact the following:
Pistrelli, Henry Martin & Asociados S.R.L., Buenos Aires
Ernst & Young LLP (United States), Latin American Business Center, New York
Ernst & Young LLP (United Kingdom), Latin American Business Center, London
Ernst & Young Tax Co., Latin American Business Center, Japan & Asia Pacific