Knowledge-Economy: Regulation of the Promotion Regime for Export Investments
A newly issued resolution established the conditions and formalities to access the regime for the promotion of investments in the export of knowledge-economy activities.
The "Investment Promotion Regime for Exports of Knowledge Economy Activities" was created on October 6, 2022, through Chapter I of the Emergency Decree No. 679/2022, 2022. The regime establishes a benefit for new projects or expansions of existing projects involving the development of knowledge-economy activities and contributing to the increase of exports inherent to the sector.
Concurrently, Chapter II of the Decree established an incentive for subjects who prove that they have increased their exports of the activities promoted under such Regime.
Find more information about this Regime in this article:
Accordingly, the Resolution -effective as of December 6, 2022- regulates such benefits, establishing and clarifying specific aspects regarding their implementation and scope.
The most important features of the Resolution are:
- Investment Promotion Regime for Exports of Knowledge-Economy Activities
Eligible investments. The Resolution clarifies that an “eligible investment for export” is any investment that, complying with the requirements in Articles 2 and 3 of the Decree, involves improvements and optimization of the applicant's export capacity.
Eligible investments must fall within the following categories:
- Investments in infrastructure,
- Capital expenditures,
- Investments in working capital.
Salaries of employees and professional fees will also be considered.
It is important to point out that the assets acquired must be used for the promoted project throughout its execution. The beneficiary must report any cease in the use and/or replacement of the assets.
Connection. Projects may be submitted and carried out by more than one company. A corporate relation between them is not necessary.
Reductions of the minimum amount. It was established a 15% reduction of the minimum investment amount for projects of the following kind, and a 20% reduction if the applicant proves compliance with more than one of them:
- Projects with immediate impact: The investment is expected to obtain results within 12 months of its approval.
- Geographic location: This includes projects that are carried on in areas considered unfavorable.
- Inclusive perspective: (i) in terms of personnel, when 30% of the reported payroll includes women, transvestites, transsexuals and transgendered, professionals with postgraduate studies in activities related to the knowledge-economy, people with disabilities, among others; and (ii) regarding actions: when the Project incorporates benefits for the personnel and the community.
- Projects with technological linkage: including projects coordinated with universities, science and technology organizations or institutes, among others.
Project evaluation. The investment project must aim at increasing exports. It must also involve the development of a knowledge-economy activity. For the project to be evaluated, there must be:
- Investments for the start-up of new projects: (i) an activity included within the Regime and (ii) an impact of the start-up of the project on the export capacity of the applicant company.
- Investments for the expansion of an existing project: an impact of the projected investment in knowledge-economy activities and an impact on the increase of its exports.
In both situations, the valuation must be based on market value, considering the probability of an increase in exports. The dates and amounts committed to be credited to the Project's account must be verified.
Deadline for submitting projects. Submissions must be made before the National Office for the Development of the Knowledge Economy by June 30, 2023.
Use of the Benefit. To receive the benefit -i.e. the exemption from settling in the foreign exchange market for up to 20% of the foreign currency that companies may receive as foreign direct investment- the companies must deposit the amounts corresponding to the approved project in the account authorized under the terms of the BCRA within 15 business days from the time stated in the schedule attached to the "Certificate of Project Approval".
The benefit will be calculated on the basis of the amount deposited in said account and the foreign currency must be used for what was declared at the time of requesting registration. If during the project the benefit needs to be used for a different purpose, the beneficiary must file information justifying so.
Non-compliance. Those beneficiaries of the Regime unable to comply with the approved investment project may request it to be readjusted prior to the default. This request may not exceed a term of 48 months, including future extensions, nor reduce the investment by less than USD 3,000,000.
- “Promotion of exports of the knowledge economy”
Access to the benefit. To receive the benefit -accessing to free-availability USD for an amount of up to 30% of the foreign currency earned as increment of net exports- the company must inform the Office of Strategies for the Knowledge-Economy the payroll details. The beneficiaries must also report any changes in the number of employees whose salaries will be paid with the foreign currency exempted from liquidation.
Proof of net increment in exports. The foreign currency that will be considered is that actually received by the companies registered in the Regime with the financial institutions for those net exports made in the quarter. The calculation of this foreign currency varies depending on whether the access to the benefit was requested before or after January 15, 2023, as follows:
1. If the benefit was requested before January 15, 2023: It is the period from October to December of 2022 that will be considered. This period must be compared with the foreign exchange earned by the beneficiaries as exports in the same quarterly period of 2021.
2. If the application for the benefit was filed after January 15, 2023: It is the increase of the calendar quarter in progress at the time of application that will be considered. Calendar quarters will be those beginning in January, April, July, and October.
If the beneficiary company had not exported goods or services during the comparative period (same quarter of 2021), the total amount of foreign currency received from exports during the analyzed period will be considered incremental.
Use of the benefit. The benefit will be exclusively used for paying the salaries of the duly registered employees working in the promoted activities.
Non-compliance. If the application authority verifies that the company used the benefit for another purpose, the benefits granted will expire, and the amount of foreign currency equivalent to those amounts that were exempted from income will be deposited in the MLC.
The penalties outlined in the Knowledge Economy Law may also be applied.
This insight is a brief comment on legal news in Argentina; it does not purport to be an exhaustive analysis or to provide legal advice.