New tax measures to promote investments

The Minister of the Economy and Production, Roberto Lavagna, announced certain fiscal measures to promote investments. On April 21, the draft law was sent to the Congress.

It establishes a 36 month regime to promote investments in new capital goods for industrial activity, except cars, and in the execution of infrastructure works, except civil works. While the regime is in force, beneficiaries may choose between the accelerated reimbursement of Value Added Tax (VAT) and the accelerated depreciation of assets in Income Tax.

This regime would not be applied to personal goods and infrastructure works in execution, nor investments with the Argentine, Provincial or Municipal Government, or with the City of Buenos Aires, executed under agreements entered into with such governments before the law is enacted.

The beneficiaries of the regime would be individuals domiciled in Argentina, legal entities incorporated in Argentina, foreign legal entities that can carry on their businesses in Argentine territory, and foreign entities incorporated in Argentina. All of them shall comply with certain requirements. Those whose fiscal credits were financed by Law No 24,402 (VAT Financing Regime), would be excluded from the regime.

The draft law establishes annual limits to be devoted to the special regime: AR$ 700,000,000 for the accelerated reimbursement of VAT regime, and AR$ 300,000,000 for the accelerated depreciation of assets regime. The Ministry of the Economy would elect those who are entitled to enter into the regime through public contest.

If any of the requirements of the regime were unfulfilled, Tax Authorities would not initiate legal verification proceedings. Instead of that, Minister of the Economy resolution pointing out the lack of fulfillment, and a payment requirement made by the Tax Authorities would be enough for the debt official assessment. An administrative fine of 100% of the credited, remitted or unpaid tax would also be applied.

(i) Accelerated reimbursement of VAT regime

The accelerated reimbursement of VAT regime contemplates the possibility of compensating VAT with other taxes, three months after the investments were made or, instead of that, a refund. This regime would not be applied when capital goods do not integrate the patrimony of the ones entitled to the project, at the moment of the credit or refund application.

It also establishes that VAT could not be compensated with obligations derived from the performance of the taxpayers as withholding agents, among other cases.

(ii) Accelerated depreciation regime

The accelerated depreciation of assets regime contemplates a bracket scale depending on the moment the investments were made:

a) investments made during the first twelve month period immediately after the law became effective: for acquired depreciated chattels, at least three annual, consecutive and similar shares; for infrastructure works, the number of annual, consecutive and similar shares which result from considering 50% of its useful life;

b) investments made during the second twelve months period immediately after the date mentioned in a): for acquired depreciated chattels, at least four annual, consecutive and similar shares; for infrastructure works, the number of annual, consecutive and similar shares which result from considering 60% of its useful life;

c) investments made during the third twelve months period immediately after the date mentioned in a): for acquired depreciated chattels, at least five annual, consecutive and similar shares; for infrastructure works, the number of annual, consecutive and similar shares which result from considering 70% of its useful life.

The project has found certain resistance in the Chamber of Deputies, which does not agree with most of the mechanism to promote investments proposed by the Minister of the Economy. This is why there is a real possibility the project will be modified before being passed.