Foreign tax credit
National taxpayers are entitled to recognise a tax credit for any taxes actually paid in the countries where they have obtained foreign-source income, in respect of similar national taxes, up to a cap, which is the increase in their Argentine tax liability due to the inclusion of the foreign income. Any excess not offset in a given fiscal year may be carried forward to the next five fiscal years.
Province of Tierra del Fuego Regime
Companies set up in the province of Tierra del Fuego enjoy a general tax exemption and important benefits in customs matters. Tax exemption includes profits tax, tax on minimum notional income, tax on personal wealth, and excise tax. The VAT benefit consists of the release from payment of the technical balance of the tax (VAT debits less VAT credits). Also, a reduction of the prevailing rate for tax on financial transactions and an exemption from taxation on the transfer of fuels is contemplated.
An investment regime for mining activity is applicable to natural and legal persons. Mining ventures included within this regime enjoy fiscal stability (i.e. tax rates will remain basically the same) for a term of 30 years, except for VAT, which will adjust to the general regime. Furthermore, the regime grants incentives for profits tax, tax on assets, import duties, and any other tax for introduction of certain assets. Additionally, this mining investment law established an exploration recovery regime for the mining investors, which allows the reimbursement of the VAT credit balances originated in the mining exploration activity.
This regime allows the reimbursement of such VAT credits after a 12-month period since the expenditure was incurred, and only if it has been paid.
Through specifics regulations, the authorities established the requirements (e.g. filing a tax return, filing a report certified by a public accountant with respect to the VAT, a presentation to the Mining Secretary) to be followed by the taxpayers in order to apply for this benefit.
There is an investment regime for plantation, protection, and maintenance of forests. It contains rules similar to those for mining activity tax incentives:
- Fiscal stability for a period of 30 years. The period may be extended to 50 years.
- Refund of VAT resulting from the purchase or final importation of goods, leases, or services effectively for forestry investment projects in a period of less than 365 days.
Exports of goods and services are exempt from VAT and excise taxes. The temporary importation of raw materials and intermediate and packaging goods for the manufacture of products for export is free from duties with the obligation of offering sufficient guarantees for the import. A reimbursement regime is in place for VAT credits paid to suppliers in relation to the export activity.
A promotional tax regime for development and production of modern biotechnology has been introduced. Pursuant to this law, the beneficiaries of the projects that qualify for this regime are entitled to the following benefits:
- Profits tax: Accelerated depreciation of capital goods, special equipment, parts, or components of newly acquired goods destined for the promoted project.
- VAT: Early refund of the tax applicable to the assets acquired for the project.
- Social security contributions: The amount representing 50% of social security contributions actually paid on the payroll salaries involved in the project shall be converted into a tax credit bond that may be applied to payment of national taxes.
Energy generation through renewable sources
Through the enactment of Law 26,190, as amended by Law 27,191, and Regulatory Decree 562/2009 and 531/2016, the Argentine government launched and updated promotional measures for the energy sector with the aim of encouraging the use of renewable energy sources for the production of electricity.
According to this regime, certain tax benefits shall be granted upon request by filing the projects with the relevant authorities. Benefits include accelerated depreciation of project assets for profits tax purposes, a five-year extension on the loss carryforward, early recovery of VAT paid on the acquisition of new assets or infrastructure work, and a tax credit certificate to be applied against federal taxes.
Also, from a provincial tax perspective, Law 26,190 invites all Argentine provinces to adhere to the regime enacting local regulations with tax benefits aimed at promoting and encouraging the production of electric energy through renewable sources.
Province incentives on local taxes
Most of the provinces have legislation establishing incentives for the development of industries within their boundaries, especially industries that utilise or develop their natural resources and provide work for their residents. The incentives, in general, consist of exemptions from provincial and municipal taxes.
Various provinces have investment promotion regimes. Even when there are certain differences among these regimes, generally they include the following incentives:
- Exemption from provincial taxes, such as turnover tax, stamp duty, real estate tax.
- Reduced public utility rates.
- Support for infrastructure and equipment projects.
- Facilities for purchase, rental, or lease without charge of public property.
These regimes are not automatically applied, and a special procedure should be followed to be entitled to the respective benefits.
Free trade zones
The free trade zones offer exporters the possibility to import free from customs duties, statistics rate, and VAT all the necessary equipment for construction of a ‘turnkey plant’ within the zones. Furthermore, exporters manufacturing within the zones enjoy the benefit of buying supplies and raw materials from third countries, without having to pay duties or taxes that lead to increased prices.
Customs authority regulating these goods considers them as stored in a third country; consequently, incoming products are subject to inspection with the sole purpose of classifying quantity and type. In other words, goods enjoy a duty-free status until they enter the Argentine customs territory. Goods may remain in the free trade zone for a maximum period of five years.
Promotional regime for knowledge-based activities
By virtue of Law 27,506 (amended by Law 27,570), Argentina’s government enacted new tax incentives intended to promote certain knowledge-based activities through the end of 2029. Taxpayers that comply with all requirements must apply and register in order to benefit from the new law.
The new regime aims to encourage the creation, design, production, and implementation or adaptation of products and services (and the associated technical documentation) related to, among others, the following ‘Promoted Activities’:
- computing and digital services
- audio-visual production and post-production activities
- certain scientific and engineering activities
- geological and prospecting services
- activities related to the industrial sector using ‘4.0 technologies,’ and
- the exportation of professional services.
Incentives under the new regime include:
- Reduction by a certain percentage of the statutory CIT rate (currently 30%). The reduction depends on the taxpayer’s
size. Large taxpayers would benefit from a 20% reduction (24% effective tax rate). Reduction for micro and small businesses is
60% and for medium sized enterprises is 40%. This reduction would apply to both Argentinian and foreign-source
- Reduction to 0% on export duty applicable to exports of promoted services.
- Non-transferable fiscal credit certificate of up to 70% of social security contributions paid by the employer with respect
to employees dedicated to the Promoted Activities, which can be applied to the payment of certain taxes, such as VAT
(excluding CIT). This bonus certificate will increase to up to 80% of the social security contributions of new hires
considered included in special interest groups (including women, LGBT, people with disabilities, and residents in
unfavourable areas). Exporters may request the use of the certificate to offset CIT liabilities.
- Tax stability with respect to the new regime’s benefits (available until 31 December 2029).
The incentives will become effective for income tax purposes starting with the fiscal year that follows the year in which taxpayers receive approval. However, they become effective for all other tax purposes as of the date the relevant governmental institution approves the registration. Furthermore, the incentives apply retroactively to 1 January 2020 for taxpayers that benefited under the software incentive regime, which expired on 31 December 2019.