Although its regulation is still pending, Title VII of the Law of Bases and Starting Points for the Freedom of Argentines (Law of Bases) creates the Large Investment Incentive Regime (RIGI, after its Spanish acronym or "the Regime") establishing incentives, certainty, legal security and a system of rights protection for private investments of USD 200,000 or more in a single project.
“It is a regime that seeks to encourage and promote private investment -both national and foreign- in projects that contribute to the development of the Argentine economy, the execution of infrastructure works necessary for these purposes, the generation of employment, and to the positioning of the country as a strategic supplier in global markets,” comments Julia Adano, Head of Tax at Grant Thornton Argentina.
This Law considers large investments to be projects in the forestry, tourism, infrastructure, mining, technology, steel, energy, oil and gas industries that involve the acquisition, production, construction and/or development of assets that will be used for activities and whose investment amount in computable assetsi is equal to or greater than two hundred million US dollars (USD 200,000,000).
This minimum investment amount must be completed before the deadline indicated in the investment plan, at least 40% of the committed investment must be fulfilled within the first two years from the date of approval of the investment plan, and the investments must be long-term.
However, the Executive Branch of the National Government may establish higher minimum investment amounts in eligible assets by productive sector or by productive stage, with a limit of USD 900,000,000.
“Those investments that contribute to Argentina's positioning as a new long-term supplier in global markets in which it does not yet have a relevant participation and are equal to or greater than USD 1,000,000,000 may be qualified by the implementing authority as 'Long-Term Strategic Export Projects' and obtain differential benefits,” says Adano.
The period to join the RIGI will be two (2) years from the entry into force of the regime (extendable once for a period of up to one (1) year) and is only available for Single Project Vehicles (VPU, for its acronym in Spanish) that present an investment plan and obtain approval from the implementing authority.
VPUs must have the sole and exclusive purpose of carrying out one or more phases of a single project that qualifies as a "major investment". Commercial companies, branches of foreign companies, temporary consortium (UTE, for its acronym in Spanish) and other associative contracts, and dedicated branches may be considered VPUs.
“Dedicated branches are those that are formed from a legal entity that develops one or more activities that will not be part of the investment project, to 'isolate' the assets dedicated to the Project. These must be registered in the corresponding public registry, obtain a Unique Tax Identification Code (CUIT), register for the corresponding taxes independently and keep separate accounting from the company to which they belong,” explains Julia Adano.
“These must have as their sole purpose the development of the investment project for which inclusion in the RIGI is requested. In addition, they must have an assigned capital and have only the assets, liabilities and personnel that will be affected by the investment project. All incentives and benefits obtained by joining RIGI will only be enjoyed by the branch,” she highlights.
When the VPUs are holders of Long-Term Strategic Export Projects, they will not withhold income tax from foreign beneficiaries on certain Argentine source income, while others will have a presumption of net profit of 30%.
When the VPUs are holders of Long-Term Strategic Export Projects, they will not withhold income tax from foreign beneficiaries on certain Argentine source income, while others will have a presumption of net profit of 30%.
“We emphasize that it is a broad and challenging regime, since it is not aimed at a single sector of the economy or a single region of the country and the tax benefits are not limited to certain taxes, but rather cover the entire tax, customs and foreign exchange system.
Additionally, by declaring projects that qualify under the regime as being of “national interest” within the framework of our National Constitution, the aim is to create a regime that grants certainty, legal security and special protection to investors against potential non-compliance by the public administration.
The Executive Branch places emphasis on guaranteeing that there will be no rule changes and therefore the chapter on Fiscal Stability becomes relevant. It contains provisions that seek to provide the Regime with the legal security necessary to guarantee the stability of the benefits and rights granted to those who invest in these projects.
In this sense, the VPU will enjoy tax, customs and exchange stability for 30 years and will not be affected by the repeal of this law or by the creation of more burdensome or restrictive regulations than those contemplated in the RIGI. In turn, provinces and municipalities that adhere will not be able to impose new local taxes on the VPUs, except remuneration rates for the services actually provided.”
Julia Adano,
Head of Tax
Grant Thornton Argentina.
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i. The Regime considers as “investment in computable assets” all those investments that are intended for the acquisition, production or development of assets affected by activities included in the RIGI (excluding financial assets and exchange goods) and also the acquisition of company shares as long as they have computable assets and are merged with the single project vehicles (VPU, for its acronym in Spanish) within a period of 180 calendar days.
