On December 27, 2023, the President of the Nation sent to the Lower House of Congress the bill to be debated in extraordinary sessions. Among other points, incorporates the Incentive Regime for Major Investments (“RIGI” after its Spanish acronym) for the Agroindustry, Infrastructure, Forestry, Mining, Gas and Oil, Energy and Technology sectors, although the National Government may include new sectors.
Incentive Regime for Large Investments (RIGI)
Major investments will be those projects involving the acquisition, production, construction and/or development of assets that will be assigned to activities of the sectors included in the RIGI, that involve an amount of investment in computable assets and foresee – for the first and second year – a minimum investment in computable assets whose amounts will be established by the enforcement authority. The investments must be of a long-term nature. [1]
In addition, the bill declares that the Major Investments that qualify and take place under the RIGI are of national interest and that they are useful and conducive to the prosperity of the country. The National Government must determine the application authority and dictate the regulations.
The interested investor will have 2 years to adhere the RIGI, counted as from the entry into force of the regime, and the Executive Power may extend once only the term to adhere to the RIGI for a period of up to 2 years as from the expiration of the previous term.
Single Project Vehicles (SPVs) that own a project that qualifies as a Major Investment are eligible to join the RIGI. SVPs must have the sole and exclusive purpose of carrying out a single investment project admitted to the RIGI. Consequently, the SPV must not carry out activities or own assets not assigned to such project, except for temporary investments of its working capital for the prudent management of the company’s funds.
Once the adhesion is approved, the Tax Authority (AFIP) will generate a special tax number (CUIT) for the purposes of the RIGI for the SVP to which the acronym “RIGI” will be added at the end of the number.
The following are considered SPVs:
(i) Corporations – including sole proprietorships and limited liability companies;
(ii) Branches established by companies incorporated abroad in accordance with Section 118 of the Argentine Company Law;
(iii) Dedicated Branches[2];
(iv) Transitory unions and other associative contracts.
Excludes from the subjects entitled to join the RIGI those convicted, those declared bankrupt, those convicted with final judgment in criminal cases initiated by AFIP (individuals and legal entities), those who have firm, enforceable and unpaid tax or social security debts, those who are not owners or operators of a Project corresponding to a Sector Included in the RIGI and those who do not have a structure in line with that of the SPVs.
Tax and customs incentives under the RIGI
- Income tax – 25% tax rate;
- They may choose to practice the respective amortizations as from the tax period in which the asset is assigned;
- The updates provided for in the Income Tax Law will be made on the basis of the percentage variations of the general level consumer price index (IPC) supplied by the National Institute of Statistics and Censuses;
- Value Added Tax – may be paid through the delivery of Tax Credit Certificates;
- The SPVs adhered to the RIGI may compute one hundred percent (100%) of the amounts paid and/or collected as tax on debits and credits in bank accounts;
- They shall be exempted from import duties, from statistics and destination verification, and from any regime of perception, collection, advance payment or withholding of national or provincial taxes;
- The exports for consumption carried out by the SPVS adhered to the RIGI will be exempt of export duties, after three (3) years counted from the date of adhesion to the RIGI;
- The interests and the exchange differences originated by the financing of the project promoted by this regime may be deducted from the profits and/or added to the losses of the company;
- The SPVs adhered to the RIGI may freely import and export goods and services for the construction, operation and development of said Adhered Project, without any prohibitions or direct restrictions, quantitative restrictions, quotas or quotas of any kind, nor qualitative restrictions of an economic nature;
- Nor may official prices or any other official measure that alters the value of the imported or exported goods, or priorities of supply to the domestic market, be applied to them;
- The SPVs adhered to the RIGI may choose to keep their accounting records and financial statements prepared in U.S. dollars using the International Financial Reporting Standards;
The SVPs adhered to the RIGI will enjoy, with respect to their projects, regulatory stability in tax, customs and foreign exchange matters, which means that the incentives granted and may not be affected either by the repeal of the Law or by the creation of tax, customs or foreign exchange regulations that are respectively more burdensome or restrictive than those contemplated in the RIGI.
Criminal Tax Regime
The Tax Administration will be exempted from filing a criminal complaint when the SPV has externalized the criteria used to determine the tax liability – including those aspects related to the taxable base, tax rate, exemptions, taxable event, scope and/or violation of tax stability, among others – through a written presentation made to the AFIP prior to the filing of the tax return.
In addition, AFIP shall establish a free manual self-assessment procedure that guarantees the SPV the possibility of submitting the liquidation of duties and other import or export taxes that it deems appropriate and of registering the import or export destination incorporating such liquidation, without being required in any case to make prior payment of the amounts that may be applicable under the regulations in force at any time. Said procedure may not be subject to prior authorization or requirements or conditions of any kind, and the free manual self-assessment may be made by the SPV with the sole presentation of the approving administrative act published in the Official Gazette.
The project also establishes a penalty regime, the penalties that will be applicable and the grounds for termination of the incentives granted to the Project.
All disputes arising out of or in connection with the present regime, between the National State and a SVP adhered to the RIGI, shall be settled, in the first instance, by amicable consultation and negotiation. If the Dispute cannot be settled amicably, the dispute shall be submitted to arbitration, in accordance with – at the option of the SPV -: (i) the CPA Arbitration Rules 2012, (ii) the International Chamber of Commerce Arbitration Rules (with the exception of the Expedited Procedure Rules), or (iii) the Convention on the Settlement of Investment Disputes between States and Nationals of Other States of March 18, 1965 or, as the case may be, the CIADI Arbitration (Additional Facility) Rules.
The National Government is empowered to establish dispute resolution mechanisms with the SPV, specific to each project, in the administrative act that approves the application for membership and the investment plan.
[1] Annex II – Section 9.- (…) They shall be considered long-term investments as long as they have a ratio of no more than 30% between, on the one hand, the present value of the expected net cash flow, excluding investments, during the first five years as from the first capital disbursement and, on the other hand, the net present value of the capital investments planned during the same period. The Authority of Application may modify this ratio, simultaneously for all the sectors involved, provided that with such modification the regime maintains the purpose of providing stability guarantees only to long maturity investments.
[2] Annex II – Section 7.- Dedicated Branches. In those cases in which a corporation or a limited liability company wishes to adhere to the RIGI and develops one or more activities that will not be part of the investment project, or owns one or more assets that will not be affected to such project, it may opt for the sole purpose of its adhesion to establish a branch that must comply with the following requirements: (a) Be registered in the Public Registry corresponding to its place of seat; (b) Obtain a Unique Tax Identification Code and register for the taxes corresponding to the activities it carries out, independently from the company to which it belongs; (c) Have an assigned capital; d) To have designated as its sole purpose the development of the investment project for which the inclusion in the RIGI will be requested; e) To have assigned only the assets, liabilities and personnel that will be affected to such investment project; f) To keep separate accounting records from the company to which it belongs. The adhesion to the RIGI and its benefits of the RIGI will only be applicable in relation to this branch.
