Tax aspects of Decree 70/2023

The Decree of Necessity and Urgency No. 70/2023, published in the Official Gazette on December 21, 2023, sets forth the following modifications in tax matters:

Repeal of Law No. 21608 of Industrial Promotion

Repeal of the Industrial Promotion System: the purpose of this system was to promote certain industries throughout the country by granting promotional benefits that included tax reductions and exemptions, exemptions on import duties for raw materials and capital goods used in promoted industries, tax deferrals, among others.

The repealed system contemplated the following:

1. Industrial promotion regimes: the sectoral regimes established the provisions for the development, regulation, and reorganization of the sector. Regional regimes determined the promotion of the different geographical areas. Special regimes were those referring to development zones or industrial parks defined as such by the executive branch, or those expressly included in the scope of the law.
2. Criteria for granting incentives: which were granted to: (i) industries manufacturing certain products that contributed to import substitution or ensured exports under convenient conditions for the country; (ii) industries dedicating their activity to the transformation of local raw materials; (iii) industries located in areas with high unemployment rates, very low industrial activity, high rates of internal migration, or where security reasons or geopolitical considerations made it convenient to settle; (iv) industries that used advanced technology and developed research and new technologies; (v) industries which provided additional social benefits to their employees and workers.
3. Promotional measures: in summary, the regime provided for the following promotional measures: (a) exemption, reduction, suspension, relief and deferral of taxes and accelerated depreciation of fixed assets; (b) exemption or reduction of import duties on fixed assets and their spare parts; (c) better conditions for the purchase, lease or loan of public assets; (d) establishment of temporary restrictions on the import of certain assets; (e) determination, modification or total or partial exemption of import duties for the raw materials or parts for assets produced under the regime. (f) fixing of import duties on goods similar to the goods to be produced as a consequence of the promoted activity.
4. Regarding foreign owners: if the beneficiaries of the regime were foreign residents or local companies with foreign owners, the promotional benefits of a tax nature were only granted based on a selective criterion and the possibility of directing the foreign investment in a programmed manner. Furthermore, in these cases, the benefits were not applicable, to the extent a transfer of income to foreign tax authorities was verified.
5. Sanctions for non-compliance: in the event that the beneficiaries of the regime failed to comply with their obligations, the same regime provided for different sanctions, including: fines of up to 1% of the amount of the project, total or partial cancellation of the promotional measures granted; payment of all or part of the taxes or duties not paid as a result of the promotion regime, plus interest and fines.
6. Prohibitions and exclusions: the establishment of new industrial activities in the territory of Buenos Aires was expressly forbidden. The Executive branch could establish general exceptions to this prohibition when, due to the nature of the activity, it was necessary for it to be carried out in Buenos Aires. At the same time, it provided for the exclusion of new industrial facilities and the expansion or improvement of existing ones in the area within a radius of sixty (60) kilometers counted from kilometer zero (0) of the cities of Buenos Aires, Rosario, and Cordoba.

Repeal of Law No. 18425 on Trade Promotion

Repeal of the Trade Promotion Regime: this system established tax benefits for certain commercial organizations defined by regulations.

The repealed system contemplated the following:

1. Eligible persons: the following types of commercial organizations were eligible for the benefits of the law: total supermarkets; supermarkets; superstores; food self-service stores; non-food self-service stores; retail chains; wholesale supply organizations; perishable goods packagers; shopping centers.
2. Benefits: the scheme provided for (i) accelerated depreciation in the tax balance for certain assets, such as (a) construction of buildings excluding the value attributed to the land; (b) investments made in machinery and plant and equipment used in the operation; (ii) priority for the provision of electricity and other essential services; (iii) allocation of land and/or buildings owned by the National Government and/or the City of Buenos Aires for the establishment of commercial organizations eligible under the promotion regime.

Foreign Trade Reforms

Regarding amendments to the foreign trade regime, Decree No. 70/2023 repealed Law No. 25625 and introduced major reform to the Customs Code by adding, amending and abrogating several articles.

1. Repeal of Law No. 25625: which prohibited the importation of retreaded and used tyres (classified under tariff headings N.C.M. 4012.10.00 and 4012.20.00, respectively).
2. Deregulation of the role of the Customs Agent: simplification of the cases of compulsory and optional intervention of the Customs Agent, reducing the conditions of their intervention. Elimination of the Register of Customs Agents and other formalities.
3. Elimination of the Importers and Exporters Registry: elimination of the obligation to register in the Register of Importers and Exporters to carry out customs destinations and foreign trade operations.
4. Customs Procedure: it is now mandatory for all customs procedures to be managed electronically. The reform included the principle of professionalization of personnel and hiring of employees in the Customs Authority based on their merit and capacity.
5. Import Destinations: the possibility of requesting the import destination prior to the arrival of the goods is allowed. A new process was instated, by which the importer is allowed to request an “advanced ruling”, where the Customs Authority will clarify the criteria applicable to the imported goods. The process of detecting customs offences is also further regulated.
6. Direct Clearance: it is allowed to submit the application for the import destination of goods within 5 (five) days prior to their arrival.
7. Export Destinations: exporters are allowed to request clarification of the criteria used by the Customs Authority to classify the exported goods prior to the operation.
8. Security Regime: modifications in the assumptions in which it must be applied and the amounts to be guaranteed. Shortening of the period within which the Customs Authority may admit or reject the application of the security regime. Regulation of the procedure for appealing resolutions that reject the application of the security regime.
9. Import and Export Prohibitions: the Executive Branch was expressly forbidden from establishing prohibitions or restrictions to imports and exports based on economic reasons (such as the promotion of employment, exchange policy, promotional or industrial regime, among other purposes).
10. Import Duties: the Executive Branch is no longer entitled to create specific import duties.
11. Price Equalization Tax: the Price Equalization Tax is eliminated.
12. Exemptions to the Payment of Export Duties: the Executive Branch is no longer entitled to grant specific exemptions to the payment of export duties.