Argentina's Implementation of the Large-Investment Regime Bill

| Picture: "Casa Rosada, Buenos Aires, Argentina" by Diego Delso is licensed under CC BY-SA 3.0.

On August 23, 2024, the Argentine Government issued Decree 749/2024, implementing the provisions of the large-investment regime bill under Law 27,742 (RIGI).

This decree outlines rules and requirements for entities to benefit from incentives within this framework. Additional regulations from other government bodies are expected within 30 days of the decree's publication.

KEY TAKEAWAYS FROM DECREE 749/2024:

1. Eligible Sole Purpose Vehicles (SPVs)

• Existing SPVs can adhere to the RIGI.
• Eligible entities include corporations, sole proprietorships, limited liability companies, branches, and joint ventures.

2. Minimum Investment Amount

• The minimum investment for most sectors is set at USD 200 million (excluding VAT).
• For oil and gas transportation/storage, the amount increases to USD 300 million.
• Offshore oil, gas exploration/production, and gas exports require USD 600 million.
• Strategic Long-Term Export Projects (SLEP) must invest USD 2 billion.

3. Expansion of Preexisting Projects

• Preexisting projects can join RIGI if the expansion meets the minimum investment requirements.
• Benefits will only apply to the new expansion, not the original project.

4. Qualifying Assets

• Only investments made after the RIGI’s approval count towards the minimum investment threshold.
• Investments in mining, oil, gas concessions, and real estate prior to the RIGI are excluded.

5. Essential Services

• Essential services can account for up to 20% of the minimum investment amount.
• Approval from the Enforcement Authority is required.
• Services provided by affiliates are excluded from this category.

6. Strategic Long-Term Export Projects (SLEP)

• SLEP projects must position Argentina as a new global market supplier.
• Each project phase must involve at least USD 1 billion.
• 20% of the investment must be in the first two years.
• Project components must be interconnected within a 200 km radius.

7. Tax and Customs Incentives

7.1. Income Tax

• • 25% income tax rate applies to SPVs adhering to RIGI.
  • SPVs can choose between the regular or accelerated amortization mechanism.
  • Transfer of tax losses is allowed under specific conditions.

7.2. Value-Added Tax (VAT)

• • VAT on purchases for project development is converted into tax credit certificates without AFIP's prior approval.

7.3. Imports

• • Imports of capital goods related to approved investment plans are exempt from import duties and certain fees.

7.4. Tax Stability

• • SPVs have tax stability for 30 years from adherence, ensuring no increase in taxes or customs duties during this period.

8. Foreign Exchange Incentives

• Export revenues are partially exempt from mandatory conversion to local currency, starting at 20% and reaching 100% in later years.
• SPVs can prepay foreign debts without a minimum stay period.

9. Procedure for Adherence to RIGI

• SPVs must submit documentation to the Enforcement Authority for review.
• The decision on adherence will be made within 45 business days, with extensions possible for additional information requests.

10. New Registries

• New registries include the "Registry of Sole Purpose Vehicles," "Registry of Strategic Long-Term Export Projects," and "Registry of Suppliers of the Incentive Regime for Large Investments."

11. Enforcement Authority

• The Ministry of Economy is designated as the RIGI's enforcement authority.

12. Jurisdiction and Arbitration

• SPVs must resolve disputes via arbitration as set forth in the Foundations Law.

It is unclear how this regulation impacts OECD GloBE rules application. In case taxable income exempt from tax in Argentina as a result of RIGI, is taxed by a foreign jurisdictions applying income inclusion rule, or any analogous measure under OECD´s GloBE, the tax benefits provided by RIGI will have no effect in practice. 

SOURCES/ RECOMMENDED READ:

• The Government of Argentina Releases the Implementation Rules of the RIGI (Tavarone, Rovelli, Salim & Miani)
  This article outlines the new implementation rules of Argentina's RIGI (Regime for Incentives for Large Investments), detailing its impact on foreign investment and strategic projects.
• Decree 749/2024 - Regulation of the RIGI (Nicholson y Cano)
  A comprehensive breakdown of Decree 749/2024, which regulates Argentina's RIGI, focusing on the framework for tax incentives and investment strategies under the regime.