World Wide Tax News Issue 53 - December 2019

Creation of “Knowledge Economy Promotional Regime”

The “Knowledge Economy Promotional Regime” (the Regime) was created through Law 27.056 and will apply throughout the country. It aims to promote economic activities related to the use of knowledge and the digitalisation of information supported by progress in science and technology. The Regime has been enacted through Decree 708/2019 (Official Gazette 10/16/2019), and Resolution (SEyPyME) 449/2019 (Official Gazette 10/18/2019).  

The Regime will become effective from 1 January 2020 and will be valid until 31 December 2029.

Subjects included

Legal entities may enjoy the benefits of this promotion regime by registering in the Registry created for such purposes, provided their total billing during the previous six months includes at least 70% in respect of activities specifically detailed in the standard.

In addition, they must prove that they can comply with at least two of the three following requirements provided for in the law:

  • To have the Quality Standard Certification;
  • Carry out expenditure in research and development activities and/or training of employees; and
  • Carry out exports of goods and/or services.

Promoted activities

  • Software, computer and digital services.
  • Audiovisual production and post-production services.
  • Biotechnology, bio-economy, molecular biology, genetic engineering, nanoscience, nanotechnology services.
  • Geological and prospecting services and other services related with electronic and communications activities.
  • Satellite industry and aerospace, space technologies.
  • Nuclear industrial engineering.
  • Artificial intelligence, robotic and industrial internet, additive manufacturing;
  • Research and development services in the following fields: engineering, exact sciences, natural sciences, agro-livestock sciences and medical sciences;
  • Professional services (export).

Tax Benefits

  • Fiscal Stability: beneficiaries will not see any increase in their Argentine total tax burden from the time of registration. This benefit may also be extended to provincial and municipal taxes as well as export and import duties.
  • Income Tax:

a. A reduced general corporate tax rate of 15%, to the extent that companies which benefit maintain the number of employees on their payroll;

b. Deduction of tax credits derived from any payment or withholding of foreign taxes, even when the taxed income is of Argentine source.

  • Value Added Tax: Not subject to any withholding and/or collection.
  • Ability to obtain a one-time transferrable tax credit bond on a portion of the social security contributions paid, which can be used for paying Income Tax and/or VAT.
  • Reduction of the employer’s social security contributions (minimum exempt by employee under work relation).

The promotion regime is very interesting, because in addition to the benefits described above, the effective tax rate is very competitive (also at an international level). This evidences Argentina’s  intention to promote these types of economic activity, regardless of who is managing the Government’s administration.

Alberto Mastandrea

Guillermo Poch