Indirect Tax News - March 2021

Promotion regime for the knowledge economy

On 7 January 2021 the legislature of the Autonomous City of Buenos Aires enacted Law N° 6394 adopting the Knowledge Economy (LEC) regime established under National Law N°27.570. The purpose of the LEC is to foster development of a knowledge-based economy. The LEC provides a tax benefit regime for those who carry out activities related to the use of knowledge and the digitalisation of information (based on science and technological advances) to obtain goods, provide services, or improve processes.

Tax benefits under the regime range from a reduction of 50% in the turnover tax rate (which can be either 3% or 5%, depending on the annual billing level of the taxpayer) to a rate of 1.5%. To take advantage of applicable benefits, those eligible must register in a public registry that will be created.

It is important to note that to claim benefits under the regime you must meet at least two commitments expressly set out in the LEC. Among the commitments expressly set out are:

  • Increasing payroll by more than 5% of one’s initial payroll,
  • Increasing the area used to carry out the promoted knowledge-based activities by up to 10%,
  • Limiting the export of goods or services that result from developing any of the promoted knowledge-based activities to no more than 13% of one’s total billing,
  • Investing up to 3% of total billings on research and development related to promoted knowledge-based activities.

Finally, we should also mention that various provinces such as Cordoba, Santa Fe, Tucuman, and others, have already established a similar regime for the knowledge-based sector with benefits like fiscal stability and a reduction in rates or a full tax exemption.

Guillermo Jaime Poch

Alberto Fabián Mastandrea