Argentina has published Law 27,506 in the official gazette enacting Decree No. 408/2019 , establishing promotional regime on tax benefits for the Knowledge Economy. The purpose of the law is to the promote of the country’s knowledge-based and digital activities resulting in manufacturing of goods, provision of services or improvement of processes through the introduction of new tax incentives.
Promoted Activities
The activities on the knowledge base economy are:
- Software and computer and digital services,
- Audiovisual production and postproduction, including those of digital format;
- Biotechnology, bio economy, biology, biochemistry, microbiology, bioinformatics, molecular biology, neuro-technology and genetic engineering, geoengineering and their testing and analysis;
- Geological and prospecting services and services related to electronics and communications;
- Professional services, only to the extent that they are for export;
- Nanotechnology and nano-science;
- Aerospace and satellite industry, space technologies;
- Engineering for the nuclear industry; and
- Manufacturing, commissioning, maintenance and introduction of goods and services aimed at automation solutions in production that include feedback cycles from physical to digital processes and vice versa, being at all times, exclusively characterized by the use of technologies of the 4.0 industry, such as artificial intelligence, robotics and industrial internet, internet of things, sensors, additive manufacturing, augmented and virtual reality.
Requirements for the Law
To avail the benefits at least two of the following requirements must be met:
- To prove the accomplishment of continuous improvements in the quality of its services, products and/or processes, or through a recognizable quality rule applicable to its services, products and/or processes,
- Evidence the realization of expenses in activities of (i) research and development in the activities in a minimum of 3% of its total billing; and/or (ii) training of employees in the aforementioned activities at a minimum of 8% of the total employees, and
- Evidence the realization of exports of goods and/or services arising from the development of any promoted activities at least 13% of the total turnover corresponding to those activities. In the case of article 2.e. (professional services), at least 70% of the total billing will have to be formed by exports related to such activity.
Promoted Benefits
After meeting at least two requirements, the companies will get following benefits:
- Reduced tax rate of 15%;
- exemption from VAT withholding and reverse withholdings;
- allowance of a credit for foreign tax paid or withheld in respect of argentine-source income;
- A tax credit bond equivalent to 1.6 times the amount payable as Social Security contributions, which could be used to offset federal taxes, such as VAT and income tax, without subjecting the obtained savings to income tax;
- Income Tax rate will be reduced to 15% (general Corporate Income Tax rate will be 25% as from FY2020), such rate will be applicable to FY starting after the date of registration with the Regime;
- The beneficiaries of the Regime for the Promotion of the Knowledge Economy will enjoy fiscal stability;
- The beneficiaries of the present regime shall enjoy, for each of their workers in a dependency relationship, duly registered a deduction equivalent to the maximum amount.
Effective Date
The knowledge-based economy promotional regime will be effective from 1 January 2020 up to 31 December 2029.
