Argentina has several regimes designed to promote productive development and investments. The treatment of these is the same for both foreigners and domestic investors. Some of these regimes must be granted by the authority.
Initial cost of investment reduction
This is for machinery, equipment, and infrastructure works destined for investment projects. Capital goods purchases may be depreciated in the balance sheets for three years after purchase and infrastructure project depreciation will be reduced by 50% visà-vis the usual depreciation period. The purpose of accelerated depreciation is to allow companies to reduce the tax burden during the first years of the project.
VAT paid in the purchase of goods destined for use in investment projects can be refunded. All VAT not offset will be refunded in cash three months after purchase.
Zero tariffs are imposed on imports of brand new capital goods destined to autonomous production lines of tangible goods.
Environmental equipment, necessary to eliminate pollution or contaminating elements from the air, soil, or water in a production plant, may also be imported under this regime. A 20 percent minimum of domestic suppliers is required. Spare parts may also be imported duty free provided their value does not exceed five percent of the total value of the imported equipment. Goods imported under this regime may not be transferred nor reexported for a period of two years from the date of importation.
The import duty for a broad range of new capital goods is zero percent and it applies only to imports of new equipment.
VAT reduction (10.5%) applies on locally purchased and imported capital goods (finished goods) and information and telecommunication goods (including their parts and components).
Export promotion incentives
In these zones imports are free of customs duties, statistics rate, and VAT, as is the equipment needed to build operations there. The purchasing of supplies and raw materials from third countries is also exempt from duties or taxes so manufacturers can produce for export at a lower cost.
Goods may remain in the zone for a maximum period of five years, meaning that they do not need to be released until a purchaser is found, thereby delaying payment of duties and taxes (free zone customers pay the duties and taxes on goods sold and leaving the zone). Industries exporting through FTZs benefit from incentives available in the Argentine Territory, avoid VAT, and save by not paying internal taxes on basic supplies such as electricity, gas, water, and telephone services.
Currently, there are free trade zones in
Buenos Aires, Córdoba, Chubut, La Pampa, Mendoza, Misiones, Salta and San Luis.
The drawback mechanism was established to refund various import charges. The following charges are rebated: import tariffs; the statistical fee on imports (0.5%); and the value-added tax of 21% (10.5% in the case of capital goods). To benefit from this mechanism, the imported raw materials must be substantially transformed or embodied in the production of goods for export.
This mechanism allows duty free admission for those goods substantially transformed or embodied in the production of goods for export. The exports must be completed within the stipulated time, as set by customs, in accordance with the type of imported inputs. Failure to re-export goods will result in a fine. The transfer of property, possession, or use is not permitted. A bond will be needed to cover the value of import charges for the goods, which is cancelled when the goods are re-exported.
This mechanism can be used by manufacturing companies, allowing the temporary entry of goods for transformation and re-export, without paying import-related tariffs and duties until final goods are exported. Temporary entry raw materials, parts, components, auxiliary material, and packaging material used in the process of industrial transformation or production for their subsequent exportation concludes when a definitive export with transformation, re-export without transformation, or importing for consumption within the company occurs. The regulation provides different timeframes depending on the final destination of the products. Another advantage of the system is that it allows Argentine importers to compensate the VAT due on definitive imports made through this regime with their favorable fiscal balance.
Total or partial reimbursement up to 6% of indirect taxes paid on exports outside MERCOSUR, especially for those products that incorporate technology, develop trademarks, and foster regional economies.
The BITs promote stable and marketoriented policies towards foreign investment through non-Discriminatory Treatment, because the investment of each contracting party shall, at all times, be accorded fair and receive equitable treatment in the territory of the other contracting party. Each contracting party guarantees to an investor of the other party the unrestricted transfer of investments and returns. Each contracting party also guarantees the unrestricted transfer of funds in repayment or loan directly related to a specific investment, the proceeds of the total or partial liquidation of any investment, and wages and other remuneration accruing to a citizen of the other contracting party. BITs establish clear limits on the expropriation of investments and provide for payment of prompt, adequate and effective compensation when expropriation takes place. In case of disputes between the contracting parties, BITs give investors from both parties the right to submit an investment dispute with the treaty partner’s government for international arbitration.
As well as the benefits described under taxation, a new reform grants further benefits for PYMEs such that they can receive a tax credit on investments on fixed assets.