Argentina – New Tax Planning Informative Regime
October 21, 2020
São Tomé and Príncipe – Binding Information: Consumption Tax. Lease Agreements.
October 29, 2020
The Knowledge-Based Economy Regime was approved in June 2019 through National Law No. 27.506. This regime foresees that tax benefits granted to entities that apply the use of knowledge and digitalization of information to obtain goods and provide services (including the export of services) and improve processes, for the development of their main activities. These activities include, among others, software, computer and digital services, audiovisual production, biotechnology, geological and prospection services, services related to electronic and communications, and other professional services.
Although this regime became effective January 1st, 2020, afterwards it was suspended in order to introduce amendments aimed at broadening the scope and delve its focus more into Micro, Small, and Medium Entities (PyMES).
In this sense, last week the Argentine National Congress passed the Regime’s amendment bill, with the following main features:
I. Stricter adhesion requirements for large entities and more relaxed ones for the PyMES.
II. More benefits for the PyMES and new limited benefits for large entities.
III. The concept of “stability in the enjoyment of benefits” replaces the “fiscal stability one”.
IV. Income Tax:
a) Micro and Small Entities: exemption equal to 60% of the income tax connected to the promoted activities.
b) Medium Entities: exemption equal to 40% of the income tax connected to the promoted activities.
c) Large Entities: exemption equal to 20% of the income tax connected to the promoted activities.
V. Tax Credit Bond:
a) The amending Law replaced a one-time transferable bond with a non-transferable one.
b) The amending law also establishes that there shall be an annual quota for purposes of this benefit.
c) The Tax Credit Bond shall be calculated as a percentage – 70% – of the social security contributions related to the employees connected to promoted activities. Said percentage shall be increased up to 80% of social security contributions in case that the new employees are, among other situations,: (i) women, (ii) transsexual and transgender persons, (iii) professionals with graduate studies in engineering, exact or natural sciences, (iv) individuals with disabilities, (v) individuals who reside in unfavorable areas and/or provinces with lower relative development, (vi) individuals who benefitted from welfare programs before being employed.
d) In principle, the Tax Credit Bond and shall be able to be used to offset Value Added Tax, and other National Taxes, liabilities, but for the Income Tax ones. However, exporters shall be entitled to use it for offsetting their Income Tax liabilities in a proportion equal to the exports – vis-à-vis the whole invoicing amount – reported upon registration.
e) The amending bill establishes a personnel cap in order to apply this bond and, once reached, the benefit may be additionally set off for new registered employees, if certain conditions are met.
f) The Tax Credit Bond shall be valid for 24 months. This period could be prorogued for another 12-month period under specific circumstances.
VI. The amending bill repeals the incremental deduction benefit for purposes of calculating the social security contributions.
VII. Foreign Withholding Taxes shall not be computed as a tax credit against argentine-source income gained by the beneficiaries. According the amending bill, they shall only be considered as an income tax deductible expense.
VIII. Beneficiaries who carry out exports of the promoted activities shall not be subject to Value Added Tax Withholdings and/or Collections.
IX. Software Self-development shall not be computed for purposes of calculating the invoicing percentage required in order to qualify as promoted activity, even in those cases where it is carried out to be exported.
X. The Knowledge-based Economy Regime shall maintain its enforceability of January 1st, 2020 for entities that were included in the former Software Promotional Regime. In the case of the remaining beneficiaries, the Regime shall apply as of the date in which this newly passed bill is published.
