Argentina adopts new promotional regime for lg investments:pwc

Argentina adopts new promotional regime for large investments

August 2024

In brief

What happened?

As described in our August 1 Insight, the Argentine Congress passed comprehensive reform, effective July 8, 2024, that introduces, among several legislative amendments, a Promotional Regime for Large Investment (RIGI for its Spanish acronym). RIGI aims to provide certainty and legal stability to specific long-term investments in Argentina by offering tax, customs, and currency exchange incentives.

On August 25, 2024, regulations were issued providing additional details on the RIGI and designating the Ministry of Economy as the agency in charge of administering the regime.

Why is it relevant?

The details provided by the regulations can help investors determine the types of investments eligible for the RIGI and help them complete the application process.

Action to consider

Investors should evaluate whether they might qualify for the new incentive regime.

Applicable sectors

The regulations define the sectors that will be eligible for the RIGI:

Forest, the activities whose main input to obtain products is wood and includes forest implantation

Tourism, but only with respect to activities related to lodging or accommodations

Infrastructure: physical structures, networks, and public or private systems necessary for the correct functioning of (1) logistics and transportation by road, land, sea, river, port, railway, and airport, or (2) public services, including health, telecommunications, education, defense, and security (among the most relevant)

Mining-related activities, including exploration, development, preparation, extraction, and exploitation of mineral resources

Technology-related activities, including production of innovative technological goods and services (e.g., biotechnology, nanotechnology, technology applied to energetical transition, aerospace, satellite, software, robotics, and AI industries)

Energy-related activities such as generation, storage, transportation and distribution of electric energy from renewable and nonrenewable sources, as well as the production of low carbon energy

Oil and gas-related activities, including construction of treatment plants, natural gas liquid separation plants, gas and oil pipelines, and other pipelines and storage infrastructure. Transportation and storage of liquid and gas hydrocarbons. In the case of the natural gas destined to exports, the RIGI may cover production, treatment, processing, fractionation, liquefaction, and transportation. Exploration and exploitation of liquid and gas hydrocarbons are excluded from the RIGI except for offshore activities.

Application request

The regulations also provide details on various aspects of the application request:

With respect to minimum investment amounts, the regulations provide a minimum of USD 200m in general for all economic sectors with the following exceptions:

USD 300m for transport and storage of oil and gas.
USD 600m for the exploitation and production of gas for exportation and exploration and exploitation of oil and gas offshore.
For Long-term Strategic Exporters, the minimum investment amount is USD 2b.

With respect to the application process, certain information must be provided when submitting the application, such as:

Provide detail of the investment amount in each stage of the project, type of activities and assets expected in each project stage, and estimated dates for the integration of the minimum investment.
In addition, the investment plan must include a technical memo issued by an independent professional stating that the project will not distort the local market. The regulations contain certain cases where no distortion will be presumed (e.g., production and exportation of commodities).
As part of the application, the company will need to commit to contract from local providers of goods and services at least 20% of the investment to be made.
The application must contain details on the sourcing of the financing and whether the funds will be entered through the foreign exchange market.

Tax, customs, and foreign exchange incentives

The regulations provide more details on accelerated amortization provisions and the possibility of transferring tax losses to third parties.

With respect to the reduction of the withholding tax on dividend distributions, the regulations provide that the reduced rate of 3.5% will apply after the end of the seventh fiscal year from the application to the RIGI without regard to the year in which the profits were generated.

With respect to customs incentives, the regulations provide that the PAIS tax (i.e., currently 30% on the price of the goods) will not apply to the importation of certain goods covered by the RIGI incentives.