Global Tax Alert (News from Americas Tax Center) | 23 September 2013

Argentina issues additional regulations regarding Software Promotional Regime

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On 16 September 2013, Presidential Decree 1,315/2013 (the Decree) was published in the Argentine Official Gazette, regulating the Promotional Regime for the Software Industry set forth by Law 25,922 and extended by Law 26,692.

Under the Promotional Regime, companies that develop software receive the following benefits until December 2019:

  • Tax stability for taxpayers registering with the system
  • Tax credit amounting to 70% of the social security contributions paid for the personnel related to the industry, which can be used to offset national tax liabilities (for instance, VAT). Such tax credit can only be used to offset income tax liabilities in proportion to the export activities carried out by the company
  • 60% reduction in the income tax burden for each fiscal year, applicable to both Argentine source income and to foreign source income
  • Exemption from VAT withholding or reverse withholding, which is an important advantage from a financial standpoint

The Decree establishes several requirements and clarifications for companies to receive the benefits detailed above.

First, the Decree creates the National Registry of Software Producers and Computer Services. Companies that comply with all the requirements must be registered with the Registry in order to receive the benefits. A company performs, as its main activity, software production or computer services when the following requirements are complied with:

  • More than 50% of the company's annual revenues correspond to the activities involved in the regime
  • More than 50% of the employees perform duties related to such activities
  • More than 50% of the annual salaries paid correspond to employees that perform duties related to such activities

The Decree provides a list of activities eligible for the Promotional Regime. In this regard, the list includes software development and value-added computer services such as computer and network security among others. The scope of the listed activities also includes, among others, the services of design, codification, maintenance, remote support and trouble solutions to be performed to software products destined for foreign markets.

The Decree excludes “self-development of software” from the eligible activities. The new rule defines the concept of “software self-development” as one performed by the companies for themselves or related parties. However, the Decree establishes that when software is incorporated into processors (inserted software) and the end users are independent entities, the software development may still be eligible even if rendered to a related party.

Finally, for the purpose of registering and remaining registered in the Promotional Regime, companies must comply with two of the following three conditions:

  • Carrying out software research and development (R&D) activities: The R&D annual expenditures should represent at least 3% of the annual total expenses in the abovementioned activities until 2015, inclusive. Afterwards, such percentage will be increased annually until 2019 (the increase will vary depending on the size and qualification of the promoted company).
  • Obtaining a quality certification of software products or processes: Such certification should be obtained through one of the quality standards listed by the Authorities.
  • Performing software exports: The exports should represent at least 8% of the annual total revenues of the abovementioned activities until 2015, inclusive. Afterwards, such percentage also will be increased annually until 2019 (the increase will vary depending on the size and qualification of the promoted company).

Companies with software development activities or computer services should evaluate the possibility of applying for the benefits.

In addition, companies already registered in this promotional regime must evaluate their status and need to re-register in accordance with the new rules.

For additional information with respect to this Alert, please contact the following:

Pistrelli, Henry Martin & Asociados S.R.L., Buenos Aires
  • Carlos Casanovas
    +54 11 4318 1737
  • Gustavo Scravaglieri
    +54 11 4510 2224
  • Ariel Becher
    +54 11 4318 1686
  • Pablo Baroffio
    +54 11 4510 2271
Ernst & Young LLP, Latin American Business Center, New York
  • Alfredo Alvarez
    +1 212 773 5936
  • Pablo Wejcman
    +1 212 773 5129

EYG no. CM3818