The new decree extends until 31 December 2038, the promotional regime for industrial companies located in the Province of Tierra del Fuego, Antarctica and the Southern Atlantic Islands. The decree also requires companies to pay a monthly contribution on the sale of products linked to approved industrial projects.
On 23 October 2021, the Argentine Government published, in the Official Gazette, Decree 727/2021 (the Decree), which extends until 31 December 2038 the promotional regime for industrial companies that are located in the Special Customs Area of Tierra del Fuego, Antarctica and the Southern Atlantic Islands (the Special Customs Area) and have projects in the works as of 23 October 2021. The promotional regime may be extended for another 15 years beginning 1 January 2039, if certain conditions are met.
Background
On 16 May 1972, Law No. 19,640 established the National Territory of Tierra del Fuego, Antarctica and the South Atlantic Islands as a Special Customs Area. Activities conducted in that area are totally or partially exempt from certain national taxes, such as income tax, value-added tax (VAT), excise duties and customs duties.
On 14 September 2007, Decree 1234/2007 extended the promotional regime outlined in Law 19,640 to 31 December 2023, for industrial entities with projects in force as of the publication date of that Decree.
Decree 727
The Decree extends until 31 December 2038, the promotional regime for industrial companies that are located in the Special Customs Area and have projects in the works as of 23 October 2021. The promotional regime may be extended for an additional 15 years beginning 1 January 2039, after the Decree has been in force for 12 years and provided that Brazil maintains the promotional regime in the Manaus Free Trade Zone.
Companies that did not begin their approved projects by 23 October 2021, will lose the regime’s benefits. Benefits for the textile industry, however, will expire on 31 December 2023, unless extended by the Industry, Knowledge Economy and Foreign Trade Management Secretary of the Ministry of Productive Development (Authority of Application).
New projects to be included
New industrial projects or the readjustment of existing ones within the framework of Law No. 19,640 for the production of electronic products, components and related technologies may be submitted for approval until 31 December 2023. The new projects or readjustments, however, must not affect the production carried out in the National Continental Territory, and any goods must not be manufactured in the Special Customs Area as of 23 October 2021.
Requirements
Industrial companies located in the Special Customs Area with projects in the works as of 23 October 2021, have six months from that date to express their willingness to adhere to the benefits and obligations established in the Decree before the Authority of Application.
New contribution
Beneficiaries of the regime must make a monthly contribution equivalent to 15% of the benefits obtained from VAT on the sale of products linked to the approved industrial projects. That amount will be deposited in the Fund for the Expansion of the Fuegian Productive Matrix.
The Decree allows beneficiaries to reinvest up to 40% of the monthly VAT contribution in their own productive investment projects aimed at expanding the productive matrix and improving competitiveness. The Executive Committee of the Fund for the Expansion of the Fuegian Productive Matrix must have previously approved the projects. The investment projects, however, cannot be directly linked to the activities promoted by the present regime.
Additional benefits
Beneficiaries that export goods manufactured in the Special Customs Area may request a reimbursement of 5% of the free on-board value of their incremental exports. Certain products produced by the oil industry would not qualify for the reimbursement.
Implications
Companies doing business in the Special Customs Area, as well as those companies willing to make investments in new industrial projects in the Argentine territory, should analyze the requirements and benefits of the new Decree.
For additional information with respect to this Alert, please contact the following:
Pistrelli, Henry Martin & Asociados S.R.L., Buenos Aires
- Carlos Casanovas
- Gustavo Scravaglieri
- Ariel Becher
- Pablo Baroffio
- Sabrina Maiorano
- Juan Ignacio Pernin
Ernst & Young LLP (United States), Latin American Business Center, New York
- Pablo Wejcman
- Agustina Paula Paradiso
- Ana Mingramm
- Lucas Moreno
- Enrique Perez Grovas
Ernst & Young Abogados, Latin American Business Center, Madrid
- Jaime Vargas
Ernst & Young LLP (United Kingdom), Latin American Business Center, London
- Lourdes Libreros
Ernst & Young Tax Co., Latin American Business Center, Japan & Asia Pacific
- Raul Moreno, Tokyo
- Luis Coronado, Singapore
For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.
