Argentine Government issues regulations for the promotional regime of investments in the automotive and auto parts industry

• A new Decree establishes regulations applicable to a promotional regime for investments in the automotive and auto parts industry in Argentina.
  
  
• The regulations include the list of tariff codes for goods that will be exempt from duties on exports.

On 29 May 2023, the Argentine Government published, in the Official Gazette, Decree 281/2023 (the Decree), which provides regulations for a promotional regime to encourage investments in the automotive and auto parts industry and its value chain.

Background

On 19 September 2022, Argentina enacted Law 27,686, which establishes a promotional regime to encourage investment in the automotive and auto parts industry. The promotional regime provides tax incentives for new investments from companies located in Argentina that produce goods directly related to the automotive industry (automobiles, trucks, engines, auto parts systems, among others).

The tax incentives provided in the promotional regime include: (i) an exemption from duties on the export of certain goods until 31 December 2031; (ii) the possibility to request a value added tax refund stemming from investments performed under the regime that have not been credited after three consecutive tax periods; and (iii) the option for accelerated tax depreciation of movable property in three consecutive annual installments.

The start-up period for investment projects approved by the Secretariat of Industry, Knowledge Economy and External Trade Management of the Ministry of Productive Development (Authority of Application) must end no later than 31 December 2029.

Decree 281

Eligible investment projects

The Decree states that to be eligible for the promotional regime, new projects must comply with the minimum investment amount to be established by the Authority of Application for each specific asset and/or activity.

To comply, amounts to be included in the minimum investment limit include investments in machinery and equipment, molds, dies or other instruments, fixed installations for processes, tests and trials and/or infrastructure work necessary to manufacture the product or improve the manufacturing process net of taxes, financial expenses, discounts and/or rebates.

The Decree also establishes the specific percentages to be considered for each type of asset/activity to be understood as a new project or significant redesign of the existing projects, eligible for the promotional regime.

Technical report

Compliance with the requirements of the promotional regime must be demonstrated by obtaining a technical report from:

• Competent departments of National Public Universities
  
  
• The National Institute of Industrial Technology
  
  
• Other organizations to be determined by the Authority of Application

Exemption from export duties

The Decree includes the list of tariff codes for goods that will be subject to 0% in duties on exports until 31 December 2031.

Audit

The beneficiaries of the promotional regime will be subject to audits by the Authority of Application to verify compliance with the obligations under the regime.

The cost for verification activities and control of the regime shall be borne by the respective beneficiaries through the payment of a fee, which may not exceed 1% of the amount of benefits received.

Implications

Multinational groups in the automotive and auto parts industry interested in doing business in Argentina should evaluate this promotional regime and the potential benefits on their operations.

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
  
  
• Sergio Caveggia
  
  
• 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 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
   

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.