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April 22, 2019
Argentina’s Executive Power proposes bill to promote knowledge-based economy
On 3 April 2019, the Argentine Executive Power sent a draft bill that would establish a promotional regime for the knowledge-based economy to Congress. If enacted, the promotional regime would be in force from 1 January 2020 to 31 December 2029.
The objective of the proposed regime is to promote knowledge-based and digital activities that result in the manufacturing of goods, the provision of services or the improvement of processes.
The bill would include the following activities in the promotional regime: software development and related activities (e.g., cloud computing, software as a service, help desk services exported to foreign markets), audio-visual productions, biotechnology, geologic services, professional services qualifying as exports, nanotechnology, satellite and aerospace industries, artificial intelligence, robotics, internet of things (i.e., extension of internet connectivity to physical devices), medicine and agriculture-related investigations and experimental developments.
To participate in this regime, resident companies would have to: (1) derive at least 70% of their revenues from the promoted activities; (2) enroll in a registry; and (3) comply with at least two of the following requirements:
Eligible companies would receive the following benefits:
Companies participating in the promotional regime would be subject to reporting obligations and audits conducted by the tax authorities and would be required to pay a fee that would not exceed 4% of the tax savings obtained from the regime.
In addition, the bill would require companies to pay an annual contribution of no more than 1.5% of the tax savings obtained from the promotional regime. The annual contribution would go towards a fund for the development of entrepreneurship.
Special Software Promotion Law 25,922
The bill would allow companies currently benefiting from the software promotion regime under Law 25,922, which is due to expire on 31 December 2019, to apply for the knowledge-based economy promotional regime. Companies would be given adequate time to comply with the requirements under the new regime.
Companies doing business in Argentina and multinational groups interested in the Argentine market should monitor the approval and entry into force of the new promotional regime and assess the potential benefits to their operations and activities.
For additional information with respect to this Alert, please contact the following:
Pistrelli, Henry Martin & Asociados S.R.L., Buenos Aires
Ernst & Young LLP (United States), Latin American Businsess Center, New York
Ernst & Young LLP (United Kingdom), Latin American Business Center, London
Ernst & Young Tax Co., Latin American Business Center, Japan & Asia Pacific