ANNOUNCEMENT 21 Oct 2015

In October 2015, the government of Argentina announced a targeted tax change.

NUMBER OF INTERVENTIONS

1

  • 0 harmful
  • 1 neutral
  • 0 liberalising
Inception date: 21 Oct 2015 | Removal date: open ended
Still in force

Tax or social insurance relief

On 21 October 2015, the government of Argentina enacted Law No. 27,191 for the purpose of extending the promotional regime for the utilization of renewable energy sources, as well as for the purpose of adding new benefits to the regime. In addition, this Law established national renewable energy targets, establishes a fund for financing renewable energy projects, and defines minimum renewable requirements for large consumers.
 
The key benefit-related aspects of this new Law No. 27,191 are:

  • The accelerated depreciation for income tax purposes and early reimbursement of VAT can be enjoyed simultaneously- in contrast to the former law of 2007 i.e. Law 26,190, which required the beneficiaries to select only one. It is important denoting that the prior applies to the implementation of infrastructure projects, including capital goods, civil, electromechanical and assembly services, and other associated services integrated into a new generation plant or existing plant.
  • As far as the accelerated depreciation for income tax purposes is concerned, according to Law No. 27,191, beneficiaries can choose the depreciation method from alternatives established in the law.
  • Net operating losses canbe carried forward up to 10 years - in contrast to the 5 years under the Income Tax Law.
  • The assets used to develop the renewable energy projects will not be subject to the minimum presumed income tax base within the initial 8 years.
  • Dividend distributions related to the renewable energy projects will not be subject to the 10% dividend withholding tax (if those dividends are reinvested in new infrastructure projects in Argentina).
  • Beneficiaries that can show they used components made in Argentina in their projects (certain requirements should be met) will be eligible for receiving a tax certificate that can be used to offset other national taxes.

Furthermore, it is important denoting that the taxpayers are able to applying for the tax benefits (once their projects are approved by the Application Authority), to the extent the project is implemented before 31 December 2017.
Additionally, Law 27,191 insinuates that a second-phase program has been established for projects that use renewable energy sources and will be implemented between 2018 and 2025. Some of the benefits are similar to the benefits available to taxpayers that start implementing projects before 31 December 2017.
Beneficiaries of this system (regardless of when the projects are implemented) will be exempt from import duties on the import of new capital goods, components, accessories, replacement parts, among others, destined for use in a renewable energy source project.
In addition to the above benefits, Law 27,191 also creates a new Fund for the Development of Renewable Energies (FODER), which is to be funded, among others, through the National Treasury with minimum 50% of the savings from shifting from fossil fuels to renewables, estimated at about US$41 billion by 2025.
 
Furthermore, Law 27,191 sets the following national targets for renewable energy:

  • By 31 December 2017, minimum of 8% of total electricity consumed comes from renewable sources.
  • By 31 December 2019, minimum of 12% of total electricity consumed comes from renewable sources.
  • By 31 December 2021, minimum of 16% of total electricity consumed comes from renewable sources.
  • By 31 December 2023, minimum of 18% of total electricity consumed comes from renewable sources.
  • By 31 December 2025, minimum of 20% of total electricity consumed comes from renewable sources.

Lastly, Law 27,191 also establishes a special obligation for large energy users (power demand exceeds 300 kW) to achieve the above-mentioned targets individually, under a threat of penalty. Their renewable energy might be produced on-site or purchased through contracts, whose price is capped at maximum US$113/MWh. This price can be modified for new contracts after two years from the entry into force of the law takes effect if required by market conditions.

Update

On March 31, 2016, the Government adopted Resolution 531/2016 setting the rules for the National Regime for the Promotion of Renewable Energies. The text defines the fiscal benefits included in the new regime as well as the institutions responsible for its functioning and regulation.

On May 15, 2016, the Ministry of Energy and Mining issued Resolution 72/2016 regulating among other things the local content requirements to access the fiscal certificate that allows investors to offset other national taxes.

On October 3, 2017, the Ministries of Energy and Mining and Production adopted Joint Resolution 1-E/2017, modifying the methodology to calculate local content in the investment projects.

On October 10, 2017, the Argentine Government adopted Decree 814/2017 extending the effective dates for the incentive for periods ranging between 12 to 60 months.

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