Argentina: Tax promotional regime for energy generation through renewable sources
The Argentine government has launched and updated promotional tax measures for the energy sector that intends to encourage the use of renewable energy sources for the production of electricity.
The measures were introduced through the enactment of Law 26,190, as amended by Law 27,191, and Regulatory Decrees 562/2009 and 531/2016.
According to this regime, certain tax benefits will be granted upon request by filing the projects with the relevant authorities, provided they start being executed before or on December 31 2017. The applicable law and regulations state that the projects will be deemed to have started when expenditures of at least 15% of the whole investment amount have been made.
For the execution of infrastructure work, including capital assets, civil work, electromechanical and assembly works, and other related services that are part of the new generation plant or included in the pre-existent ones that functionally work together in producing energy through renewable sources, the following benefits will apply:
Accelerated depreciation: beneficiaries may choose to apply either the regular straight-line depreciation method or the special depreciation method consisting of two or three equal, annual and consecutive instalments depending on whether the investments were made during 2016 or 2017 respectively. If they consist of real estate property, the accelerated depreciation would result from reducing its estimated useful life to 50% (2016) or 60% (2017). Lower reductions to the useful lives apply in subsequent years. The relevant assets must be held for at least three years;
A five-year extension for computing tax losses arising from the benefited projects (being barred by statute of limitations after 10 years from generation instead of five);
Early recovery of VAT paid for the purchase of new assets or infrastructure works not offset against VAT outputs by means of a refund or a credit against certain other federal taxes;
Relief from minimum notional income tax for the assets involved during the first eight years of the project, notwithstanding that the minimum notional income tax has been repealed as from 2019;
A tax credit certificate will be applied against federal taxes that would be granted, equal to 20% of the amount of purchases in domestic components for the project (certain exclusions apply) to the extent it can be proved that at least 60% of the total components are of domestic source (lower percentage may be accepted as long as it can be demonstrated it cannot be obtained in the domestic market but should never be lower than 30%); and
Relief from import duties for importations made up to December 31 2017.
Some guarantees have to be offered to enjoy the above tax benefits. Also, from a provincial tax perspective, Law 26,190 invites all Argentine provinces to adhere to the regime enacting local regulations with tax benefits aimed at promoting and encouraging the production of electric energy through renewable sources.
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