Argentina: Promotional Regime For The Use Of Renewable Energy

Joint Resolution N° 123-313/2016 issued by the Ministry of Energy and Mining, and the Ministry of Production (the "Resolution") entered into force on July 11, 2016, when it was published in the Official Gazette. The Resolution describes in its Annex goods to be used in investment projects which are not manufactured in Argentina to determine the applicability of the following tax benefits provided in the Promotional Regime for the Use of Renewable Energy: (i) Tax Certificate and (ii) exemption from taxes on imports.

Notwithstanding the list of goods in the Annex of the Resolution, this list may vary because:

  1. The interested parties (including manufacturers that import the goods for the domestic or foreign market) are able to request the inclusion of new goods by duly demonstrating they are not produced in the country. This request must be done within the term of 15 business days as from July 11, 2016 or as from the acknowledgement that the good is not manufactured in Argentina.
  2. The manufacturers are able to request the exclusion from the list of the goods they produce in the country or will start to produce in the future by due proof of such production in the country. This request must be done within the term of 15 business days as from July 11, 2016 or as from the date those goods start being produced.

In both cases, the request must be made before the Ministry of Energy and Mining which, in turn, will then involve the Ministry of Production. The request of inclusion or exclusion will be resolved jointly by both ministries.

The inclusion or exclusion of the goods list will be grounded on the following standards that certify the product is not manufactured in Argentina:

  1. When the product is neither manufactured in Argentina in a timely manner nor is it available for the project's schedules ; or
  2. When the product manufactured in Argentina does not meet all the minimum requirements of quality, technicality and reliability according to Argentine or international acceptable guidelines.

Concerning the benefits, the Resolution establishes that:

a. Tax Certificate

The benefit consists of the issuance of a Tax Certificate for  20% of the Total Argentine Component as long as it is proved that 60% of components in the electromechanical installations are Argentine-made - excluding civil works, costs of transport and assembly of equipment – or less than 60% but always higher than 30% if it can be demonstrated that the product is not manufactured in Argentina..

"Electromechanical installations" are defined in the terms of the Resolution as "parts, fittings, assemblies and subassemblies of goods of the systems of developed technology that combine electrical, electronic and mechanical components to constitute the mechanism and generate electric power, excluding civil work."

To calculate the percentage of the Argentine component in the electromechanical installations ("declared Argentine component" or "C.N.D" after its Spanish acronym), the proportion that represents the "Total Argentine Component" (or "T.C.N." after its Spanish acronym) over the total cost of the goods corresponding to electromechanical installations (Argentine component plus CIF value of goods imported until their arrival to an Argentine port) should be calculated.

In other words:

  1. In the numerator the "Total Argentine Component" (or "T.C.N.") and
  2. In the denominator the sum of T.C.N. and the cost of the imported goods plus the international insurance and freight calculated at the port of destination – Argentina- (total value CIF).

In graphic terms:

To grant the Tax Certificate, the result of the C.N.D. must be 60% or 30% if in electromechanical installations are incorporated goods included in the Annex of the Resolution, that is, goods that are not manufactured in Argentina.

To calculate the T.C.N., the value of the Argentine component of all the parts, fittings, assemblies and subassemblies of goods ( "Goods") that meet the characteristics that are enumerated below (plus  15% as "miscellaneous" or small parts which are difficult to quantify such as  screws, nuts, washers, etc. which must be deemed as "Argentine-made")  must be added:

  1. Goods whose maximum imported content does not exceed  40%;
  2. Goods whose production is made from raw materials of Argentine origin;
  3. Goods whose production is made from raw materials which are imported but have undergone  a process of transformation that implies a change in the  classification under the relevant chapter of the Mercosur Common Nomenclature. If the destiny is to generate electric power from solar photovoltaic energy, it must be accredited also that the Argentine component integrated is at least 25%.

Finally, the Argentine component of investment projects is also relevant for the purposes of allocating the resources of the FODER.

b. Exemption from taxes on imports

The capital goods, special equipment, parts, elements, components, replacements, accessories and new input necessary for the implementation of a project included in the Annex; that is, the goods that will be imported (final import as of December 31, 2017) because they are not manufactured in Argentina, will enjoy exemption from import duties or other charges or statistical rates and are excluded from other "service fees."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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