Argentina: Regulation Of Benefits To Bolster Small And Medium Sized Enterprises

By means of Decree No 1101/2016 and Tax Authority General Resolution Nos 3945 and 3946, the Argentine Executive Branch of Power regulated the scope and legal requirements in order to access the benefits provided in Law No 27,264 of Promotion of Small and Medium Sized Enterprises.

On July 13, 2016 Law No. 27,264 of Promotion of Small and Medium Sized Enterprises was sanctioned and later published on the Official Gazette on August 1, 2016 (the "Promotion Law"). The Promotion Law was sanctioned in order to promote the recovery of small and medium sized enterprises ("SMEs") contemplating certain financial and tax benefits to that end. The Promotion Law was commented in Marval News # 164.

On October 17 and 19 the Official Gazette published Decree No. 1101/2016 and General Resolutions Nos 3945 and 3946 issued by the Tax Authority ("AFIP"); regulating the Promotion Law.

The Promotion Law and its regulations set out two main aspects: (1) a special tax treatment for SMEs by means of certain tax benefits and (2) a series of measures to bolster productive investments, described as follows:  

1.   Tax Benefits for SMEs

  • Presumed Minimum Income Tax exemption. To be effective for fiscal exercises as from January 1, 2017. Decree No. 1101/2016 instructs AFIP on the regulation of this benefit. To the date of this publication, such regulation has not yet been made public.
  • Tax on Debits and Credits in Bank Accounts already cancelled may be computed at 100% as payment on account of Income Tax for enterprises considered "micro" or "small" and at 50% for manufacturing industries considered "medium – section 1".
    According to the regulation hereby analyzed, that benefit includes the amount of the Tax on Debits and Credits in Bank Accounts effectively paid until the end of the fiscal year in course. For the first fiscal annual year, the amount paid as from August 10, 2016 will be taken into account if and when the taxpayer is categorized by the AFIP as an SME before December 31, 2016. If the categorization is accepted after that date, the taxpayer may take advantage of the benefits as from the month in which the categorization is approved. The process to obtain such categorization needs to be made on the AFIP's website.
  • Value Added Tax ("VAT") payment deferral. "Micro" and "small" enterprises may pay the resulting balance in VAT affidavits on the second month following the original due date. Thus, the tax will still be assessed and declared by the taxpayer on its original due date (according to AFIP regulations), but taxpayers will be able to defer payment for 90 days.
    AFIP's General Resolution No. 3945 specifically excludes people facing criminal charges involving tax crimes, or common crimes related to not complying with tax, customs or social security obligations.
    At the same time it sets forth the legal requirements for granting such benefit, such as: not having a lack of presentation neither of informative nor determinative affidavits before AFIP; not being in a state of bankruptcy; requesting to be categorized as an SME and the express adhesion to the benefit in AFIP's IT system; having an electronic fiscal domicile, among others.
    It is important to bear in mind that the benefit will be effective once the categorization is approved and that it will be rightfully lost when the beneficiary fails to present three monthly affidavits and /or fails to pay the tax.
  • Compensation of credit and debit balances and automatic reimbursement. The Promotion Law also includes the possibility of offsetting credit and debit balances in a systematic way and the possibility of requesting the reimbursement of any positive balance. Pursuant to Decree No. 1101/2016, the balances contemplated in the benefit are of those corresponding to every tax which is collected by the AFIP. The reimbursement will be done with public bonds.
  • Other measures: The Promotion Law also simplifies procedures which favor the assessment and payment of Federal Taxes; the implementation of programs which tend to recompense SMEs located in border areas and a bigger benefit for SMEs related to regional economies. To date, those benefits have not been expressly regulated by the AFIP.

2.   Productive Investment's Promotion

The Promotion Law also establishes a series of measures to promote productive investments done by SMEs between July 1, 2016 and December 31, 2018. The following are  understood to be productive investments : (i) capital goods to be used in the company's economic activity and not for regular sale (buy, construction, fabrication, elaboration or definite importation of new or used goods which are amortizable for Income Tax, including the acquisition of reproductive cattle and excluding vehicles), and (ii) infrastructure projects. 

The promotion measures are:

  • Fiscal stability until December 31, 2018 for every tax (direct taxes, fees and contributions). Argentine Provinces may adhere to this benefit by sanctioning a Law in which they should expressly invite Municipalities to sanction similar laws for their jurisdictions;
  • Computing as payment on account of Income Tax of the amount arising from applying a 10% rate over productive investments (net of VAT), with a certain cap;
  • Granting a non-transferable bond which may be used for payment of federal taxes, including customs taxes, for the maximum amount of VAT tax credit arising from the productive investments. This bond may be used within 10 years as from its emission.  

The regulation provides that, in order to access to those benefits, the potential beneficiaries must file an affidavit through the AFIP's website, together with a legal opinion issued by a public accountant backing the investments and the VAT tax credit arising from them.

Furthermore, it is regulated that benefits hereby provided will expire if, in the fiscal year in which the benefit was computed and/or in the next, the company reduces its employment level by 5% in relation to the average employees declared during the previous fiscal year. The employment level declared at the moment of adhesion to the regime will not be considered reduced in case of employees' retirement, death or quitting. Certain labor contracts will not be considered as well (fixed-term contracts, seasonal contracts or casual work contracts, among others).

Finally, it is provided that infrastructure projects under construction must be concluded within 4 years as from the granting of the benefit and must remain as an asset of the beneficiary for certain period of time once the project is concluded.

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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