New Incentive Regime for Large Investments

On 8 July 2024, Regulatory Decree 592/2024 (the “Decree”) was published in the Official Gazette, regulating Law 27.742 Basis and Starting Point for the Freedom of Argentinians (the “Law” ), which in Title VII creates the Incentive Regime for Large Investments (“RIGI”).

The following is a summary of Title VII of the Law:

Chapter I establishes:

  1. Creation of the Regime: Establishment of the RIGI. Declaration of National Interest: “Large Investments” under this regime are declared to be of national interest.
  2. Annulment of Restrictive Norms: Any norm or act, both at national and local level, that restricts, limits, hinders or distorts the provisions of the RIGI will be absolutely and irreversibly null and void.
  3. Priority Objectives:

a) To encourage large national and foreign investments in the Argentine Republic in order to guarantee the country’s prosperity; 

b) To promote economic development;

c)To develop and strengthen the competitiveness of the various economic sectors;

d) To increase exports of goods and services abroad included in the activities developed in the RIGI;

e) Favour the creation of employment;

f) To immediately generate conditions of predictability and stability for the Large Investments foreseen in the RIGI and competitive conditions in the Argentine Republic to attract investments and for them to materialize by temporarily bringing forward the macroeconomic investment solutions without which certain industries would not be able to develop;

g) To create a regime that provides certainty, legal security and special protection for Large Investments that comply with the requirements of the RIGI, in the event of possible deviations and/or non-compliance by the public administration and the State with the RIGI;

h) Promote the coordinated development of competences between the National State, the provinces and the respective enforcement authorities in the field of natural resources; and

i) Promote the development of local production chains associated with investment projects covered by the RIGI.

Chapter II states:

  1. The RIGI will be applicable to Large Investments in projects in the forestry, tourism, infrastructure, mining, technology, steel, energy, oil and gas sectors that meet the requirements.
  2. Deadlines: The initial term to join the RIGI will be 2 years from its entry into force, with the possibility of a one-time extension of 1 year by the National Executive Power (“PEN“).
  3. Eligible Subjects: Single Project Vehicles (“VPU“) holding one or more phases of a project qualified as “Large Investment”, for the sole purpose of carrying out one or more phases of an investment project admitted to the RIGI, may apply for accession to the RIGI.
  4. The following are considered as VPUs:
  1. Public limited companies, including sole proprietorships and limited liability companies;
  2. Branches established by companies incorporated abroad in accordance with Article 118 of the General Companies Act;
  3. Dedicated branches as provided for in Article 170 of the Law. 
  4. VisteTransitory unions and other associative contracts.

Holders of concessions relating to the execution and/or exploitation of infrastructure works and/or provision, operation and/or administration of services, which are provided in competition with other concessionaires, operators or providers at local or regional level, may join the RIGI if: (i) they submit an investment plan that qualifies as Large Investments under this regime and (ii) they meet the remaining requirements and conditions for inclusion in the RIGI.

Suppliers of goods or services with imported merchandise may apply for registration in the RIGI exclusively for the purpose of benefiting from the incentives and rights provided for in Article 190 of this law with respect to the merchandise, including inputs, that they import for the services they intend to provide to a VPU that is a member of the RIGI.

Chapter III defines:

1. Large Investments: Projects that include the acquisition, production, construction and/or development of assets destined to activities that meet the following requirements:

  • Investment in computable assets equal to or greater than USD 200,000,000 two hundred million (or a higher amount established by the PEN for any productive sector).
  • Minimum investment in eligible assets equal to or greater than 40% of the minimum investment amount during the first and second year of the project (the distribution will be determined by the PEN).
  • Long-term” investments shall be considered to be long-term as long as they have a ratio of no more than thirty per cent (30%) between, on the one hand, the present value of the expected net cash flow, excluding investments, during the first three (3) years from the first disbursement of capital and, on the other hand, the net present value of the capital investments planned during the same period. The implementing authority may modify this ratio, simultaneously for all sectors involved, provided that with such modification the regime maintains the purpose of providing stability guarantees only to long maturing investments. Also, projects that may result in the positioning of the Argentine Republic as a new long-term supplier that does not yet have a relevant participation, in accordance with the requirements established by the regulations and that involve capital disbursements in successive stages whose minimum investment in computable assets per stage is equal to or greater than one billion United States dollars (USD 1.000.000.000.000), may be qualified as Long-Term Strategic Exports by the implementing authority.

Chapters IV and V establish:

  1. Exchange Incentives Partial lifting of the obligation to enter and settle in the Free Exchange Market the countervalue of exports of goods, in accordance with terms and scales.
  2. Exchange Flexibilisation: Greater freedom in the availability of foreign exchange corresponding to certain items and the ability to make payments through the FEM.
  3. Customs Exemptions: Exemptions from customs duties and other benefits, such as guaranteed stability of the customs regime for 30 years.
  4. Special Tax Treatment: A special tax treatment for income tax and a system based on “Tax Credit Certificates” for the payment of VAT obligations.

Chapter VI provides for:

  1. Regulatory Stability: VPUs adhered to the RIGI will have regulatory stability in tax, customs and foreign exchange matters for a period of 30 years. This stability may not be affected either by the repeal of the RIGI or by the creation of more burdensome or restrictive tax, customs or exchange regulations.

Chapters VII to XII regulate:

  1. Termination of Incentives: Cases of termination of incentives.
  2. Infringement and Appeals Regime: Rules on infringements and appeals.
  3. Authority of Application: Creation of the authority in charge of applying the regime.
  4. Jurisdiction and Arbitration: Determination of jurisdiction and arbitration mechanisms.
  5. Accession of Local Jurisdictions: Invitation to local jurisdictions to adhere to the RIGI.
  6. Transitory Provisions: Transitory rules relating to the regulation of the regime.

The Law came into force with its publication in the Official Gazette on 8 July 2024.

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