The promotional regime provides a number of opportunities that should be considered by multinationals in the renewable energy sector. Accordingly, these multinationals should review the process for applying for the promotional regime and analyze whether any of the benefits may apply to current projects.

The Argentine government published Decree 532/16 in the Official Gazette on March 30, 2016, which provides guidance on the tax benefits under the promotional regime for the utilization of renewable energy sources.

Background

In October 2015, the Argentine Congress passed National Law No. 27,191 (published in the Official Gazette on October 21, 2015), which extended the promotional regime for the utilization of renewable energy sources previously established by Law No. 26,190 in 2007 and added tax benefits (see Tax Alert 2015-2140 for further information).

According to the Law, renewable resources of energy include wind power, solar power, geothermal power, tidal power, hydropower, biomass power, waste-to-energy power, sewage treatment plant gases and biogas.

The Law includes the following tax and customs benefits:

— Accelerated depreciation for income tax purposes and early reimbursement of VAT
— Carry-forward of net operating losses (NOLs) for a 10-year period (as opposed to the five-year term established by the Income Tax Law)
— Exemption from minimum presumed income tax base for the first eight years for assets used to develop the promoted activities
— Exemption from the 10% dividend withholding tax for dividends distributed from the promoted activities to the extent said dividends are reinvested in new infrastructure projects in Argentina
— Offset of national taxes for beneficiaries that demonstrate the use of components made in Argentina in their projects (certain requirements should be met)
— Exemption from import duties on the import of new capital goods, components, accessories, replacement parts, among others, destined to be used in a promoted project

Decree's clarifications

Decree 532/16 introduces requirements to qualify for these tax benefits and clarifies many other aspects of the regime, including the following:

— The promotional regime applies to every investment for the generation, auto-generation and co-generation of electric energy from the use of renewable energy sources within the Argentine territory, including new generation plants or extensions and/or improvements of existing ones to the extent new assets are incorporated into the project.
— To benefit from the regime, individuals must be domiciled and legal entities must be established in Argentina.
— Beneficiaries will have to provide a guarantee equivalent to 100% of the total amount of tax benefits assigned to the project.

The application authority for this regime will be the Ministry of Energy and Mining, which will be in charge of the selection process, analysis and approval of the projects and establishment of a merit ranking for applying to the regime if the fiscal threshold assigned to the regime was exceeded. In addition, the application authority will have to issue the rules describing the procedures and documentation required to access the regime, as well as coordinate with other official organizations — including the Argentine Tax Authorities (AFIP) - to implement the promotional system.

Additional procedural regulations, providing guidance on applying for the promotional regime, are still pending. The regulations also will define the parameters to be considered by the application authority for the selection of a project. These regulations are expected to be issued in the following weeks, given the expressed objectives of the Argentine government to attract new investments to the country in the short-term.

This promotional regime provides interesting opportunities for multinationals in this industry. Accordingly, multinationals should stay alert for any developments in the near future.

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