Multinationals in the renewable energy sector should review the application process and analyze whether any of the tax benefits may apply to their projects.

Argentina's Ministry of Energy and Mining has issued Resolution No. 72/2016, which establishes the procedures and documentation needed to apply for the promotional regime for the utilization of renewable energy sources.

Background

In October 2015, Argentina enacted Law No. 27,191 (the Law), which extended the promotional regime for the utilization of renewable energy sources (previously established by Law No. 26,190) and added new benefits (see Tax Alert 2015-2140).

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

— Exemption from import duties on the import of new capital goods destined to be used in a promoted project

At the end of March 2016, Argentina issued Decree No. 531/2016, which provides new guidance on the requirements to qualify for the tax benefits under the promotional regime and clarifies many aspects of the regime (see Tax Alert 2016-784 {}).

Resolution's clarifications

Resolution No. 72/2016 establishes the procedures companies should use to request the "Certificate of Inclusion" needed to participate in the promotional regime and obtain the tax benefits under the promotional regime.

To obtain a certificate and have a project qualify for the promotional regime, companies must comply with several filings, including the filing of specific forms, investment project details and complete information about the project, as well as the project identification number.

The companies also will have to detail and estimate the tax benefits their projects will comprise. Moreover, the companies will have to provide a guarantee equivalent to 10% of the total amount of the tax benefits assigned to the project within 15 days of the presentation of the project.

Once the Secretary of Finance defines the total budget for the tax benefits to be granted under this promotional regime, there will be a pre-selection by the Sub-Secretary of Renewable Energy of those projects that meet the eligibility requirements. The pre-selected projects will be sorted according to their assigned merit. This pre-selection will be elevated to the Secretary of Electric Energy for further review and analysis.

The Ministry of Energy and Mining will then select which projects will be accepted to participate in the promotional regime.

Once the Ministry of Energy and Mining selects a project for the promotional regime, the company will be subject to several controls by the authorities (for instance, that the investment schedule is progressing as planned). A company will need to file quarterly reports showing the project's progress for verification purposes.

Additional regulations for the promotional regime are still pending. 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 multinational companies in this industry.

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