- An additional reimbursement has been established for incremental exports to third countries of goods originating in the Province equivalent to 5% of the FOB value.
In more detail
On 23 October 2021, the Decree was published in the Official Gazette, by which the validity of the Regime, created by the Law, was extended to 31 December 2038.
1. Tax incentives of the Law
For the purposes of the Law, Argentina is divided into three operative areas, as follows:
- The free area, which comprises Antarctica and the South Atlantic Islands
- The special custom area ("Tierra del Fuego Free Zone"), which comprises the island of Tierra del Fuego
- Continental territory
The tax incentives mentioned below refer to the Tierra del Fuego Free Zone and include: a) exemptions of federal taxes applicable to activities or operations to be performed in the Tierra del Fuego Free Zone or upon goods located in the Tierra del Fuego Free Zone; and b) customs benefits applicable to the reception or delivery of merchandise that a company located in the Tierra del Fuego Free Zone can make from or to companies located in any of the other operative areas. In fact, this type of transaction will be considered an export-import operation.
The exemptions apply to the following taxes: income tax, VAT and excise tax.
The analysis of the customs benefits requires a first distinction between imports and exports, and a second distinction considering if the operation goes to or from the Tierra del Fuego Free Zone, taking into account that, as mentioned above, the Tierra del Fuego Free Zone is considered a jurisdiction different from the continental territory. In addition, the origin and destiny of the goods (raw materials and finished products) should be considered.
For the purposes of this analysis, it is important to note that exports are subject to export duties and imports are subject to import duties, VAT and statistical tax.
2. The Decree
2.1. Validity of the Regime
The Decree establishes until 31 December 2038 the term of validity of the rights and obligations of the Law, granted in favor of industrial companies based in the Province, with projects in force on the date of the publication of the Decree, to the extent in which they fulfill the requirements established therein.
After 12 years of the validity of the Decree and provided that the Federative Republic of Brazil maintains the validity of the special regime of benefits of the Manaus Free Zone, the aforementioned rights and obligations will be extended for an additional 15 years, counted from 1 January 2039.
The Decree also provides for the cessation of benefits for those approved projects that have not started their activity in the Province at the time of its entrance into force.
2.2. Presentation of industrial projects
The Decree authorizes until 31 December 2023 the presentation of new industrial projects and/or the readjustment of existing ones within the framework of the Law, for the production of electronic products, components and related technologies, provided that it does not affect the production carried out in the continental territory and the goods that are not manufactured in the Province at the time of the entry into force of the Decree.
2.3. Monthly contribution
Industrial companies that undertake to make mandatory monthly contributions equivalent to 15% of the benefit obtained in VAT from the sale of the products that are related to the industrial projects approved under the Regime may access the measures provided by the Decree. These amounts will be used to finance the Fund for the Expansion of the Fuegian Productive Matrix ("Fund"). The production of auto parts that are used in units whose final destination is export to third countries will be exempt from the monthly contribution.
Companies adhering to the Regime may apply up to 40% of the amount corresponding to the mandatory monthly contribution to their own productive investment projects that are framed within the objectives of expanding the productive matrix and improving competitiveness, and that have been previously approved by the Executive Committee of the Fund.
In the case of applying the contributions to the approved projects, the companies will issue a certificate of enforceable debt in favor of the Fund, which will be paid during the term of the project.
2.4. Compliance with employer obligations
Industrial companies or their successors in the event of sale, merger, spin-off or bankruptcy are obliged to comply, within the corresponding deadlines, with all the employer's obligations regarding contributions, whether of a social security, social work, wages, compensation or other nature that may arise from national and provincial laws, collective bargaining agreements or agreements entered into between companies and their workers, in accordance with current regulations. The failure to comply with these obligations may be grounds for the cessation of the benefits established in the Decree.
2.5. Additional reimbursement for exports
The Decree establishes an additional reimbursement for incremental exports to third countries of goods originating in the Province equivalent to 5% of the FOB value, with the exception of the tariff positions of the MERCOSUR Common Nomenclature (NCM) contemplated in Annex I of the Decree (i.e., crude petroleum or bituminous mineral oils, natural gas, propane and butane).
2.6. Adherence to the Regime
Industrial companies will have a period of six months, counted from the entry into force of the Decree, to express their willingness to adhere to the benefits and obligations established therein. Said manifestation will be made before the enforcement authority and will be subject to the presentation of an express waiver of any administrative and/or judicial claim against the national government and the provincial government, referring to issues related to the Regime.
The Decree also establishes for all those companies that do not manifest their adherence to the same, within the term and under the forms previously indicated, the cessation of the benefits, rights and obligations agreed in the framework of the Law as of 1 January 2024.
2.7. Tax and customs benefits repealed
Finally, the tax and customs benefits provided for in the Regime of the Law, in terms of VAT, excise taxes and import duties, related to the manufacture, distribution and/or commercialization of goods, whose tariff positions of the NCM are detailed in Annex II of the Decree (i.e., automobiles, motorcycles, airplanes and other aircraft, recreational boats and lifeboats), are repealed to the extent that they enjoy differential tax treatment with respect to the one of the continental territory.
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