The incentive regime for large investments in Argentina - an overview

Juan Manuel Iglesias Mamone
Mitrani Caballero Abogados, Buenos Aires

juan.manuel.iglesias@mcolex.com

Introduction

The Incentive Regime for Large Investments (Régimen de Incentivo para Grandes Inversiones or RIGI) is an ambitious and innovative initiative by the Argentine government designed to attract substantial investments in specific business sectors. The RIGI offers a range of incentives, legal protections and stability measures to foster a conducive environment for large-scale investments. This article delves into the key aspects of the RIGI, including its main features, eligibility requirements and the various incentives provided to investors.

The RIGI is based on the recognition of the benefits related to the national interest and the usefulness of large investments for the prosperity, development and competitiveness of the country, as well as for the creation of employment opportunities, an increase in exports and the generation of foreign exchange. The RIGI is a regime that deserves to be analysed and considered by potential investors interested in being involved in projects in Argentina.

The RIGI is applicable to the owners of qualified investment projects and suppliers of goods and services in relation to imported goods, and has an entry window of two years, closing on 8 July 2026, with a possible extension until 8 July 2027.

Local jurisdictions (the city of Buenos Aires, provinces and municipalities) are invited to join the RIGI and establish similar benefits and incentives. So far, the provinces of Catamarca, Chaco, Chubut, Jujuy, Mendoza, Río Negro, Salta, San Juan and Tucumán have joined, and the city of Buenos Aires and the provinces of Córdoba, Corrientes, Neuquén, San Luis, Santa Cruz and Santa Fe have begun the process to join the scheme.

Eligibility requirements

To qualify for the RIGI, investment projects must meet the following criteria:

• the project must be owned and developed by a special purpose vehicle (SPV), which does not own assets or carry out activities that are not related to the promoted investment project;
• the investment must be directed at eligible business sectors;
• the project must involve a minimum investment amount in regard to computable assets that varies depending on the applicable business sector, with at least 40 per cent of the investment met within two years; and
• the project must qualify as a long-term investment, with a specific ratio between the present value of the expected net operating cash flow and the planned capital investments during the first three years.

For the purposes of the RIGI, ‘investment in computable assets’ means investments that involve the acquisition, production, construction or development of assets fully dedicated to the promoted activities, excluding financial assets and exchange goods. It also includes the acquisition of company shareholdings to the extent they have computable assets and are merged with the SPV within a period of 180 calendar days.

Certain investment projects may be qualified as long-term strategic export projects, which are subject to the following additional incentives and special requirements:

• they must position the country as a new long-term supplier in markets in which it does not yet have significant participation; and
• they must involve investments in successive stages, with a minimum investment per stage of US$1bn and a total minimum investment of US$2bn, with at least 20 per cent (US$400m) met in the first two years.

Business sectors and minimum investments

The RIGI targets several key business sectors, each with a specified minimum investment amount as detailed below (net of value-added tax (VAT)).

The procedure to join the RIGI

To join the RIGI and enjoy the applicable incentives, the SPV must (1) file an application together with an investment plan, describing the main features of the investment project and evidencing the SPV’s compliance with the applicable requirements and (2) obtain approval from the Ministry of Economy.

The procedure to apply for and obtain RIGI approval is a regulated and non-discretionary procedure. The Ministry of Economy will adhere to the relevant objective parameters and consider the principle of equality.

Tax and customs incentives

The RIGI offers a range of tax and customs incentives to qualifying projects, which are set out below.

Income tax: (1) a reduced Corporate Income Tax (CIT) rate of 25 per cent, (2) an optional accelerated depreciation regime, (3) unlimited tax loss carry forwards, with the possibility of transferring these to third parties after five years, (4) a reduced dividend withholding tax of 3.5 per cent, (5) the adjustment for inflation for tax purposes with no restrictions, (6) the full crediting of tax on bank credits and debits, and (7) the deduction of financing expenses (including intercompany financing) without limitation in first five years, as well as an exemption and reduced withholding tax on payments to foreign entities.

Value-added tax (VAT): beneficiaries are exempt from paying VAT on certain investments, including imports, with the possibility to pay the VAT to the local vendor through tax credit certificates, which can be creditable by the local vendor against other tax liabilities, transferred to third parties or reimbursed.

Imports and exports: an exemption from all taxes on imports of new capital goods, spare parts, components, consumables and temporary imports. An exemption from export duties after a specified period of time.

The RIGI law specifically addresses the potential application of the Organisation for Economic Cooperation and Development’s Pillar Two framework as a way to limit the local application of tax incentives. In this regard, the law states that the tax incentives will not produce effects to the extent that they could result in a transfer of income to other countries through the application of a minimum global tax, whether through an income inclusion rule, a low-tax payment rule or any other similar measure, that implements or is aimed at implementing, totally or partially, the OECD Inclusive Framework’s Pillar Two model rules. This means that RIGI beneficiaries will not be able to enjoy the tax benefits that reduce their effective tax rate below 15 per cent, or enjoy such benefits up to the 15 per cent effective tax rate.

The foreign exchange regime

Although Argentina retains extensive foreign exchange controls and restrictions, the RIGI contemplates certain foreign exchange benefits, as detailed below (if and to the extent capital injections or loans have been previously settled in AR$ or made in kind, as applicable).

Financial debt: no prior Argentine Central Bank approval is required to access the foreign exchange market to prepay interest and the principal, or to cancel and/or prepay the principal and interest with related-party lenders.

Flexibility for financing imports of capital goods: financings may be made by a wider group of foreign credit institutions or by related parties or obtained through the overseas placement of debt securities.

Dividend distributions: no prior Argentine Central Bank approval is required to access the foreign exchange market to make dividend payments abroad.

Repatriation of direct foreign investments: no prior Argentine Central Bank approval or waiting period is required to access the foreign exchange market to repatriate direct foreign investments.

Export of goods: export proceeds are gradually exempt from mandatory repatriation through a foreign exchange market as from the project commencement date (ie, the earlier date of either the date of first export or the date on which 40 per cent of the minimum investment amount is completed).

Export of services: export proceeds are exempt from mandatory repatriation through the foreign exchange market from the project commencement date.

Regulatory incentives

The RIGI also includes several regulatory incentives, outlined below.

Free import and export: SPVs may freely import and export goods for the project without prohibitions or restrictions.

No official prices: no official prices or similar measures altering import or export values may be imposed.

Guaranteed availability: the guaranteed free availability of products applies without an obligation related to commercialisation in the local market.

Transferability: SPV participation may be freely transferred without prior authorisation.

Stability and investment protection

Qualifying SPVs will enjoy stability in regard to tax, customs, foreign exchange matters and dispute resolution mechanisms for 30 years from the application date. For long-term strategic export projects, this stability can be extended to 30 years from the project commencement date.

The incentives established by the RIGI are protected from future regulatory changes that may be more burdensome or restrictive. Additionally, SPVs will enjoy constitutional protection akin to property rights over the RIGI’s incentives, and any national or local rule that limits or distorts these rights will be considered null and void.