Resolution No. 72/2016 issued by the Ministry of Energy and Mining regulates the procedure for obtaining the certificate of inclusion and corresponding tax benefits in the framework of the "Regime of National Promotion for the Use of Renewable Energy destined to the Electric Production", as well as the subsequent procedure for the control of the committed investments and the application of the tax benefits.
On May 18, 2016, the Official Gazette published Resolution No. 72/2016 (hereinafter, "the Resolution") issued by the Ministry of Energy and Mining in the framework of the "Regime of National Promotion for the Use of Renewable Energy destined to Electric Production" enacted by Law 26,190, as amended and extended by Law 27,191 (published in the Official Gazette on October 21, 2015) regulated by Regulatory Decree N° 531/2016 (published in the Official Gazette on March 30, 2016) (hereinafter, "the Regime").
The Resolution regulates the procedure for obtaining the certificate of inclusion and corresponding tax benefits under the Regime ("Procedure for Obtaining the Benefits") as well as the subsequent procedure for the control of the committed investments and the application of tax benefits ("Procedure for the Control of the Investments and the Application of the Benefits").
The Resolution
The Resolution regulates the Procedure for Obtaining the Benefits corresponding to the owners of investment projects and/or dealers of new works of electric power generation for projects to be developed under the framework of individual supply contracts executed directly with Large Users or Large Demands or for projects of self-generation or co-generation of electric power from renewable sources.
When requesting the grant of benefits, guarantees of implementation of the project linked to each of the benefits requested must be constituted ("Guarantees of Implementation"), regardless of the ones that must be constituted at the moment of applying or using the respective benefits ("Guarantees of Application").
Once the applications are submitted, the Under Secretariat of Renewable Energy will assess them, elaborate an order of merit according to the score derived from a formula established in the Resolution and indicate those to whom the tax benefits requested could be granted. Later, it will be up to the Ministry of Energy and Mining to approve the assessed projects and grant the corresponding benefits until the available tax quota is completed.
Regarding the owners of investment projects and/or dealers who submit bids under the Program of RenovAr, the grant of the Fiscal Certificate and the tax benefits (until the available tax quota is completed) will be done as a consequence of the adjudication of the bid and the execution of a supply contract of electric power with CAMMESA. Bidders will have to submit information similar to the one requested under the Procedure for Obtaining the Benefits. In this case, the Guarantees of Implementation will not be requested since the bidder will cover the Guarantee for the Maintenance of the Offer, regardless of the applicable Guarantees of Application when using the benefits granted.
Regarding the Procedure for the Control of the Investments and the Application of the Tax Benefits, it will be applicable to those who: (i) execute supply contracts with large consumers with power generators, (ii) choose self-generation and co-generation projects, and (iii) bidders under the Program RenovAr.
The Certificate of Inclusion and tax benefits
According to the Regime, the tax benefits vary depending on the stage in which a project of renewable energy sources is approved with effective execution. The first stage refers to those projects approved with effective execution before December 31, 2017 and the second stage to projects approved with effective execution between January 1, 2018 and December 31, 2025. Both stages are related to the objectives of the Regime to achieve a determined consumption of electric energy derived from renewable energy sources: as of 8% for December 31, 2017 and (ii) as of 20% for December 31, 2025.
Anticipated Value Added Tax (VAT) refunds
The benefit will be applied over the amount of VAT that beneficiaries shall pay with respect to their expenses from the purchase of goods, services and/or execution of infrastructure works included in the promoted project as from the award of the Certificate of Inclusion until the completion of the respective project (within the term provided for the entry into commercial operations), to the extent it is not absorbed by the VAT fiscal debit. The VAT will be offset against other national taxes1 collected by the Argentine Federal Tax Authorities (AFIP) or refunded in the way to be established by the AFIP.
The term for the offset or anticipated refund varies depending on the moment in which the investments are made (until December 31, 2017 inclusive, between January 1, 2018 and December 31, 2021 inclusive and between January 1, 2022 and December 31, 2025 inclusive). The offset or devolution would take place, at least, between 1 and 3 tax periods as from the time the investments were made and depending at which moment they were made.
At the moment of requesting the benefit, a Guarantee of Implementation for 10% of this benefit, quantified in the way provided for in the Resolution must be constituted, and it will be released at the time of: (i) the constitution of the Guarantee of Application for the first request of anticipated VAT refund for 100% of the amount requested, that must be maintained for a period of 12 months as from the date of entry into commercial operation; (ii) the rejection of the application.
The Resolution states the application of the benefit is through the AFIP's website.
Accelerated depreciation in Income Tax
The Regime allows the beneficiary to choose for an accelerated depreciation since the fiscal period of "habilitation" of the new depreciable capital goods –except for vehicles- or infrastructure works. The scale of depreciation depends on the moment of the investment (the benefit decreases over time) and the nature of the depreciable assets: (i) for Depreciable movable assets acquired, manufactured or imported, the depreciation varies at least between 2 and 5 equal, annual and consecutive installments; (ii) for infrastructure works, the depreciation varies in the installments derived from considering the estimated "useful life" of the infrastructure between 50% and 80%.
At the moment of requesting the benefit, a Guarantee of Implementation for 10% of this benefit, quantified in the way provided for in the Resolution must be constituted, and it will be released at the time of: (i) the verification that the investment project approved is at production and operation stage; (ii) the rejection of the application.
The Resolution states the application of the benefit is through the AFIP's website with a prior notice of not less than 40 working days of the due date for filing the Income Tax Return detailing the information as regards "useful life"2 and the depreciation rate applicable.
Tax Losses carryforward
This benefit consists of the extension to 10 years (instead of 5 years) the term to offset tax losses carryforward. It is not necessary to constitute a Guarantee of Implementation for this benefit.
Exemption of Minimum Presumed Income Tax (MPIT)
According to the Regime, the goods that are affected to the project will not integrate the taxable base of this tax (at the tax rate of 1%) as from the effective execution of the works until the 8th exercise, inclusive, since the date in which the project is in stage of production and operation ("puesta en marcha").
At the moment of requesting the benefit, a Guarantee of Implementation for 10% of this benefit, quantified in the way provided for in the Resolution must be constituted, and it will be released at the time of: (i) the verification that the investment project approved is at production and operation stage; (ii) the rejection of the application.
Tax Certificate
The Regime provides for the issuance of a Tax Certificate as an electronic bond to those that prove the following percentage of national component in the electromechanical installations, excluded civil works, transport and assembly of equipment: (a) 60% where national production exists; (b) 30% where national production does not exist.
In these cases, the Tax Certificate can be requested by the beneficiaries as from the entry into commercial operations3 and it will be issued for an amount equivalent to 20% of the national component demonstrated. This Tax Certificate can be applicable to the payment of the Tax Returns and payments in accounts of Income Tax, Minimum Presumed Income Tax, VAT, and Excise Tax.
The Tax Certificates granted shall be valid for 5 years from January 1 of the following year of the date of grant. Once that term elapses, they expire automatically and cannot be used by the beneficiary or the transferee (as the tax certificate can be transferred to third parties only once).
At the moment of requesting the benefit, a Guarantee of Implementation for the 10% of this benefit, quantified in the way provided for in the Resolution must be constituted, and it will be released at the time of: (i) the constitution of the Guarantee of Application for the first request of anticipated grant of the Tax Certificate for 100% of the amount of such Tax Certificate plus an additional 15%; (ii) with the delivery of the Tax Certificate for the 100% of the benefit if it is requested fully at the time entry into commercial operations occurs; (iii) the rejection of the application.
Exemption from the Tax on Dividends or Utilities Distribution
The Regime takes into consideration a benefit that consists of the exemption from tax on dividends or utilities distribution to the extent such dividends or utilities are reinvested in new projects of infrastructure in the country within the term of 12 months as from January 1 of the following year when the distribution occurred.
For this benefit to become effective the beneficiary must submit a note/affidavit before the Under Secretariat of Renewable Energy prior to the distribution, indicating the amount of dividends or utilities to be reinvested and the Under Secretariat will issue a certificate in duplicate with the authorized amount. One copy of said certificate will be delivered to the entity that distributes the dividend/utility so that it does not withhold 10% over the authorized amount.
Prior to the issuance of the certificate with the authorized amount, the beneficiary must constitute a guarantee for 100% of the amount of the exempted tax. The guarantee will be released once compliance with the reinvestment is accredited.
Imports
Regarding exemption from taxes4 on imports, the Resolution confirms that the benefit is applicable to imports performed as of December 31, 2017, setting that date as the limit of validity of the "authorizations to import with the application of the benefit".
The exemption is granted to the definite imports of new goods, which are not produced locally, and entails the obligation to destine them to production and operation ("puesta en marcha") and development of the investment project. This condition is subject to a "verification of destination" until the end of the "useful life" of each good or the conclusion of the cycle of activity for which they were imported.
Footnotes
1. It cannot be offset against: (i) obligations under substitute liability or under withholding or collection regimes or (ii) taxes whose exclusive destination is financing funds with specific affectation/purpose or (iii) Social Security debts.
2. It will be assigned by the Under Secretariat of Renewable Energy based on the submitted information and the analysis made.
3. In some cases, it can be requested the partial and anticipated grant of this benefit related to the tax certificate according to article 7 of Annex II of the Resolution.
4. The exemption includes the import duties or other charges or "tasa de estadística" (except for "services fees" and VAT).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
