With the publication of General Resolution 4618/2019, AFIP has established the procedure for all owners of investments and those who have been conceded new renewable-based electric energy projects , including article 8 of national law 26.190 from 27/12/2006, modified by law 27.191 from 23/09/2015—that they may obtain tax credits from certificates when the requirements are met in point 6 under article 9 of the aforementioned legislation. The credits may be used towards deductions of reported credit balances and for advances on income taxes for the minimum presumed income (repealed by law 27.260 starting 1/1/2019) or tax that it is to replace, including value-added and internal taxes.
Tax benefits have been established for those who have made investments or projects involving the promotion of the production of electricity coming from renewable sources for the provision of public service; research and development; and equipment manufacturing. As such, it is appropriate to mention that, with regards to these promotional benefits, projects that were not underway during the early stages of the law 27.191’s enactment (until 12/31/2017) will not be mentioned, nor will formal and procedural aspects be detailed that are subjects to other work:
A) The benefit from article 3 of Law (PLN) 26.360 of 03/12/2008 will be applied to both VAT and Earnings. The following is established with regards to the return of that which corresponds to infrastructure assets or works related to the project:
- For investments made from January 1, 2018 up to and including December 31, 2021, the early VAT refund benefit will be available after at least 2 fiscal periods have passed following the initial investment.
- For investments made from January 1, 202 up to and including December 31, 2025, this benefit is available after at least 3 fiscal periods have been counted since the investment start.
Both earnings and the deduction of redemptions may be done under the conditions set out in articles 83 and 84 of the tax law, or for the following:
1.1. For redeemable and movable property acquired, processed, manufactured or imported during said period in at least 4 annual, equal and consecutive installments.
1.2. For infrastructure work that began in the same period it must come in the form of annual, equal and consecutive installments that are related to the estimated durability of the installments reduced to 70% of the estimation.
2— For investments made on or after January 1, 2026 with reasonable execution prior to the aforementioned date:
2.1. For redeemable movable property that was acquired, processed, manufactured or imported during said period, the installments must come in 5 annual, equal and consecutive payments.
Law 27.191 amplifies the reach of Law 26.360 with respects to benefits related to VAT and Income until the end of the 2nd stage of the “National Development Regime for the Use of Renewable Sources of Energy for the Production of Electricity,” if all conditions established in the first regulation are met. It must be mentioned that regulations have changed with respect to what is laid out in Law 26.360 since it furthered the exclusive use of benefits.
B) The period to which compensation can be had is extended 10 years to compensate losses on top of earning.
C) With regards to the Minimum Presumed Income Tax (already mentioned as valid), or that which stands in for it (important to be mentioned here), all goods affected by these activities will not factor into the tax promoted by this law. This starts at the beginning of the execution of the works when spending of project-related funds have been made for no less that 15% of the total investment that was in planning before 12/31/2017. The benefit will be extended up to and include the 8th year, starting from the official project start date.
D) When a company must be dissolved due to article 94 subsection 5 (share-captial loss) and the application of article 206 (mandatory loss reduction incurred by reserves and 50% of capital), both articles from law 19550 may be deducted from company losses, interest and exchange differences that came from the financing of the project promoted here by the law under question.
E) Exemption of Income Tax on the distribution of dividends or profits ((not with a tax rate of 7%, and 13% as of 2021) to project holders of project investments receiving benefits from this tax structure so that they may be reinvested in new nationwide infrastructure projects.
F) Tax certificates may be applied to Federal taxes for a value equivalent to 20% of the national components of the electrical and mechanical installations, excluding civil works; The beneficiaries of the tax credit must prove that 60% of the project is made with national components in the electrical and mechanical installations, excluding civil works, or a smaller percentage to which they effectively demonstrated non-existence of national production—which may be no less than 30%. Tax certificates are registered and may only be transferred to a third party once.
It is possible to conclude by mentioning that the government has had the intention for years to promote investment in renewable-energy sources in a praiseworthy manner, but that the economic, financial and political elements to which we are sadly accustomed have not allowed for full development. The new administration should highlight and encourage these types of projects, which also provide an added financial effect that can even be measured in terms of income; they far exceed expenses made by the public due to the promotions coming from this tax regime.