The Chamber of Deputies The final ruling that could give final sanction to the bill is being discussed on the premises. Base Law promoted by the Government of Javier Milei. The norm ratifies the modifications that were made in the Senate, including the changes in the Large Investment Incentive Regime (RIGI) with which the government seeks to boost economic activity with benefits to companies that decide to make an investment of at least USD 200 million.
The Upper House made modifications to the RIGI that will be ratified in the final text that would become law this week. One of them is the delimitation of economic sectors that may enter the incentive scheme, so it can no longer be “any” activity.
On the other hand, there was a gesture from the senators to the suppliers of the local industry and changes regarding the exchange rate benefits that unique projects in Argentina will have. The possibility of claiming before foreign courts, the ICSID or the ICC, in case of non-compliance is also granted.
The Large Investment Incentive Regime (RIGI) seeks to provide incentives, certainty, legal security and a system of protection of acquired rights to the holders of a single investment project, but which must be greater than USD 200 million.
Companies that want to join will have two years to do so and the Executive Branch is authorized to extend that period for up to one year.
Those who join the RIGI will have, for the project entered, tax, customs and exchange benefits for 30 years. Among them is greater flexibility to transfer foreign currency abroad, one of the main objections that businessmen have when investing.
Although the base investment amount of USD 200 million was maintained, there were changes in the capillarity of the regime. Previously it was open to “any sector” and now it will be delimited.
The Upper House made modifications to article 165 of the RIGI to limit it to short sectors such as forestry-industry, infrastructure, mining, energy, technology, tourism, steel, oil and gas.
On the other hand, it sought to give space to local suppliers in the face of warnings from the local industry due to possible “unfair competition” with foreign firms. Specifically, the commitment for this case will be “at least 20% of the entire investment amount, as long as the offer is available and under market conditions.”
The advantages that RIGI offers for Vehicles Owning a Single Project (VPU)that is, the investment must be greater than USD 200 million, ranging from better tax, customs and exchange conditions.
Regarding the tax part, there will be a reduction of the Income Tax to 25% for VPU. An accelerated amortization of movable property and infrastructure will be sought. Tax losses not absorbed within the first five years may be transferred. There will be a refund of VAT balances in favor within a period of no more than three months. In addition, the computation of 100% of the tax on Bank Debits and Credits as a credit in Profits will be allowed.
On the other hand, companies will have an exemption from paying Import Duties to bring capital goods, spare parts, parts and supplies. During the first three years of the project there will also be no export duties, that is, withholdings.
Another important change will be in article 196 – exchange incentives –, which limits the obligation to settle in the exchange market to the foreign currency that comes in from exports of products generated by the projects. It will be 20% after two years from the start of the investment; 40% after three years; and 100% after four years.
However, when it comes to the collection of exports declared as “Long-Term Strategic Exports”, for the purposes of the exception from the obligation to enter and settle in the exchange market, the periods indicated in the preceding paragraphs will be calculated as follows:
- Twenty percent (20%) after one (1) year has passed since the date of launch of the Single Project Vehicles (VPU);
- Forty percent (40%) after two (2) years have passed since the date the VPU was put into operation;
- One hundred percent (100%) after three (3) years have elapsed from the date of implementation of the VPU
- H2: Criticism of the RIGI changes in the Senate
One of the main criticisms of the changes in the Senate that Rigi had is that the mining royalties They were set at 3%, like the current scheme, but the provinces could raise them to 5% for new investment projects.
The Argentine Chamber of Mining Companies (CAEM) spoke out against this point two weeks ago, when the change was known. Basically, the mining sector affirms that the modification, which increases the amount of royalties to be paid to the provinces by 67%, modifies Law 24,196 on mining investments, passed in 1993 “It is a contradiction and represents a setback in the path taken up to this point with the purpose of generating conditions of greater competitiveness for the country.”
“The Mining Investment Law seeks to be an umbrella that provides certainty to companies willing to contribute large-scale, productive investments with a long payback period to Argentina. The modification of this key tool will have consequences on the confidence in our country as an investment destination and will have the opposite effects to those sought to be promoted by the Regime of Incentives for Large Investments (RIGI),” says one passage.
CAEM also states that Argentina “already has a higher tax burden than those nations with which we compete for investments. “Argentine tax pressure is high and extremely regressive.”
According to the mining companies, the change “would negatively impact gold and silver production projects, which today represent 70% of the country’s exports.” This is a segment, he continues, in which due to lack of new investments, the existing deposits are already mature, with high and increasing production costs. Therefore, he explains, “increasing the tax pressure will impact by shortening its useful life, and consequently, there will be less collection, achieving a result opposite to that sought.” To make matters worse, he says, it is a mining subsector where there will be no replacement, since there are no new projects in the pipeline that can start production in the coming years.
Furthermore, according to CAEM, the increase in royalties “will also affect lithium projects, both those under construction and those in production.”
