Argentina’s legal framework spurs quick growth in biotechnology

By María Lucía Belliz, Argentina’s Ministry of Foreign Affairs and Worship
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Following on from a diversified menu of sectoral incentives to develop investment projects in Argentina, in this issue, we would like to focus on the sectors that demand a higher level of innovation, knowledge and applied technology for production.

Previously, we mentioned two industries that have grown in the past decade, supported by proactive policies oriented to increase high-skilled job creation, especially in the software development sector. In this column, we will review Argentina’s investment incentives related to the development of science and technology.

María Lucía Belliz Director of the Investors Assistance Office Argentina’s Ministry of Foreign Affairs and Worship
María Lucía Belliz
Director of the Investors Assistance Office
Argentina’s Ministry of Foreign Affairs and Worship

In the area of biotechnology, Argentina offers a specific legal framework, under Law No. 26270 on the promotion of state-of-the-art biotechnology development and production. This law defines state-of-the-art biotechnology as all technological applications based on rational knowledge and scientific principles from the fields of biology, biochemistry, microbiology, bio-informatics, molecular biology and genetic engineering that use live organisms, or parts of these, to obtain goods and services, or for the substantial improvement of productive processes and/or products. The use of the word “substantial” means that it includes innovative content suitable for industrial application, resulting in a social and economic impact, in addition to cost reductions and productivity increases.

Investor benefits

The benefits obtained by investors are: the accelerated depreciation for income tax purposes on capital goods, special equipment or parts of these goods that are new and acquired specifically for the project benefiting from the promotion; the early refund of value-added tax (VAT) paid on the purchase of capital goods, special equipment, or parts of these goods, which are new and acquired specifically for the project benefiting from the promotion incentive; 50% of the amount of paid-up employer’s social security contribution is converted into tax credits; capital goods, special equipment and parts of these goods that are new and acquired specifically for the project are not included in the taxable base for the purposes of minimum presumed income tax, nor any tax that might complement, amend or replace it in the future; 50% of the amount invested in the outsourcing of research and development services from national public science, technology and innovation institutions exclusively for research/development projects may be converted to tax credits; and tax credits under this law are non-transferable and will be valid for 10 years from the project approval date.

Biofuel production

In the case of biofuel production, the legal framework is regulated by Law No. 26093 “on the regulation and promotion for the sustainable production and use of biofuels”, and Decree No. 109/2007 on biofuels.

This programme aims to regulate and promote the sustainable production and use of biofuels. Biofuels include bioethanol, biodiesel and biogas produced from raw materials of agricultural or agro-industrial origin, or organic waste.

The benefits offered are detailed as follows:

  • The acquisition of capital goods or the undertaking of the corresponding infrastructure works benefits from accelerated depreciation for income tax purposes and/or the early refund of VAT (the same treatment afforded under Law No. 25924);
  • The goods allocated to projects involving the sustainable production, blending, marketing, distribution, consumption and use of biofuels are exempt from minimum presumed income tax;
  • Biodiesel and bioethanol produced to meet the statutory levels of biofuel-fossil fuel blends are exempt from the water infrastructure tax, the liquid fuels and natural gas tax, and the specific tax levied on the transfer or import of diesel oil.

Last but not least is the renewable energy programme, regulated by Law No. 26190 “on the national promotion for the use of renewable sources of energy for the production of electricity”, and Decree No. 562/2009. The law declares the national interest of electricity generation from renewable energy sources for public service rendering. The law aims to increase the electricity generation from renewable sources to supply 8% of the domestic electricity consumption within a term of 10 years from the effective date (2006).

The beneficiaries of the programme are individuals and/or concessionaires of new public works of electricity generated from renewable sources destined for the wholesale electrical market and/or the rendering of the electricity public service.

The law establishes different incentives, according to source, for 15 years. The Secretariat of Energy created a renewable energy fiduciary fund, administered by the Electric Energy Federal Board, in order to make additional payments per kilowatt hour from renewable energy sources targeted to the wholesale electricity markets or the electricity public service.

Investment programme

The law also establishes an investment programme for 10 years for the construction of new works for the generation of electricity from renewable energy sources, including capital goods, civil, electromechanical and assembly works, and other related services that are part of new-generation plants or are to become part of existing plants. Investors choose between the following options:

  • Early refund of the VAT levied on the purchase, manufacturing, elaboration or import of capital goods or infrastructure works (making long-term projects attractive);
  • Accelerated amortisation of assets for income tax purposes. Additionally, the assets benefited from the promotion programme are not included in the taxable base for minimum presumed income tax purposes until the third year after start-up (making short-term projects attractive);
  • Exception in the payment of custom duties in the import of goods related to renewable energy projects.

In future issues of this column, we will continue providing information about local incentives aimed at fostering production and investment in different provinces and/or cities of Argentina, where resources and business opportunities are so diversified that they can match with all kinds of investors profiles.

Maria Lucia Belliz is the director of the Investors Assistance Office of the Argentina Ministry of Foreign Affairs and Worship

Ministry of

Foreign Affairs and Worship

Esmeralda 1212 – Piso 6

Ciudad Autónoma de Buenos Aires

(C1005AAG) República Argentina

Tel: 54 11 4819 7904

Fax: 54 11 4819 7904

E-mail: izl@mrecic.gov.ar

www.inversiones.gov.ar

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