The Argentine government recently (i) modified the National Promotional Scheme for the use of renewable energy sources for the production of electricity (ii), implementing new measures to encourage the adoption of alternative energy sources.

Argentina has some of the best regions in the world to produce these sorts of energies, offering a wide range of opportunities for foreign investors. In order to foster these investments, a new promotional scheme with tax benefits for renewable energy generation projects is determined by this recent amendment.

The activities that fall within the new promotional scheme are the construction of new works for the generation of electricity from renewable energy sources, including capital assets, civil, electromechanical and assembly works and other related services that are part of new generation plants or the expansion of existing plants.

The sources of energy included in the promotional scheme are wind, solar (thermal and photovoltaic), geothermal, tidal, wave energy, of ocean currents, hydropower, biomass, landfill gas, sewage treatment plant gas, biogas and biofuels.

Those eligible for this promotional scheme will enjoy the following tax benefits as of approval of the respective project:

a) Anticipated reimbursement of Value Added Tax (VAT): The VAT resulting from the purchase, manufacturing, elaboration or imports of capital assets or performance of infrastructure works corresponding to the relevant project will be reimbursed after the first fiscal period (monthly) from the date of the investments;

b) Accelerated depreciation for Income Tax purposes: The beneficiary may opt between the Income Tax Law regime and the special regime provided in this new promotional scheme, with specific terms for depreciation of the assets in accordance with the investment made;

c) Tax losses may be carried forward and offset against the income obtained in the following ten fiscal years (iii);

d) The assets allocated to projects will not be subject to Minimum Presumed Income Tax (iv) up to the eighth fiscal year closed after the start-up of the project;

e) Dividends or profits distributed from investment projects will not be subject to Income Tax (10%) if they are reinvested in new infrastructure projects in the country;

f) Beneficiaries of projects with a certain percentage (v) of national components used in their electromechanical facilities will receive and additional benefit by means of a tax credit certificate of 20% of the national component to be applied to national taxes;

g) Exemption of import duties: The imports of capital goods are generally levied at a tax rate of 0% to 14%, regarding the good imported. Under this promotional scheme imports of new capital goods, special equipment or component parts or elements of such goods, and supplies determined by the authority that are necessary for the implementation of the investment project are exempted of import duties up to December 31, 2017.

These tax benefits are subject to prior approval of the project by the authorities, and provided that the project has effective implementation beginning before December 31, 2017.

The effective implementation beginning shall be presumed upon completion of expenditures of funds associated to the project in an amount not less than fifteen percent (15%) of the total investment planned. Also, similar, but slightly reduced, tax benefits may apply to projects participating in a second stage, i.e. for investments to be done between January 2018 and December 2025.