RIGI Customs Issues (with updated information)

Note originally published in julio de 2024 and updated with data provided by the author.

Concept

The RIGI is the Large Investment Incentive Regime established by Title VII of Law No. 27.742 - the Law of Bases and Starting Points for the Freedom of Argentines - and regulated by Decree No. 749/2024. 

Through this approach, the government aims to attract investment by offering prospective investors specific tax, customs, and foreign exchange benefits. It also ensures that the incentives offered will not be altered by subsequent repeals of the aforementioned regulations or by tax, customs, or foreign exchange legislation that is, respectively, more burdensome or restrictive than the one contemplated in the aforementioned regulation.

To date, six projects have been officially approved, totaling investments of USD 13.062 billion. A seventh project is awaiting formal approval. The remaining applications—13 in total—are in various stages of evaluation. The government expects RIGI membership to exceed USD 50.000 billion, a crucial figure for reversing the current negative balance of Foreign Direct Investment. 

Priority objectives pursued by the State through the RIGI

The State seeks to attract investment to Argentina to promote national economic development, enable the development of certain industries that would otherwise be impossible to operate, foster the growth of local production chains, promote job creation, and, in our case, increase exports of goods and services within the sectors of interest promoted by the RIGI (forestry industry, tourism, infrastructure, mining, technology, steel, energy, oil, and gas). 

Customs Benefits

First, art. 193 of the law provides that beneficiaries, investors qualified as vehicles holding a single project -VPU-, may freely import and export merchandise for the construction, operation and development of the project attached to the RIGI. Consequently, in this framework, they will not be affected by: “…prohibitions or direct restrictions, quantitative restrictions, quotas or quotas, of any kind, nor qualitative, of an economic nature. Nor Official prices or any other official measure that alters the value of imported or exported goods, or supply priorities for the domestic market, may not be applied to them, even when they are provided for in the legislation in force at the date of accession and except when they are expressly and specifically included in the approval by the implementing authority of the application for accession and the investment plan presented.…”. It is explained that: “…Advance sworn declarations, automatic and non-automatic licenses, import certificates, import or export monitoring systems, and any other declaration, intervention, administrative act, or presentation prior to the registration of import clearance or export shipping permit that requires express, tacit, or systemic approval, authorization, validation, or enablement by the State shall be considered to constitute direct prohibitions or restrictions on imports or exports of an economic nature, under the terms of this article. Measures that require the presentation of certificates of origin shall also be considered direct restrictions, except when the origin of the merchandise whose import is requested entitles it to the application of tariff preferences or differential treatments, or when said merchandise is subject to the application of antidumping, compensatory, or specific duties, or to safeguard measures.…”. It also provides that: “…Any restriction and/or affectation in the terms of the preceding paragraphs will be considered a violation of the provisions of article 165 of this law.…”. In turn, this rule states: “…Any rule or de facto action by which the provisions of this title are limited, restricted, violated, hindered or distorted by the Nation, the provinces, themselves and their municipalities, and the Autonomous City of Buenos Aires, which have adhered to the RIGI, will be absolutely and irremediably null and void and the competent Justice must immediately prevent its application.…”. The following comments emerge from the transcript: 

a.- The customs legal terms “prohibitions” and “direct restrictions” are synonyms. Thus, the Explanatory Memorandum of the Customs Code indicates that "direct restrictions" are those that "directly impede import or export." Therefore, the article under discussion would have been appropriate to state that VPUs will not be covered by "direct prohibitions or restrictions" instead of "direct prohibitions or restrictions." However, the legislative technique employed is emphasized when, in the course of the same article, automatic licenses, import certificates, any type of declaration, intervention, administrative act, or presentation prior to the registration of import clearance or export shipping permits that require express, tacit, or systematic approval, authorization, validation, or authorization by the State, or, in certain cases, certificates of origin, are defined as direct prohibitions or restrictions; when in all of these cases, we are dealing with "indirect restrictions" on import or export. 

This characterization, by which customs prohibitions are equated with indirect restrictions - so that the arbitrary application of an indirect restriction does not turn it into a direct restriction - while protecting future investors, leaves current investors - importers and exporters - unprotected, since it seems to throw away years of jurisprudence settled by the Supreme Court of Justice of the Nation through the leading case "Nate Navegación": "...To sustain the argument of the defendant (DGA), in that Resolution 909/94 and its amendments... exclusively established a prohibition regime, would imply... elevating to such a category all restrictions and simple conditions for the export or import of goods…”; “…All customs operations must be carried out following the established guidelines regarding schedules, methods, administrative procedures, declarations and payment of the corresponding taxes and other well-known requirements of such a delicate regime. But this cannot imply the inversion of the fundamental rule enshrined in art. 19 of the National Constitution, thus elevating such requirements to the level of prohibition.… ”(in d "Nate Navegación", ruling of 12/06/12, in which the Supreme Court of Justice adopted the opinion of the Attorney General's Office (PGN). With the new regulation, however, an interpreter could consider that the legal terms referred to—prohibitions, automatic licenses, certificates of origin, etc.—are comparable—not only with respect to the RIGI—and thus argue that whenever an indirect restriction is not complied with, a prohibition is violated. This interpretation, according to our Supreme Court, violates the Principle of Legal Confidentiality, since no one is prevented from doing what the law does not prohibit (cf. art. 19 of the CN). Consequently, it would not be appropriate for the intention of generating legal certainty for new investors to create uncertainty for current investors; this could provoke the very distrust that is intended to be eradicated.

b.- It seems that, in response to successive arbitrary practices in Argentina regarding import licenses, the decision was made to include them within the concept of "prohibitions," even though they are not included in international legislation or the Customs Code. In some ways, the objective was to ensure that Argentina would refrain from such practices. In the most emblematic case, we recall that RG No. (AFIP) 3252/12 was in force, establishing an automatic import licensing system called "DJAI" (Advance Import Declaration). Through this system, the administration's objective, at least as stated in the preamble to the regulation, was to have advance information on the merchandise intended to be imported for consumption. Under this import licensing regime, importers were required to declare certain information regarding the merchandise to be imported in advance on the AFIP website. The collected information was then made available to various government agencies, which, within certain timeframes and with sufficient justification, were required to issue a ruling on the intended import of the goods. If the DJAI in question was "observed" by any body—for example, the Ministry of Commerce—the import for consumption could not be registered in the Customs Information System, as this information system required an approved DJAI to proceed with the process. In practice, the intervening agencies systematically observed the DJAIs without justification and indefinitely. Such administrative arbitrariness resulted in "de facto prohibitions" and prompted multiple complaints from several World Trade Organization Members before their dispute settlement bodies (40 countries, including those comprising the European Union, the United States, and Japan). Ultimately, our nation was condemned in the WTO (1). The Appellate Body, which upheld the Panel Report, held: "…the fact that the The finding that the DJAI procedure does not automatically give rise to a right to import supports its finding that the DJAI procedure constitutes a restriction on imports…”. Ultimately, the WTO understood that the DJAI Regime and, in particular, its administration violated the provisions of Article XI, paragraph 1 of the GATT, according to which: “…Neither Contracting Party shall impose or maintain - other than duties, taxes or other charges - any prohibitions or restrictions on the importation of any product into the territory of another Contracting Party…whether enforced by…import licensing…or by other measures.... ".

c.- The benefit does not include any economic prohibitions or restrictions in force and expressed in the approval by the implementing authority of the application for membership and the investment plan submitted. 

d.- Non-economic prohibitions in force and already legislated are not included in the benefit either. The latter is obvious given that, based on the eventual irreparability of the legal assets that are ultimately protected through these prohibitions - e.g. public health, the environment, etc. - this type of concession cannot be made.

e.- Finally, with respect to the benefits included, any restriction and/or affectation that limits, restricts, violates, hinders or distorts them by means of a norm or de facto action, will be absolutely and irremediably null and void; the competent Justice will be instructed to prevent its application immediately. The latter, in order to be applicable, must have, on the one hand, expedited procedures arranged for this purpose according to the jurisdiction and, on the other, possibly, agreements of the corresponding Judicial Powers. 

Secondly, very broad guarantees are granted with regard to the supply, transport and processing of inputs for exports corresponding to the participating projects. In this sense, the VPUs are assured that they will not be affected by “regulatory restrictions” on such inputs, including within this type of restrictions those motivated by internal supply priorities or regulatory rights in favor of other sectors of demand. Note that the broad scope of the terms used is not limited to customs restrictions.

Thirdly, the importation for consumption and the temporary importation of new capital goods, spare parts, parts and components for the participating projects is facilitated, exempting the VPU and its suppliers from import duties, statistical and destination verification fees and from any regime of perception, collection, advance or retention of national and/or local taxes that may be applicable. However, art. 190 states: “…Imports of new capital goods, spare parts, components and consumer goods, as well as temporary imports made by VPUs adhering to the RIGI, will be exempt from import duties, the statistics and destination verification fee, and from any system of collection, collection, advance or withholding of national and/or local taxes....". The transcribed rule gives rise to different interpretations. It would seem that what has been intended to be said is that all merchandise imported for consumption or temporarily, as long as it is affected by the attached investment project, will enjoy the aforementioned tax exemptions. The only requirement expressly provided for is that, in the case of capital goods, these must be new (2). It is added that any "imposition" contrary to the aforementioned will be considered null, absolutely and irremediably void, and the competent court must immediately prevent its application in accordance with art. 165.

Fourthly, exports are facilitated, since after three years from the date of joining the RIGI, exports for consumption of goods obtained under the promoted project are exempt from export duties. In the case of holders of projects declared as long-term strategic export projects, this period is reduced to two years. On the other hand, collections of exports of products from the RIGI-adhered project made by the VPU are exempt, in certain percentages, from the obligation of entry and/or negotiation and settlement in the exchange market. The corresponding percentages depend on the date of implementation of the VPU. After: a) 2 years, 20% is exempted; b) 3 years, 40% is exempted; c) 4 years, 100% is exempted. In the case of the collection of exports -by products- referred to in the first paragraph of this article made by VPU holders of Projects declared as "Long-Term Strategic Exports", the indicated terms are reduced: a) 1% is exempted for 20 year; b) 2% is exempted for 40 years and c) 3% is exempted for 100 years. The funds corresponding to the referred percentages will be freely available and these benefits will be applied unless the exchange market regulations are more favorable in such periods.  

Temporal scope of the normative stability offered

VPUs adhering to the RIGI will enjoy, with regard to their projects, regulatory stability in tax, customs and exchange matters. Accordingly, the incentives granted may not be affected by the repeal of this law or by the creation of tax, customs or exchange regulations, respectively, that are more burdensome or restrictive than those contemplated in the RIGI. This stability will be valid for 30 years, computed from the date of adhesion. Starting from the fiscal year immediately following the expiration of said term, the RIGI will no longer have stability for the adhering VPU and may be modified by the general regulatory, tax, customs and exchange regime. In the case of projects that are declared “Long-Term Strategic Export” and that are executed in successive stages, said term may be extended by the authority enforcing the law; all of which must be expressed in the administrative act approving the application for adhesion and the investment plan. In such a case, the stability for each stage of the project may be extended up to 30 years after the estimated start-up date, provided that the minimum investment commitments provided for in paragraph a) of article 172 are met for the first stage. However, in no case will the stability of the successive stages extend beyond 30 years from the tenth year after the start-up of the first stage of the project.

However, in order to enjoy such stability, it is essential to remain in the RIGI for the periods mentioned. In turn, such permanence will depend on compliance with the conditions provided for in Title VII, as well as those established by regulation. With this, the regulatory route acquires considerable importance. 

Scope of tax and/or tax-customs stability

The benefits granted by this law are based on art. 75, inc. 18) of the National Constitution (art. 165 of the law). The same text of the aforementioned paragraph qualifies them as "privileges" since they alter the generality with which taxes must be applied. In turn, according to art. 16 of the CN, equality is the basis of taxes and public charges, and must be applied in such a way that it fully covers the categories of persons or assets provided for by law and not just a part of them (Rulings: 307:1083). For this reason, the Court has interpreted this type of benefits in a restrictive manner, adhering to the letter of the law as the first source of interpretation.

Likewise, art. 202 of the law guarantees that new taxes created and/or increases in existing taxes regulated from the date of adhesion to the RIGI will not be applicable to VPUs. However, VPUs may benefit from the future elimination of taxes or reduction of rates in force on the date of adhesion.

In this context, the provisions of this regulation are far from what occurred in the case of the "Investment Regime for Mining Activities" - Law 24.196 and Decree No. 2.686/93 -, which, unlike the present regime, ensured that the "total tax burden" would not be affected. In the leading case “Minera del Altiplano SA v. National State- PEN and Another s/ amparo” (Case M.13 7, L.XLVI) the Attorney General of the Nation, through the opinion dated 07/04/2011 to which the Supreme Court of Justice of the Nation adhered, stated: “…Since Minera del Altiplano SA is included in the benefits of fiscal stability enshrined in Article 8 of Law 24.196, it can be concluded that it only has the right - after justifying and proving, in each case, with the necessary and sufficient means, that there has actually been an increase in its "total tax burden" (see Article 8, paragraph 5 of the Law) - to request compensation or refund of the excess amounts paid, in the manner established in Article 4, paragraph c) of Annex I of Decree 2.686/93. It is therefore unacceptable that now, through this amparo action, it seeks to rise up against the scope of the benefit and the procedure to which it voluntarily submitted to assert it, to obtain a sort of exemption from new taxes or increases in existing ones, when this was not what was agreed in the regime (arg. Rulings: 225:216; 285:410; 299:221; 307:1582; ​​314:1175, among others). It does not escape my analysis that it could be argued that a more convenient legal formula to guarantee the fiscal stability of the promoted companies would have been to exclude them completely from paying future taxes or their increases…”.(3)

However, although the tax benefits granted differ from what occurred in the “Minera del Altiplano” case, the notion of total tax burden should not be completely discarded in the understanding of this law, since art. 196 provides for a hypothesis of exclusion of tax benefits that contemplates it: “…The tax incentives granted through this regime will not produce effects to the extent that they could result in a transfer of income to foreign treasuries through the application of a global minimum tax - whether through a profit inclusion rule, a low-taxation payments rule or any other similar measure - that implements or is aimed at implementing, in whole or in part, the second pillar of the Inclusive Framework of the Organization for Economic Cooperation and Development and the G-20 on base erosion and profit shifting.…”. Given the generality of the rule, all tax incentives granted are included, whether of a tax or customs nature. However, the burden of proof of this minimum total tax burden could become a matter of controversy, as well as the judicial route that should be used in the event of such benefits being denied. To clarify this last point, art. 202 ultimately provides: “…It shall be the responsibility of the VPUs that invoke a violation of tax stability to justify and prove said violation in the sense and with the scope arising from the provisions of this article. However, when the violation is a consequence of the creation or increase of a new tax or a legal or regulatory modification of any aspect related to the taxes in force at the date of accession, it shall be the responsibility of the Federal Public Revenue Administration to justify and prove, in each case, that there has not been an increase in the tax burden as a precondition for applying said tax or the higher rate to the VPU.…”. (4)

On the other hand, the article in question stipulates that it will be understood that there is an "increase in taxes stabilized under the RIGI and not applicable to the VPU" when: a) the rates, fees or amounts are increased; b) exemptions are totally or partially repealed or activities or goods not taxed on the date provided for in the first paragraph of this article are taxed; c) the mechanisms or procedures for determining the taxable base of a tax are modified, by means of which guidelines or conditions different from those that were set at the time when the VPU adhered to the RIGI are established and which mean an increase in said taxable base (5), or d) situations that were excepted or not covered are incorporated into the scope of a tax.

Finally, the tax stability benefit grants VPUs adhering to the RIGI the right to reject any claim by the ARCA (formerly AFIP) for amounts that exceed the tax due pursuant to the preceding paragraphs. If, however, the VPU pays an amount that is not due, the tax stability benefit will enable the VPU to use it as a tax credit to be applied immediately to the payment of any other national tax.

Proper and improper use of the incentives granted

The beneficiary of the RIGI is obligated to properly use the granted incentives. This obligation includes the following aspects: a) the incentives may only be used by the VPU (6) exclusively with respect to the participating project. The VPU may not own or develop other activities or projects other than the participating project. Notwithstanding the foregoing, VPUs may be merged and/or participating projects acquired in order to form a single participating project; b) the assets that have been computed for the purposes of meeting the minimum investment amount must remain assigned to the participating project that is the object of the approved investment plan for the end of their useful life or until the end of the stability period or the end of the useful life of the participating project or until the date on which the implementing authority grants permission to de-assign it, whichever occurs first; c) the implementing authority may authorize, at the request of the VPU, the de-assignment of assets for the duly justified sale and replacement operations provided for in section b) of art. 183 as long as the amount invested in the replacement is equal to or greater than the amount obtained from the sale.

For this reason, the ownership, possession, holding or use of the benefited merchandise, except for the inputs used for production, cannot be transferred, unless said transfer is made to another VPU adhering to the RIGI; which must be notified to the application authority within fifteen calendar days after the transfer has occurred. The interpretation of this obligation should be clarified by regulation and it would be convenient for the administrative act approving the investment project to specifically indicate in each case what is considered an “input”. The interpretative hypotheses that arise from the rule are the following: a) it could be understood that the inputs can only be transferred from VPU to VPU; b) it could be thought that the inputs can be subject to transfer from VPU to Subjects that are not VPU or c) it could be considered that any merchandise that is benefited, whether it is an input or not, can be transferred from VPU to VPU.

Failure to comply with the obligation in question will result in the application of the sanctions provided for by this regime, beyond any possible customs, tax or exchange liability that may apply.

Temporary extension of the prohibition on the transfer of benefited goods. Its relationship to criminal prosecution. 

According to the aforementioned art. 179: “…Assets that have been computed for the purposes of compliance with the minimum investment amount must remain assigned to the attached project that is the subject of the approved investment plan for the term of its useful life or until the end of the stability period or the end of the useful life of the attached project, or until the date on which permission is given by the implementing authority to de-assign it, whichever occurs first....". Thus, it could be the case that the prohibition on the transfer of the benefited goods could be extended, for example, for thirty years from the date of accession - the end of the general stability period. At the same time, it should be noted that, although it is considered that the possible infringement that would be incurred by the early and unauthorized (irregular) transfer of the goods has a criminal legal nature, this regime does not regulate the statute of limitations for such criminal action or its possible causes for interruption or suspension; therefore, these issues will be governed by the Penal Code (7) based on the provisions of its art. 4: "...The general provisions of this code shall apply to all crimes provided for by special laws, insofar as they do not provide otherwise.…”. In view of this, if there is no cause for interruption or suspension, the criminal action punished with a fine will expire two years after midnight on the day of the irregular transfer (conf. art. 62, inc. 5° of the CP). 

¿How does the State protect itself from the possibility of misuse of tax or customs incentives?

Art. 182 provides: “…The regulations will establish the types of guarantees that must be required to preserve the tax credit related to the granting of tax and customs incentives to VPUs, specifically related to the improper use of incentives. Provided that the amount and solvency of the guarantee are considered satisfactory by the implementing authority, VPUs may choose one of the following forms: a) Cash deposit; b) Deposit of public debt securities, their values computed in the manner determined by the regulations; c) Bank guarantee; d) Guarantee insurance; e) Real guarantee, in the first degree of privilege, in which case the value of the real estate or personal property in question will be established in the manner determined by the regulations; and f) Others authorized by the regulations for the cases and under the conditions established therein.... ".

The guarantee provided must therefore cover any potential risks to the tax credit in the event that customs or tax incentives are misused. For example, if imported goods for consumption, benefiting from exemption from import taxes, are used for a purpose other than that for which the approved investment project is intended.

In this regard, Articles 65 to 67 of Decree No. 749/2024 regulate the customs and tax guarantees to be established. These guarantees will be released when any of the following circumstances occur: a) payment of the waived duties according to the calculation provided for in Article 15 of these regulations; b) re-exportation of the merchandise to the extent that this does not affect compliance with the minimum investment amount for which said merchandise was calculated; c) expiration of the expiration period for verification of destination provided for in these regulations; or d) exemption from condemnation in the cases provided for in Article 66 of these regulations.

Thus, the "acquired right" that the VPU will enjoy over the incentives granted and other rights resulting from the RIGI (Article 178) is subject to compliance with the obligations assumed and specified upon approval of the membership application and corresponding investment plan. Consequently, it will depend, among other issues, on the appropriate oversight exercised by the implementing authority over the proper use of the merchandise whose import or export has benefited. Without prejudice to this, the mere passing of the deadline for verification of the intended destination will entail the release of the guarantees provided.

Based on the above, in reality, the VPU's right to the aforementioned incentives will be consolidated once it can release the guarantees established to which we have referred and the respective tax, customs and/or exchange actions have also prescribed in accordance with such legislation. 

On the other hand, it is difficult to conceive of an acquired right, comparable to the right of property, which, if exercised, without causing harm to another, gives rise to an action of a criminal legal nature -conf. arts. 211 and 215 (8)- which can be submitted in turn, as we will see, to arbitration.

Finally, in the event that the VPU intends to withdraw from the RIGI, it must, as a condition for approval of the withdrawal, have complied with the essential obligations provided for in art. 172 or pay the fine provided for in subsection e) of art. 213 (9). However, it is recognized that the realization and continuity of the investment project depends on a variety of factors whose control is sometimes beyond the control of the VPU and therefore it may, at any time, in the event of a fortuitous event or force majeure in the terms defined in the Civil and Commercial Code of the Nation, make the decision to suspend, restart and/or close it temporarily or permanently, partially or totally, without incurring liability under this law. To this end, within fifteen days of having become aware, it must notify the enforcement authority in writing of the existence, causes and nature of the alleged force majeure or act of God; Explaining whether this results in the suspension (with its estimated duration), partial closure, or permanent closure of the project. In the event of suspension, once the impediment has disappeared, the affected VPU must immediately resume fulfilling its obligations, and the use and enjoyment of the incentives will resume. 

Violations of the RIGI 

Art. 211 provides for the different types of infractions: “…The following breaches of this regime and its regulatory norms shall be punishable:

• a) Failing to provide or delaying the submission of information required by the enforcement authority or other competent bodies under this law.
• b) Submit false or inaccurate information or sworn statements to the enforcement authority or other competent bodies under this law.
• c) Failing to obtain prior and express authorization from the implementing authority in those cases where it is necessary in accordance with the provisions of the RIGI.
• d) To remove (either by sale or re-export) goods introduced under exemptions established by the RIGI or in compliance with the obligations provided for in paragraphs a) and b) of art. 172 prior to the expiration of the periods provided for in the second paragraph of art. 179 and in the third paragraph of art. 190.
• e) Carry out activities that do not correspond to the sole purpose of the VPU in violation of the obligation provided for in the second paragraph of art. 169, or in the case of suppliers, fail to comply with the requirements and obligations provided for them in paragraphs five to eight of art. 169.
• f) Unjustifiably failing to comply with the obligations provided for in paragraphs a) and b) of article 172. And,
• g) Undue enjoyment of the tax, customs and exchange exemptions provided for in this regime.

Infringement Procedure 

Once an alleged infringement has been verified, the enforcement authority must notify the VPU in a reliable manner so that, if feasible, it corrects the non-compliance within thirty working days of service of the aforementioned notice. If it has not been corrected within this period or if it is an incurable infringement, the enforcement authority will proceed to the corresponding summary proceedings, notify it and transfer it to the VPU so that within fifteen working days it may present its defense and offer all the evidence it considers pertinent. Once the defense has been presented or the deadline for doing so has expired, the enforcement authority will decide on the admissibility of the evidence offered, ordering the production of that which is pertinent and rejecting by reasoned decision that which is excessive or inappropriate. Once this has occurred, if there is evidence to be admitted, a deadline will be set for this purpose which may not be less than twenty working days. Once the evidentiary period has closed, the beneficiary will be notified so that he may submit his arguments within a period of five working days. Finally, once the argument has been submitted or the deadline for doing so has expired, the enforcement authority must issue a decision on the summary within the following thirty working days.

Applicable penalties

• a) Warning, for the cases provided for in subsections a) and b) of art. 211.
• b) A fine of ten to thirty million pesos for the acts provided for in paragraph a) of article 211.
• c) A fine of one hundred to four hundred million pesos for the acts provided for in subsections b), c) and d) of article 211.
• d) A fine of one to three percent of the minimum investment amount of paragraph a) of art. 172 for the acts provided for in paragraph e) of art. 211.
• e) A fine of five to fifteen percent of the minimum investment amount of paragraph a) of Article 172 that is pending compliance, for the acts provided for in paragraph f) of Article 211.
• f) Termination of the RIGI for the events provided for in paragraph f) of Article 211, which will entail the total expiration of the RIGI incentives since the non-compliance with said obligations has been resolved in a definitive and firm manner by the competent court.
• g) Disqualification from requesting the adhesion of a new Project to the RIGI as an eventual additional and accessory sanction to that provided for in the previous paragraph, depending on the severity of the conduct, which will be effective from the moment the resolution ordering the sanction has been resolved definitively and firmly by the competent court, constituting said date the effective date of cessation; and
• h) Refunds of tax, customs and exchange exemptions for the events provided for in paragraph g) of Article 211, plus compensatory interest.

Consequently, the "improper enjoyment of the tax, customs, and foreign exchange exemptions provided for in this regime" constitutes a violation of the RIGI (General Rules of Procedure) (see art. 211, paragraph g) - which gives rise to the summary procedure regulated by law and, if applicable, to the penalties it entails. These include the return of tax, customs, and foreign exchange exemptions, plus compensatory interest; this does not prejudice their accumulation with other sanctions under this infraction regime and the possibility of incurring customs, tax, and/or foreign exchange liability and the application of the penalties provided for in these legal systems. These latter aspects will surely merit constitutional objections, in the first case because the indiscriminate accumulation of sanctions is permitted under the terms of the law. Secondly, it gives rise to the possibility of doubling the penalty in cases where the respective customs, tax, or foreign exchange laws provide for the obligation to return such exemptions as part of their penalties. 

On the other hand, the fines contemplated in subsections b) and c) of article 213 in question are expected to be updated, which will be adjusted annually by the coefficient arising from the annual variation of the General Consumer Price Index (CPI), published by the National Institute of Statistics and Census. This could also give rise to constitutional objections.

Finally, it is added that failure to comply with the obligation provided for in the penultimate paragraph of art. 180 (10) will be grounds for aggravating the sanction in those cases in which, upon termination of the RIGI for a VPU as a result of failure to comply with the conditions of permanence in the RIGI, the enforcement authority determines, without reasonable doubt, that the VPU knew or should have known that it was unable to comply with the conditions and commitments for remaining in the regime.

Particularities

Article 214 of the law provides: “…In the same resolution in which the enforcement authority orders the opening of the infraction investigation, it may instruct the initiation of the relevant actions so that the competent court may order, as a precautionary measure, in a preventive manner and until a final and firm decision is made in this regard, the preventive suspension of the enjoyment of the incentives under this RIGI. Likewise, during said period, the fulfillment of the other obligations under the RIGI will be considered suspended.…”. In turn, Article 119 of the regulatory decree provides: “…The suspension of obligations under the RIGI provided for in Article 214 of Law No. 27.742 will occur to the extent that the enjoyment of the incentives is preventively suspended, as provided in the aforementioned article. The suspensive effect of the appeal filed by the adhering VPU pursuant to Article 217 will have no effect on the precautionary suspension that may eventually be ordered in court, pursuant to Article 214.... ".

It is noted that the enforcement authority will have substantive jurisdiction to resolve the merits of the infringement provided for in this law, but not over precautionary aspects such as the preventive suspension of the effects of the RIGI. It is noteworthy that the enforcement authority even instructs the initiation of actions for this purpose, which may raise objections given the potential for dual role of judge and party. Likewise, the limitation on the suspensive effect of appeals that the affected party may file could also raise questions regarding the right to defense and due process.

On the other hand, although cessation in the RIGI constitutes one of the most serious sanctions (11) that is arrived at by the unjustified non-compliance of the most important obligations foreseen by the regime -conf. arts. 172, 211 inc. f) and 213 inc. f)-, it can derive from it in an indirect manner. This would occur if, for example, there were an improper use of the incentives for de-allocation, whether by sale or re-export, of goods introduced under the protection of franchises established by the RIGI or in compliance with the obligations foreseen in sections a) and b) of art. 172 before the expiration of the deadlines foreseen in the second paragraph of art. 179 and in the third paragraph of art. 190. 

Recursive paths

The sanctions imposed by the implementing authority on the VPU may be appealed, at the interested party's option, through administrative channels (Law 19.549) or by submitting the matter to arbitration. Furthermore, if the administrative channel has been chosen, the filing of appeals or challenges will not prevent the VPU from withdrawing them at any time to pursue an arbitration claim. However, if the arbitration channel has been chosen, administrative appeals against the same act subject to arbitration may not be filed subsequently or subsequently. 

Furthermore, the VPU - and eventually its sanctioned supplier - are granted different procedural guarantees:

a.- Withdrawal may in no case be interpreted as a waiver of the rights that the VPU may have, nor will it prevent the arbitration claim from being made once those rights have been definitively resolved. 

b.- It will not be necessary for the VPU to present prior claims or administrative challenges of any kind, nor will they have to exhaust the administrative instance in order to submit any controversy related to this regime to arbitration.

c.- No limitation period shall apply to the initiation of an arbitration claim, even in the face of an express resolution of an administrative appeal or challenge.

d.- The resources and/or alternative judicial and/or arbitration remedies filed by the VPU will suspend the execution and effects of the acts issued by the enforcement authority. And,

e.- If the termination is revoked by a final judgment, the VPU will be granted the incentives that it would not have enjoyed due to the precautionary suspension eventually ordered. The suspended obligations will also be resumed.

Latest observations

It is essential that the regulations, on the one hand, guarantee the timely, technical and efficient exercise of the functions of the law enforcement authority and, on the other, that they do not impose in the future conditions of permanence in the RIGI that are very difficult for the VPU to comply with or that are unreasonable based on the authorized project and investment plan. 

For its part, it is suggested that the beneficiaries of the RIGI carry out a legal-economic risk mitigation analysis that takes into account future regulations of the law and procedural opportunities to make, in a timely manner, the corresponding requests in order to avoid future complications.  

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1. See cases: DS438, 444, 445 and 446.

2. Unlike what is established by Res. ME No. 511/2000 that regulates the Import Regime of Used Production Lines, benefiting from 0% Extra-Zone Import Duties.

3. This same criterion was later reproduced by the Supreme Court in the case “Procesadora de Boratos Argentinos SA (TF 28448-A) v. DGA” (judgment of 19/11/2013, Rulings: 336:2209).

4. Likewise, depending on the case, the provisions of Article 208 must be taken into account: “…The benefits provided for in the RIGI may not be combined with incentives of the same nature existing in other pre-existing promotional regimes. However, adherence to the RIGI will not imply a waiver or incompatibility with other current and/or future promotional regimes with which incentives of a different nature may be combined that do not overlap, accumulate or repeat with the incentives provided for herein. For the purposes indicated in the last part of the previous paragraph, the restrictions provided for in article 32 of Law 24.331 on Free Trade Zones will not apply.…” This last rule provides: “…Free zone users will not be able to benefit from the tax benefits and incentives of the industrial, regional or sectoral promotion regimes, created or to be created, in the territory of the Nation.... ".

5. It would appear that the aforementioned paragraph c) is intended to prevent the recurrence of situations such as those generated by the Martínez Raymonda Law - Law 26.351 - following the amendments introduced to Law No. 21.543.

6. However, let us remember that according to art. 169: “…Suppliers of goods or services with imported merchandise may apply for registration with the RIGI exclusively for the purpose of benefiting from the incentives and rights provided for in Article 190 of this Law with respect to the merchandise, including inputs, they import for the services they intend to provide to a VPU affiliated with the RIGI. These incentives will apply exclusively to merchandise imported for the provision of goods or services to a affiliated VPU and may not apply to merchandise intended for other purposes. If the merchandise is imported for the provision of services to a VPU and the supplier cannot allocate said merchandise to the provision in favor of a VPU adhering to the RIGI, either because it was not selected for a tender or because of the termination of the contract that gave rise to the provision, or a similar cause, the beneficiary supplier must inform the authority immediately and request the de-allocation of the merchandise's destination before being able to use it for another purpose.…”. Failure to comply with these obligations gives rise to the infringement provided for in art. 211, paragraph e), last part.

7. Let us remember that the Supreme Court of Justice has stated that prescription is a general institute of law that must be governed by the provisions of the National Congress ("First Data Cono Sur SRL", Judgments: Volume 346. Page 217).

8.Art. 215: Criminal action for violations of Article 211 punishable by a fine is extinguished by voluntary payment of the minimum fine that may apply to the offense in question.

9. A fine of five to fifteen percent of the minimum investment amount of subsection (a) of Article 172 that is pending compliance.

10. The VPU that has certain knowledge of the impossibility of complying with any of the essential conditions and/or requirements for remaining in the RIGI, must inform the enforcement authority within ten (10) business days after gaining such knowledge.

11. The firm and definitive resolution to terminate the incentives implies the automatic loss of the right to use all incentives after the effective date of termination.