Within the framework of the recent legislation aimed at promoting investment in strategic sectors, the Central Bank of the Argentine Republic has issued Communication “A” 8099, which regulates the exchange aspects of the Large Import Incentive Regime (RIGI). For the purposes of its effective application, CPN Luis Demarco explains the regulations in five points.
1. Law Bases
On June 28, 2024, the Chamber of Deputies of the Nation approved and converted into law the project of “Law of Bases and Starting Points for the Freedom of Argentines".
Under Title VII of the Basic Law, the new RIGI was incorporated, which establishes tax, customs and exchange benefits to promote large investment projects in strategic sectors.
The RIGI was recently regulated by the National Executive Branch through the Decree 749 / 2024 published in the Official Gazette on 22/8/24.
2. Exchange rate stability and accumulation of benefits
The Communication establishes that Single Project Vehicles (SVPs) will enjoy exchange rate stability in terms of the regulations applicable on the date of adhesion to the RIGI. It also establishes that the exchange rate benefits of the RIGI “may not” be accumulated with other existing exchange rate incentives or those that are created in the future.
3. Exceptions to the obligation to collect and settle export collections
Certain exceptions are established to the obligation to collect and settle payments on the Foreign Exchange Market for exports of goods and services from VPUs.
a. Exports of goods. As regards the value received for exports of goods made by VPUs, exceptions apply in different percentages, depending on the period in which the export is made.
These periods are calculated from the “start”, as defined in article 94 of Decree 749/2024, and vary depending on whether or not they are Long-Term Strategic Export projects (contemplated in Art. 172 of the Basic Law): The benefits will be greater the longer the term of the VPUs.
These Exceptions apply to the entire amount received according to the agreed sales condition (i.e. it is not reduced only to the FOB value).
b. Advance payments, pre-financing and post-financing of exports of goods. It is clarified that advance payments on exports of goods, pre-financing and post-financing (local or foreign) are exempt from the Obligation, always to the same extent as the export being financed. According to the provisions of Points 1.4 and 1.5 of the Communication, and in Art. 98 of the Decree, it can be interpreted that:
- The corresponding exception (the one that will apply - in the future - to exports) may be applied to the advance payment or disbursement of financing;
- In the case of pre-financing, 100% of the export collection may then be applied to repayment;
- If an export is made on a date for which it would have been entitled to a lower percentage of exemption than originally foreseen (at the time of entering and settling the advance or pre-financing), the exporter must enter and settle the difference in order to obtain the corresponding compliance.
c. Service exports . VPUs are exempt from entering the total value of exports of services (services provided by VPUs to non-residents), to the extent that they have been provided or accrued after Start-up.
Article 198 of the Basic Law suggested the possible application of this exception. It is now clear that this benefit is in force, since it was regulated by the BCRA.
d. Affidavit for beneficiaries of the Exceptions. VPUs that are considering using the Exceptions to access the Foreign Exchange Market to purchase foreign currency must submit a sworn statement stating that the total amount of foreign currency received and settled by the VPU, up to that moment, is equal to or greater than the amount that results from adding them up.
(i) The amount of the transaction to be processed; and (ii) The total amount of expenditures by the VPU under all concepts (except for permitted payments of interest, profits, dividends or the capital of certain local financing).
Additionally, this information will be validated in an online system implemented by the BCRA.
It is established that the Affidavit will not be applicable when access to the VPU Exchange Market is for the purpose of paying:
- Profits and dividends to shareholders (admitted according to Point 3.2 of the Communication);
- Interest payments on the financing provided for in points 3.1.1 to 3.1.11 of the Communication (the “Financing”); and
- Capital payments of local financing, contemplated in Points 3.1.3 and 3.1.5 of the Communication.
4. Exchange benefits for the outflow of foreign currency
Regarding the conditions for accessing the Foreign Exchange Market, to make payments of Financing received by the VPUs, profits and dividends, and to repatriate contributions from foreign direct investment:
- Repayment of Financing: Access is permitted for the payment of (i) interest accrued before maturity; and (ii) the outstanding capital. In the event that all the Financing funds cannot be computed as entered and settled, the VPU will have access to:
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- Interest payments accrued up to the date of access and non-payments, corresponding to the portion of capital that can be computed as entered and settled; and
- Payments of principal due that correspond to the proportion of funds that can be computed as received and settled.
- Payment of profits, dividends and repatriations of FOREIGN DIRECT INVESTMENT: access is permitted under these concepts without prior approval of the BCRA for up to an amount equivalent to:
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- The proportion of direct investment contributions entered and settled in the Foreign Exchange Market; and
- Direct investment contributions implemented in kind through deliveries of capital goods that meet certain conditions.
In the case of repatriations of FOREIGN DIRECT INVESTMENT, any minimum period of stay will not be applicable.
We understand that access to pay capital reductions is included within the concept of repatriations of FOREIGN DIRECT INVESTMENT, but not eventual sales of shares by foreigners. We hope that this exclusion will be clarified or reviewed by the BCRA.
- Purchase of foreign currency by non-residents: non-resident clients may be given access to transfer abroad the funds they have received in the country as a creditor for collections of a debt with a foreign country, provided that:
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- The funds correspond to the collection of principal and interest on the debt from payments made by (i) the VPU (or under any other modality that would have allowed local collection from a default); or (ii) by other residents, including companies linked to the VPU, as guarantors;
- The VPU would have had access to make the payment (including, among other requirements, the Affidavit); and
- Access will be granted within 10 business days following the availability of funds by the non-resident.
It is important to verify that, from an operational point of view, access can be achieved, since certain obstacles could be encountered, given the existing difficulties for non-residents to open local bank accounts.
5. Other exchange benefits
Additionally, Communication "A" 8099 allows: the following
- The application, by the VPUs, of certain charges on exports of goods and services subject to the Obligation to pay certain interests and repatriations of FOREIGN DIRECT INVESTMENT, under certain conditions.
- The accumulation in accounts abroad or in the country of the collections of exports of goods and services subject to the Obligation, to guarantee the cancellation of external debt maturities, in the terms provided for by Point 7.9.5 of the “Foreign and Foreign Exchange” regulations of the BCRA.
- Compute the income from DIRECT FOREIGN INVESTMENT contributions in kind instrumented through the delivery of capital goods as entered and settled in the Foreign Exchange Market, as long as certain conditions are met (the customs entry record is demonstrated, said computation is consistent with the value of the capital goods, that 90% of the total FOB value are capital goods, that the contribution is definitively capitalized within 365 days, among others).
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