The National Assembly approved the Law on Water and Air Quality (Official Gazette No. 6,207 Extraordinary, of December 28, 2015) (the "Law").  The purpose of the Law is the  management of the water and air's quality, environmental nuisances, and conditions for the management of liquid and gas wastes in order to protect living beings and ecosystems.  The Law will enter into force on February 27, 2016.  

In accordance to the Law, the State may grant tax benefits to individuals or legal entities that: (i) make activities destined to reduce emissions and limits of environmental quality established in the technical rules, especially when they help reduce gas emissions that create the greenhouse effect or reduce the ozone layer; (ii) install equipment and machinery and procedures for eliminating or reducing liquid and gas waste production; and (iii) make analysis of the life cycle of the products or materials that they create and present alternatives for their processes, usage, new use, recycling and final use of liquid and gas waste.  

The possible tax incentives are: (i) a total or partial exoneration of taxes, fees and special contributions, in accordance with the Tax Code; (ii) any other financial and tax incentive.  The President of the Republic, through Presidential Decree, may grant the referred exonerations.  

Within the exonerations described above the President may grant income tax exonerations to industries.  In order for this exoneration to apply, the taxpayer must have invested the income in the conservation, defense, improvement, use, and restoration of the water and air quality.  The exoneration may be applicable to the fiscal year in which the taxpayer starts the process or uses the technology to achieve any of the goals described above.  To calculate the exoneration, the taxpayer must apply to the net income at the beginning of the fiscal year the percentage that results from relating the investment made with its books value of fixed assets, excluding land or buildings, used for the production of net income.  The exoneration may apply for five consecutive fiscal years.  

The Law also establishes that these investments must have a maximum 10-year depreciation. When depreciating national equipment or investments, the residual value should not exceed 20% of their book value, and when depreciating international equipment or investment the residual value should not exceed 10% to 15% of their book value.  

In order for taxpayers to benefit from these tax incentives, the competent authority must approve the taxpayers' studies and projects on this matter.  Likewise,  taxpayers must comply with the parameters of environmental quality established in the technical rules to benefit from the VAT exoneration or  any other exoneration from an equivalent tax and tariff rates on the investment on technologies for the optimization and waste minimization.