By Decree No. 1315/2013 the National Executive issued new regulations for the regime to promote the software industry.
On September 16, 2013 Decree No. 1315/2013 was published in the Official Gazette issued by the National Executive (hereinafter, “Decree”), regulating the Software Industry Promotion Law No. 25,922 (hereinafter, “Law”, also see “Promotion of the Software Industry” in Marval News # 32 dated September 30, 2004) with the amendments issued by the Law No. 26,692 (hereinafter, jointly with the Law and the Decree, “Regime”) that, among other matters, extended the duration of the benefits until December 31, 2019.
The law, prior to its reform through Law No. 26,692, had been regulated by Decree No. 1594/2004 (see also "Regulation for the Regime to Promote the Software Industry” in Marval News # 35 dated as December 23, 2004). As several of Decree No. 1594/2000 provisions receive the same treatment in the new regulation, only the new issues will be explained.
The Decree creates the Software and IT Services Producers National Register (hereinafter, “Register”) under the scope of the Industry Subsecretariat.
- Conditions for Admission and Permanence in the Regime
The Decree establishes that, in order to be admitted in the Regime and continue to be enrolled, interested subjects must prove the fulfillment of the requirement a) and at least two of the requirements b), c) and (d), in accordance with the following guidelines.
- Main activity - Subjects must have Software and IT Services industry as their main activity. On this understanding, they must prove that more than 50% of their activities are associated with the creation, development, production and implementation of software systems according to the promoted activities listed by the section No. 5 of the Decree (hereinafter, “Activities”).
For the purpose of achieving the 50% above mentioned, each subject should prove that in the course of 12 months prior to the date of filing the application for the admission to the Regime, more than 50% of its billing, number of employees and annual payroll costs are associated to the Activities. After the admission, the beneficiary must periodically demonstrate that it maintains these conditions.
In addition, in order to continue to be enrolled in the Regime, the beneficiary shall keep at a minimum the amount of total staff informed at the time of filing the application for registration.
- Expenses in research and development of software - Each entity must prove that in the course of 12 months prior to the date of filing the application for the admission to the Regime, the annual expenses effectively incurred for software research and development have represented at least 3% of the total annual expenses of the Activities. From the year 2016, this percentage will increase annually according to the type of corporation (micro, small or large corporations) and in accordance with the parameters provided by the Decree itself.
Those expenses which, in general terms, do not involve a functional or technological progress in the area of software as well as those financed with public funds, are excluded from the mentioned estimation.
Accreditation of a recognized quality standard applicable to software’s products or process - Certifications carried out or in course of being obtained will be accepted as valid, when they have been issued by certification entities accredited by the Argentine Accreditation Agency (OAA for its Spanish acronym) in accordance with quality standards listed by the Enforcement Authority of the Regime.
Exports of software and IT services - The subjects complies with this requirement when, in the course of 12 months prior to the date of filing the application for the admission to the Regime, the total annual sales of the beneficiary abroad in relation to the Activities, represents at least 8% of total annual sales in relation to the Activities. From the year 2016 this percentage will increase annually according to the type of business and in accordance with the parameters provided by the Decree itself.
- Self-development of software
This is defined as activities made by subjects for their own use or for corporations related to the subjects. The Regime excludes from its benefits this type of activity. Notwithstanding, the Decree establishes that development of software that is prepared to be incorporated into processors should not be considered as self-development, even though their incorporation in a physical good is carried out by corporations related to the to the software’s developer, provided that the effective user of the good is not a corporation related to the software’s developer. According to these guidelines, if the activity was not considered as self-development, the subject must prove the fulfillment of the conditions for admission and permanence in the Regime, as it was explained in point 1.
- Income Tax Reduction
The beneficiaries of the Regime shall have a 60% reduction in Income Tax for the Activities in relation to fiscal periods beginning after the filing in the Registry. This benefit will be applicable to both Argentine source income and foreign source; with the exception of foreign source profits for regular establishments of Argentine resident holders.
The Decree establishes the exclusions to the Regime, including those subjects who integrate their organs of administration, representation or control with one or more persons that are behind with debt owing to the National, Provincial or Municipal Tax Authorities. The Decree also excludes those subjects who have been beneficiaries of a promotional incentive, would have cause the rescinding of the respective promotion provided when five years from the act that had declared the rescission has not yet passed.