Regulation of the Promotion Regime of the Knowledge Economy.
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Tax Department Report | Regulation of the Promotion Regime of the Knowledge Economy
Dear Sir or Madam,
By Decree No. 708/2019 (published in the Official Gazette on October 15th, 2019), the Executive Branch regulated the “Promotion Regime of the Knowledge Economy”, created by Law No. 27506.
With this Decree, the Executive Branch established that:
• The requirement to develop the main activity will be met when at least 70% of the total annual invoicing is generated in one of the promoted activities or in the sum of 2 or more of them.
• Should one of the promoted activities include the exportation of professional services, those services could be considered as long as 70% of the total invoicing or 45% of the total invoicing (in the case of small or medium companies) is generated by the exportation of professional services, that is to say, those chargeable services, developed in the country, without an employment contract, whose use or effective exploitation is performed abroad, being understood by such, the immediate use or the first act of disposition from the user of the service.
• Regarding the requirement of performing research and development activities (expenses that should represent the at least 3% of the total invoicing of the period), these could be developed directly by the beneficiaries or through public entities, universities, among others.
• The requirement regarding the training of the employees is applicable to permanent employees who do not fall under certain special employment regime.
• In order to be included in the register of beneficiaries of the “Promotion Regime of the Knowledge Economy” the Companies will have to prove compliance with the requirements described in section 4 of Law N°27506 for 6 months prior to the registration date. The Companies must also comply with their tax and payroll obligations.
• The activity of exportation of services will be proved with invoices “E”.
• A reduction of the level of employment will occur with a difference higher than a 10% of the employees from the last 6 months prior to the registration request. Also, the Decree establishes certain cases that will not be considered as employment reduction.
• The Federal Tax Authorities will issue the regulations regarding the use of the “fiscal bonds”.
• The Competent Authority will have to issue the corresponding regulation regarding the transferring of the benefits of the former Software Industry Promotion Regimen (Law No. 25922) to the new Regime.
Should you require any further information on this matter, please do not hesitate to contact us.
Sincerely.
Santiago L. Montezanti
Enrique López Rivarola