Hacienda Virtual Realty Argentina - HVRA
Incentives
for Industrial Development
There used to be a considerable
variety of industrial promotion systems that granted tax benefits to specific
types of industries or geographical regions, for establishing industrial activities
in given areas.
Effective December 1, 1992, decree 2054/92 implemented the system for substituting
tax benefits applicable to business entities that already had approved industrial
promotion entitlements under law 23,658 (published in January 1989 and partially
governed by the regulations of decree 1033/91).
The main features of the new substitute system are as follows:
Companies entitled to industrial
promotion benefits (tax exemptions, abatements, and so forth) are required to
pay their taxes in the same way and at the same time as other taxpayers in general.
Instead of the original benefits, the promoted entities are to receive tax credit
bonds that can only be used for meeting tax liabilities with regard to which
the theoretical fiscal cost of each promoted project has been calculated, and
based on the degree of progress of the promotional undertakings.
These bonds are to be preallocated to the applicable financial years and may
be used for meeting tax liabilities arising during the year concerned and the
next one, but may not lead to any credit balance in favor of their holder.
Law 23,658 suspended the granting of new promotional benefits relating to manufacturing
activities.
By means of decree 937/93 whose rules are effective from May 12, 1993 until
December 31, 1994, a tax refund system has been instituted covering 15% of the
selling price of new nationally-produced capital assets earmarked for investment
in economic activities.
Those benefiting from such refunds (which are not deemed part of the taxable
basis either for V.A.T. or for income tax) are the manufacturers who produce
and sell such assets and who are registered for such purposes with the Department
of Industry and Commerce and the National Tax Authority, provided they effectively
reduce the selling prices by an amount equivalent to that of the refund. In
the case of sales effected as from July 1, 1993, the manufacturers will also
be required to have an industrial plant located in the provinces that have suppressed
certain provincial taxes on such transactions.
The Industrial Specialization
Plan
This promotional regime has proven
quite successful, and constitutes a good example of the types of programs set
up by the government to be enjoyed by both domestic and foreign investors.
Established in December 1992 via Decree 2641, it allows a company to import
manufactured goods at 2% customs duty up to an amount equal to the increase
in company exports, provided the import and export goods belong to the same
bracket in a code based on the worldwide Harmonized Merchandise Designation
and Coding System.
Since the basis of the 2% import credit is the increase in exports (based on
December 1992 figures), and most foreign investors would naturally begin business
after that date, manufactured goods imports at 2% customs duty will be authorized
for the full amount of the company's exports from Argentina.
This promotional regime will be in effect until December 31 1996, and thereafter
the customs duty rate will be calculated according the following formula:
Import Duty = 2% + (A - 2%) * B where A is the import duty in effect at the
time of shipping, and B will be 0.25 during 1997, 0.50 during 1998 and 0.75
during 1999.
All it takes to be eligible for the specialization regime is to be up to date
with all tax and social security payments.
Law on Technology Transfer (No. 22,426)
This law, enacted in March
1981, governs all contracts whose principal or accessory object is the transfer,
assignment or licensing of technology or trademarks by non-resident individuals
or juridical persons to individuals resident in Argentina or public or private
juridical persons organized in this country, when the contracts are to take
effect in it and are made for valuable consideration.
Contracts to which the armed or security forces are a party and which are classified
as military secrets by the Executive Power are exempt from the provisions of
the law. According to the regulations, technology comprises patents, models
and industrial designs, and all forms of technical know how for making a product
or rendering a service.
Contracts covering the transfer of technology according to the above definition
must be registered with Institute of Industrial Technology for statistical purposes.
Failure to register these contracts does not render them invalid, it simply
prevents the payer from deducting the consideration paid as an expense for tax
purposes, and the payee is taxed on the full amount of the consideration received,
without being entitled to the standard flat expense allowance.
The contracts must be submitted in Spanish or accompanied by a Spanish translation;
either party may apply for and pursue the registration.
Trademarks, Patents and Copyrights
The trademark legislation (Law 22,362)
provides for the protection of trademarks that have been duly registered with
the National Industrial Property Board. This registration is subject to payment
of a fee.
Trademarks may consist of one or more words, drawings, emblems, monograms, engravings,
stamps, seals, pictures, bands, combinations of colors in a given place on products
or containers, wrappers, containers, combinations of letters and numbers, letters
and numbers drawn in a special way, publicity slogans, embossed marks that are
distinctive and all other signs for distinguishing products or services.
Protection is granted for a maximum of ten years each time a trademark is registered,
but registration may be renewed indefinitely provided the trademark has been
used in the last five years.
Argentina has adopted the international classification of goods and services
used by the International Intellectual Property Organization.
Patents protecting industrial property rights are granted by the Patent Office
for 5, 10 or 15 years depending on the Patent Office's judgment of the appropriate
period, upon application by the owner and subject to payment of a fee.
No renewals are granted.
Foreign patents may be renewed for a maximum of 10 years, but the term for which
their Argentine registration is granted may not go beyond the life of the original
foreign patent.
Patents are transferable by deed and subject to registration by the Patent Office.
Patents lapse if they are not used within two years of their registration, if
their use is interrupted for a similar period or upon the expiration of the
term for which they are granted.
In 1967 Argentina became a party to the Paris convention covering industrial
property and its subsequent amendments, including the 1958 Lisbon Agreement
and the 1967 Stockholm Agreement.
Control of patent and trademark issuance is the responsibility of the National
Industrial Property Board.
Copyrights are granted by the National Register of Intellectual Property upon
application and subject to payment of a fee; they protect the authors' rights
during their lifetime, and those of their heirs for another fifty years. Anonymous
works belonging to organizations and juridical persons are protected for thirty
years.
Argentina has subscribed to the Bern Convention (and its subsequent amendments,
including the 1971 Paris Agreement), the Inter-American Convention held in Washington
in 1946, and the Geneva Convention of 1952 concerning copyrights.
Congress is currently studying a bill on computer software copyright, not yet
specifically dealt with under Argentine law. [ NOTE: hence, more
than 80% of software, commercial or private, is pirated. Don' t try to
sell software here. Most people think its free! ]
Another bill that would allow the patenting of pharmaceutical products and processes
has also been forwarded to the National Congress by the Executive Power.
Argentina has no trade secret law per se, but the concept is recognized and
encompassed by laws on contract, labor and property. Penalties exist under these
statutes for unauthorized revelation of trade secrets.