Published and draft legislation - Argentina

Productive Recovery Programme and SMEs

SME ACT 27.264

On 9th August Argentina’s Official Bulletin published Act 27,264 known as the “SME Act”, in Decree 903/2016, which grants tax relief to small and medium enterprises within the scope of the Productive Recovery Programme.

The following is a summary of the new regulatory framework:

  • Abolition of the tax on minimum notional income
  • Offsetting the banking credit and debit tax: by up to 100% in the case of Micro and Small enterprises; up to 50% in the case of bracket 1 medium enterprises. The category used currently to define a company as an SME depends on the average annual sales in the previous three years, with the cut off figure differing according to the company’s activity sector:

- Farming $100.000.000

- Industry & Mining $360.000.000

- Trade$450.000.000

- Services$125.000.000

- Construction$180.000.000

  • Deferring VAT payments

- For Micro and Small enterprises a month’s worth of VAT is payable at 90 days; thus VAT for June is paid in September, July’s in October, etc.Deferring VAT payments

- Tranche 1 medium enterprises accumulate three months before payment, ie. VAT from June, July and August is paid in September, etc.

  • When there are credit and debit balances on taxes that cannot be offset under current legislation, the taxpayer may request a refund through a tax rebate, according to a mechanism to be defined by AFIP, the Federal Tax Administration.

Complementary package of SME promotional measures

  1. Encouraging investment

SMEs may deduct up to 10% of their investments from their income tax. They may also get a tax refund for the unrecovered VAT from the investments made.

This relief will be increased by between 5% and 15% in the case of SMEs in regional economies.

  1. Productive recovery programme

The Ministry of Labour, Employment and Social Security has raised the productive recovery programme to the category of law. The amounts for SMEs have been raised and the simplification of the administrative procedure guaranteed. This programme, which had already been renewed by the government, enables companies going through a critical situation to request a subsidy to pay wages and thus avoid firing staff.

  1. Promoting SME competitiveness

The Department of State for Entrepreneurs and SMEs has set up a public-private consultative council to monitor the competitiveness of SMEs. This Council has given the category of law to the SME Competitiveness Institute.

  1. More financing options

More guarantees for SMEs (FOGASME) and higher tax rebates for non-financial institutions and SMEs that issue instruments structured as public offerings.

The letter of credit giving SMEs a medium-term funding instrument using the securities market has been improved. To achieve this, a quota-based amortisation system can be set up.

Limited liability companies are allowed to issue negotiable debt securities.

The Act adds a series of sanctions payable if mutual guarantee companies are not compliant.

  1. New lines of financing

The credit line for productive investment has been renewed, increasing commercial banks’ lending quota for SMEs from 14% to 15.5%. This means that a further ARS 63 billion is available in the second half of 2016, at an interest rate of 22%.

The percentage allocated to discounting cheques in the credit line for productive investment has been increased so that more SMEs can get access to short-term finance. The Ministry of Production's Banco de Inversión y Comercio Exterior (BICE) has launched and is promoting its “First SME loan”. This credit line means that those SMEs which could not access banking finance may now do so at preferential rates of 16%.

There are more interest rebates and greater access to financing for working capital, investments and energy efficiency through the Ministry of Production’s programmes. With interest rates at between 9% and 18%, terms of up to 7 years and figures of up to ARS 10 million.

  1. Tax relief

The deadline for settling VAT has been deferred to 90 days for micro, small and bracket-1 medium enterprises, improving short-term financing conditions for them. This involves a further ARS 5 billion working capital for SMEs.

SMEs available balances have been reduced by automating the issue of the VAT no-withholding certificate, as well as increasing caps and floors to the tax withholdings against VAT and profits. This means that fewer SMEs are subject to withholdings or have to make them, improving their cash flow and reducing paperwork.

  1. SME register

An application has been developed in conjunction with the AFIP, the Federal Tax Administration, so that SMEs can obtain proof of their SME bracket. This app is already available on AFIP’s website through the F. 1272.

The aims of this register are as follows:

  • To have updated information on the composition and nature of the Micro, Small and Medium Enterprise segments, so that suitable policies and instruments to support these companies can be designed for them;
  • To collate, register, digitise and save the information and documents about companies that want or need to prove their condition of Micro, Small or Medium Enterprise to the relevant authorities or to any other public or private institution to comply with the standards established by those authorities;
  • To issue certificates accrediting the category of Micro, Small or Medium Enterprise in response to a request from the company concerned or the requirement of national, provincial and municipal authorities.