Guide to understand the incidence of tax promotion regimes in development companies and software production
With the aim of encouraging and strengthening the software industry in our country, in recent years different tax promotion regimes have been created with important benefits for both companies and individuals that are dedicated to the development and production of software.
In general terms, the activities benefited are the creation, design, development, production and implementation, and fine-tuning of the software systems, excluding the software self-development activity (that is, the software development carried out by the subjects for their exclusive use or that of related companies).
The main tax advantages that are offered both nationally and in the area of the CABA and the Province of Buenos Aires are the following:At the national level, we have two laws that assimilated the activity of software production to industrial activity, a necessary requirement to enjoy the tax benefits:
- Law 25.856 that established that the software production activity should be considered as a productive activity of transformation similar to an industrial activity.
- Law 25,922 (and amendments) through which the activity of software production is recognized as an industry and establishes in favor of those who develop this activity in the country the possibility of joining a promotion regime which includes the following Benefits:
- Reduction of the aliquot in the Income Tax: Reduction of 60% of the tax determined for each fiscal year. In practice, this implies that the Corporate Income Tax rate is reduced from 35% to 14%.
- Fiscal Stability until 12/31/2019: Until that date, the tax burden for national taxes can not be increased, from the application of the benefit.
- Bonus for the payment of taxes: Tax credit bonus that arises from 70% of what is paid as employer contributions, which can be used to pay other national taxes, such as VAT.
- Obtaining a certificate of non-withholding of VAT: The beneficiaries will avoid suffering from withholdings and / or VAT perceptions from their customers and suppliers respectively, avoiding a higher tax cost that affects their liquidity.
Who can enroll in the scheme?
The legal entities incorporated in the Argentine Republic that comply with at least two of the following conditions may be adhered:
- a) Accreditation of expenses in research and software development activities
- b) Accreditation of a recognized quality standard applicable to software products or processes
- c) Realization of software exports.
Technological District of the Autonomous City of Buenos Aires
In addition to the exclusive benefits for the activity, if the development of the software is carried out in the Technological District of the Autonomous City of Buenos Aires (CABA) located in the Parque Patricios area, the benefits are even greater, since the Companies will enjoy the following advantages:
Exemption of up to 10 years in gross income tax with definitive registration to the regime.
Deferral of 2 years in the payment of the Tax on gross income with provisional registration, until obtaining the definitive registration.
Exemption or deferral of Stamp Tax
Exemption for 10 years in the payment of the ABL (Lighting, Sweeping and Cleaning) for the properties of the area that are owned or rented by the employees in relation of dependence of the companies registered in the scheme.
Non-refundable subsidies to finance up to 50% of the cost of obtaining quality certifications.
Preferential credit lines of the City of Buenos Aires Bank for financing the purchase of buildings and constructions, and for the acquisition of homes.
In Province of Buenos Aires
Those subjects constituted or domiciled in the Province of Bs. As. That are enrolled in the Promotion Regime for the software industry of Law 25,922 will be exempt from the payment of the Tax on the Gross Income and Real Estate Tax. Likewise, the legal acts related to said activity will be exempt from Stamp Tax.
The tax exemption will be 100% in the case of beneficiaries who have manifested in their application for registration to the Software Industry Promotion Regime that, a percentage higher than 80% of the activities developed is part of the promotion. For those who have declared a percentage higher than 50% and up to 80%, the tax exemption will be 70%.
While these promotion regimes encourage and enhance the development of the activity, for young companies that are growing in the industry, it is not a simple decision to apply them.
These types of benefits require requirements that imply having a solid organizational structure, since they must assume legal, labor and financial commitments that demand greater formality in operations and therefore an increase in operating expenses.
Most decisions are made by weighing the costs, commitments and complexities versus the benefits, but the fundamental factor that makes the difference is the growth projection that the company has towards the future.
Companies that have confidence, security and good prospects in their business project will not hesitate to apply these benefits, since their final costs will be more competitive when measured with other companies in the sector thus improving their market position.
In conclusion, it is advisable to make a diagnosis of the situation of the company before making a decision, to ensure that the structure costs do not exceed projected revenues, and if appropriate, manage the registration, with a strategy that Allow him to start enjoying the benefits as soon as possible.
CPN. David Acuña
Responsible for Taxes of Barrero & Larroudé – firstname.lastname@example.org