The recently enacted Law Number 27,349 on Support for Entrepreneurial Activities (Ley de Apoyo al Capital Emprendedor or LACE) is aimed to provide a legal framework to foster and fund entrepreneurship in Argentina. The LACE has established special tax benefits for investors, a crowd funding system and the Simplified Corporation as a new company type1. All in all, the LACE will enhance the venture capital industry in Argentina, providing the myriad of high-skill entrepreneurs the country has with their most scarce resource up to know: funding. Following, we will summarize the tax benefits created to benefit those investing in entrepreneurs in Argentina.
The LACE defines an entrepreneurship (or start-up) as any - for-profit or not-for-profit - activity being undertaken in Argentina by a newly incorporated legal entity or by a legal entity with a creation date not exceeding seven years (LACE, Article Number 2, Section 1).
In turn, the law defines entrepreneurs as those individuals starting new productive projects in Argentina or undertaking start-ups under the law regulations (LACE, Article Number 2, Section 2).
Entrepreneurial Capital Institutions are those Argentine legal entities - public, private or mixed - or those locally constituted funds and trusts - public, private or mixed - with the exclusive purpose of providing their own or third-party resources to a group of start-ups (LACE, Article Number 3, Section 1).
Under Article Number 3, Section 2 of the LACE, Entrepreneurial Capital Investors are those:
Legal entities - public, private or mixed - or funds and trusts - public, private or mixed - investing their own or third-party resources in Entrepreneurial Capital Institutions;
Individuals investing their resources in Entrepreneurial Capital Institutions; and
Individuals directly investing their resources in start-ups
Entrepreneurial Capital Investors will be entitled to deduct from income tax those percentages set by future regulatory decrees, up to 75% of their capital contributions and as long as such deductions do not exceed 10% of the taxable net income of the fiscal year (the excess - if any - may be rolled over the following five immediate fiscal years). When it comes to capital...