Law To Encourage Entrepreneurship

Author:Mr Gabriel Gotlib, Diego S. Krischcautzky and Maria Paula Castelli
Profession:Marval O'Farrell & Mairal

On April 12, 2017 Law No 27,349 on Entrepreneurship was published in the Official Gazette. The Law provides tax benefits to encourage investors interested in this type of project; as well as creating the legal figure of the Simplified Corporation. This new corporate type will allow to incorporate and register a company via the Internet, obtain a Single Tax Identification Code (CUIT) within 24 hours and open a bank account on the spot.

The aim of the Law is to "encourage entrepreneurial activity in the country and its international expansion, as well as the generation of entrepreneurial capital in the Argentine Republic", and the Ministry of Entrepreneurs and Small and Medium-Sized Enterprises of the Ministry of Production is the enforcement authority.

The outstanding points the Law provides are:

A. Tax benefits

The Law provides two main fiscal benefits for investors in projects that are not yet in existence or are in existence. The first benefit provides for the possibility for duly registered legal entities or individuals with the Registry of Entrepreneur Institutions (Registro de Instituciones de Capital Emprendedor) to deduct up to 85% of the amount pertaining to their own income tax —depending on the geographical location of the entrepreneurships— regarding capital contributions made to entrepreneurships or institutions whose only corporate purpose is to contribute their own or third parties' resources to entrepreneurships. In any case, the deductible amount no more than 10% of the net taxable income of a given fiscal year (or the proportion calculated as of the beginning of the activities if it is less than a fiscal year).

This percentage may be reduced by the Executive Branch, either by a Decree or by a Resolution enacted by the Tax Authority, so it should be highlighted that, since the deduction of income tax in the case of donations made to foundations or any other non-profit organization currently includes up to 5% of the net taxable income, if the regulations to be enacted cover this topic, we may expect the limit to range between 5% and 10%.

The second benefit establishes that the amount exceeding 10% of the net taxable income of a given fiscal year may be deducted during the following five fiscal years, which is consistent with the current losses' mechanism available for commercial companies. In other words, the benefit analyzed herein is focused on encouraging the investor to make contributions that generate a benefit for...

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