Argentina’s Tax Reforms Aim to Change the Game for Investors

The Argentine government has introduced an incentive regime for large investments, known as the RIGI, with the aim of attracting foreign direct investment and reversing longstanding economic stagnation.

The RIGI program applies to investments made in Argentina within seven broad economic sectors and for a minimum investment amount: The general amount required is $200 million, except for certain oil and gas investments, for which a higher amount may apply depending on the subsector involved.

Unlike previous initiatives of its kind, which provided a range of specific incentives for different activities and geographical areas, the RIGI directly addresses the most common and significant problems that investors face when doing business in Argentina—the high tax burden and the lack of predictability and legal certainty.

The RIGI is intended to offer a convincing solution to the challenges that usually hold foreign investors back from making or fulfilling investment projects in Argentina.

After the disquiet caused in national and foreign investors by Argentina’s volatile economy and disruptive policy measures, the adoption of the RIGI can be seen as both a major bet by President Javier Milei’s government and as a potential game-changer for the country.

The measure was included in Law No. 27,742 and entered into force on July 8. Implementing regulations on its scope and practical implementation were recently issued by Decree 749/2024, published in the Official Gazette on Aug. 23.

The RIGI offers substantial benefits, including on:

• National taxes including customs duties which, in this case, are much more generous than those typically awarded under other preexisting regimes
• Local taxes from Argentine subnational jurisdictions, such as the city of Buenos Aires, provinces and municipalities, that decide to join the RIGI
• Foreign currency exchange controls and obligations, which are progressively eased and waived over a period of three or four years, depending on the case
• Restrictions imposed on international commerce and the free disposal of a business’s products, which are removed and insured with adequate guarantees
• Negative effects on investment projects as a result of potential changes to Argentina’s legislation. A “30-year stability rule” covers all the tax, customs and foreign exchange benefits awarded under the RIGI (including certain guarantees to reinforce the credibility of such long-term benefits)
• Potential disputes between investors and the Argentine government on any matter related to the RIGI, which are subject to favorable arbitration rules.

Considerations for Investors

Foreign investors potentially interested in applying for the RIGI should be aware of factors that may have a significant impact for their businesses.

Adherence of subnational jurisdictions to the RIGI. The significant protection offered by the national program in relation to local taxes depends on this.

For projects that can be developed in more than one local jurisdiction, the jurisdiction that has joined the RIGI will certainly be the most attractive for investors. In a recent example, the Province of Buenos Aires lost a potential liquefied natural gas development investment of $30 to $50 billion in favor of Río Negro Province partly due to the former jurisdiction’s rejection of joining the RIGI.

Impact of the implementing regulations. Even though Law No. 27,742 states that the regime is already in force and that the regulations, published Aug. 23, will not hinder the full application of its benefits, the actual scope and practical implementation of a promotional regime covering so many different areas that still need clarification will ultimately depend on these specific regulations.

OECD GloBE rules. Multinational groups and foreign investors must verify whether the taxable revenue exonerated in Argentina as a result of the RIGI is taxed by a foreign jurisdiction by means of the application of an income inclusion rule, an undertaxed profits rule, or any other analogous measure that implements or aims at implementing the OECD’s GloBE Rules. This is relevant because, if that is the case, the tax benefits provided by the RIGI will have no effect.

Potential market distortion. There are criteria (not defined by Law No. 27,742) under which the competent authority of the Argentine government applying the RIGI will determine whether an investment project causes a local market distortion. Such projects will not be admitted under the promotional regime.

Computation of expenses. There are specific rules regarding the computation of expenses related to a given project—these are important for assessing which of these expenses may be considered for the purpose of the minimum investment threshold required to qualify under the RIGI.

Investors who are interested in this promotional regime, but hesitant to join as a consequence of Argentina’s track record of regulatory volatility, may consider adopting a “wait and see” strategy. However, it’s worth highlighting that the application period to join the RIGI (in principle, two years from July 8) is quite short considering the nature of the investment projects that may qualify under such program and the time normally required for the planning, design and effective implementation of such projects.

If it’s administered well, the RIGI program’s broad and significant benefits, which specifically target the core challenges of investing in the Argentine market, mean that this could certainly represent a strong and effective policy tool to put the country back on the radar of international investors. Only time will tell whether this initiative was indeed a true game changer.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Juan Manuel Vázquez is a professional support lawyer with Loyens & Loeff, specializing in international and European tax law, and a doctoral researcher at the University of Amsterdam.
Juan Pablo Baumann Aubone is an independent consultant and tax law specialist based in Argentina.

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