The RIGI, just in case, sets limits by defining service rates

Large investment projects approved under the regime are declared to be of national interest, in line with article 75, section 18 of the National Constitution.

It includes investments of at least US$200 million, although the Executive Branch is authorized to increase this amount depending on the sector in question. The sectors covered are: forest industry, tourism, infrastructure, mining, technology, steel, energy, oil and gas.

It offers a significant number of incentives in the tax, customs and exchange order that includes VPU and local suppliers, under certain conditions, in relation to various taxes such as Income, Value Added and Bank Credits and Debits, as well as the exemption of import duties, statistical rates and the application of withholding or perceptive regimes that fall on the import of certain goods and merchandise for consumption.

To this must be added the exchange rate incentives and the commitment to fiscal stability for a period of 30 years. in tax, customs and foreign exchange matters since joining the RIGI. This commitment is regulated by articles 105 to 110 of Decree 749/24.

Regarding the mentioned stability, Nicolini (1) expresses: “It will be very important that the provinces adhere to the RIGI, and facilitate with an adequate tax, legislative and infrastructure framework, the installation of these important investment projects. No less important is that municipalities also adhere, without trying to apply taxes disguised as fees for services not provided..”

This warning from the author, anticipating the ingenious creativity displayed by the municipalities, did not escape the legislator.

Jurisprudence eloquently shows the need for their intervention in matters that, by their nature, should never have reached the courts. But politicians emerge from the citizenry and bring with them their goodness and mischief. In these cases, the slowness of justice plays in their favor.

Invitation to provinces and municipalities

The regime dedicates its Chapter XI to inviting local jurisdictions to adhere to it with the idea of ​​further enhancing the benefits and increasing its attractiveness for investment. But not in a random way, but respecting the requirements and conditions that the law regulates.

Thus, the invitation to join the provinces, the Autonomous City of Buenos Aires and the municipalities is under all the terms and conditions of the RIGI. And the jurisdictions that adhere They will not be able to impose new local taxes on VPUs, except for remuneration rates for services actually provided.

Explicit rules

The aforementioned restriction on imposing new taxes does not remain a legal mandate without a definition of its scope.

As a general concept, it stipulates that the regime will understand that there is a new local tax when a new taxable event is created with respect to those existing as of December 31, 2023 or, likewise, when the taxable event, the tax base, the rate, the deductions, the exemptions and/or tax reliefs and/or any other aspect of the taxes existing on that date are modified, which in fact implies a higher tax burden.

Notwithstanding the foregoing, the VPU shall be entitled to benefit from any elimination or exemption of taxes in the general regime, as well as from any reduction in its rates, established by the adhering jurisdictions.

Now, since jurisdictions cannot impose new taxes, except remuneration rates for services providedexisting or to be created in the future, the law defines the conditions under which existing ones must operate and new ones may be imposed without violating fiscal stability.

These rates may not exceed the specific cost of the service actually provided to the subjects considered individually..

Additionally, the law understands that a rate exceeds the specific cost of the service actually provided when its tax base is determined based on sales, gross income, profits or similar parameters.

If we break down the characteristics that make up the definition and limitations of the tax base, it can be seen that the concepts and restrictions are based on both relevant judicial jurisprudence and on outstanding fundamental doctrine.

The individualization of the person obliged, for which the service must be divisible, the amount of the rate must not exceed the cost of the service and there must be effective provision, as essential elements that characterize this tax. Which, in principle, prevents the implementation of a veiled tax.

Effects of non-compliance

Any failure to comply with the above will be considered a violation of the provisions of Article 165, which declares large investments to be of national interest and useful and conducive to the prosperity of the country, the advancement and well-being of all provinces, the Autonomous City of Buenos Aires and the municipalities.

And he adds, “Without prejudice to the legitimate exercise of local jurisdictions and powers, any rule or de facto means by which the provisions of this title are limited, restricted, violated, hindered or distorted by the Nation, the provinces, themselves and their municipalities, and the Autonomous City of Buenos Aires, which have adhered to the RIGI, will be absolutely and irremediably null and void and the competent Justice must immediately prevent its application.”

The definitions of the CSJN and the doctrine

The Supreme Court of Justice of the Nation has stated (2) that the rate is distinguished from the tax in that the factual budget of the former “consists of the development of a state activity that concerns the obligated party.” And it adds that the distinction between taxes, rates and contributions “is not merely academic, but plays an essential role in the coordination of tax powers between the different levels of government.”

Additionally, the ruling also highlights that the collection of a fee “must always correspond to the specific, effective and individualized provision of a service.”

From the above, the defining characteristics of a service fee emerge: the individualization of the obligated party and the effective provision of the service.

However, the rule also states that the rate cannot exceed the specific cost of the service and in this sense the calculation is not always exact.

Already in the Federal Pact for Employment, Production and Growth of 12/8/1993, the provinces committed to ensuring that the rates established “respond to administrative services effectively provided and are related to their costs”

Based on the outstanding jurisprudence of the Supreme Court, Rodolfo R. Spisso states: “The amount of the fees must be reasonably proportional to the cost of the service that is paid for, although it is not necessary that there be a strict equivalence, which is impossible to establish” (3)

In this order, the rigidity of the legal norm can become a source of conflicts with a view to proving the excess of the “quantum” of the rate.

Nor should we rule out the possibility that rates can be set based on tax capacity, as the CSJN also admitted in various rulings, which generated divergent opinions in the doctrine, a topic analyzed by Spisso on page 196 and following of the work cited in citation (3)

Adhering and non-adhering jurisdictions

The adhering jurisdictions are those that are subject to the above-mentioned provisions. Those that do not adhere are not bound by anything.

In this last sense, there are provinces, such as Buenos Aires, that promote their own incentive project to tempt companies to invest in their territory. This causes the VPU to carry out the evaluation of the project considering the coexistence of two promotional regimes: the national one and the non-adhered local one.

Adhering jurisdictions are expected to provide tax incentives in line with and in administrative harmony with the RIGI, i.e. for large investments.

But regardless of whether or not they adhere to the national regime, jurisdictions can dictate promotional regimes that attract smaller investment projects that currently do not have a national law that promotes them; for example, a new SME Law as requested by the UIA.

(1) Nicolini, Juan Carlos. RIGI: its scope, incentives and activities included. Tax News of June 25, 2024

(2) Quilpe SA ruling, SCJN, 9/10/12

(3) Municipal Tax Law, Ed. AdHoc, page 193