On 14 November 2018, Argentina published, in the Official Gazette, Decree No. 1049/2018 (the Decree), reinstating tax benefits for oil and gas activities in Tierra del Fuego. The benefits will apply to new projects and the Application Authority (Energy Secretary) will clarify the scope and eligibility requirements.
Law 19,640 and supplementary regulations established tax benefits applicable to economic activities in the Province of Tierra del Fuego, the most southern province in Argentina. The benefits generally included federal income and value-added tax exemptions, as well as exemptions or reductions in import duties or other customs benefits.
In 2012, through the issuance of Decree 751/2018, the Argentine Government eliminated the tax benefits for hydrocarbon production activities listed therein, namely, crude oil and natural gas extraction, services related to oil and gas extraction, and geological and prospection services.
To increase hydrocarbon reserves and production and to foster the development of new projects and investments, the Decree establishes that income obtained from oil and gas activities in Tierra del Fuego will not be excluded from the tax benefits if the activities are related to “new projects.”
The Decree indicates that the Application Authority will define the scope of what should be understood as “new projects” for purposes of applying for the tax benefits.
The tax benefits will apply from 1 January 2019 and onwards.
This is a major tax development for companies engaged in the oil and gas industry in Argentina, or evaluating new investments in this sector. Taxpayers should monitor the release of additional regulations.
EYG no. 011944-18Gbl
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