On the occasion of the recent promulgation of Act No. 27.264 which provides tax benefits to SMEs and being a subject of great interest to one of the most important sectors of our country, we communicated with the accounting firm Miguel A. Monti & Asoc., specialists in the field, to provide us with the accounting details of such an important Act and the scope of the benefits for companies. Below, you can find an article written by Julián Monti, partner of the abovementioned accounting firm (see Résumé).
The Executive Branch has enacted Act No. 27.264, which translates into a series of benefits for SMEs. Although the agencies involved –AFIP included– have yet another month to publish the respective regulations (the fine print), we think it is interesting to review what the benefits are for the mentioned companies.
First and foremost, it is important to define the requirements for companies to be categorized as SMEs. In this sense, Section 1 of Act No. 25.300 and Resolution No. 24/2001 of the Secretariat of Small and Medium-Sized Enterprises establishes that the companies whose average of sales of the last three business or fiscal years which do not exceed the limits of the regulations will be included in this category. If you require further information on the billing amounts, please click here. It is important to note that companies that meet the requirements to be SMEs, but are controlled by or linked to other national or foreign companies that do not meet the requirements, will not be considered SMEs.
As a first measure, the Act reinstates the Productive Recovery Programme (REPRO) within the framework of the National Employment Emergency. Aimed exclusively at workers providing services in declining private sectors and geographic areas in crisis, REPRO is intended to provide economic assistance to beneficiaries in order to mitigate the negative effects on the level of employment. Companies within the category of SMEs and complying with the conditions of being “companies in crisis” with “employees at risk” will receive a monthly subsidy equivalent to an Adjustable Minimum Living Wage during a maximum period of six months, intended to comply with the basic remuneration of the employment category of each employee.
The Minimum Presumed Income Tax will not apply to Companies categorized as SMEs in accordance with the current legislation in fiscal years beginning on January 1, 2017. It is important to remember that the Minimum Presumed Income Tax is a supplementary tax to the Income Tax, for which 1% of the value of the asset is paid (provided that this amount is greater than the Income Tax established). Taxes effectively paid under this taxation could be used to pay the Income Tax of the following years, but they were a greater burden for companies with low profitability or negative results since they could not be applied.
Continuing with the benefits, Tax on Debits and Credits in Bank Accounts may be computed at 100% as payment on account of Income Tax for micro and small enterprises, and at 50% for Medium Enterprises, tranche 1. For comparison purposes, companies could compute 34% of the tax on credits with an average of 16% of the total. The tax may be computed based on the Affidavit or its advances, but if it cannot be fully used, it may not be compensated on other taxes and may not be transferred to third parties.
Another benefit is that companies that fall under this categorization will be able to include the balance of their VAT Affidavits on the due date corresponding to the second month immediately following the original due date. For instance, the tax corresponding to transactions made in August would expire in September, but with the benefits of the current Act, this tax would expire in November.
Continuing in the area of finance, how many times does a company have credits that cannot be applied against any tax and generate financial costs by being held until the next fiscal year? Upon the adoption of the new Law, companies may request the reimbursement of credits that cannot be applied to other taxes. The Act instructs AFIP to implement the procedures aimed at simplifying the determination and entry of taxes and to ensure that reimbursements are made in a simple and fast way.
Furthermore, this Act promotes productive investments made by SMEs, both for the acquisition of capital goods and infrastructure works. They must be aimed at the purchase, construction or import of new or used capital goods, excluding motor vehicles, and must be made between July 1, 2016 and December 31, 2018, period within which the beneficiary companies of the Regime shall enjoy fiscal stability, so their tax burden cannot increase.
Companies making such investments may compute 10% as payment on account of Income Tax (with a limit of 2% of sales, and 3% in the case of manufacturing companies).
Moreover, in the event that such investments generate a VAT tax credit and it cannot be used until the Income Tax Affidavit due date, a tax bond may be requested for that amount in order to be applied against other taxes.
There are certain groups of people that are not allowed to access these benefits, such as: i) persons declared in state of bankruptcy when the continuation of the operation has not been authorized; ii) persons who are criminally charged in connection with the Tax Criminal Law; iii) persons charged with common crimes which are connected to the non-compliance of tax obligations; iv) legal entities whose directors and partners are in the mentioned situations.
The expected benefits for productive investment will expire when companies reduce the level of employment as established by the regulations, or if the goods that gave rise to the benefit cease being part of the company, except after one third of their useful life or if they are replaced by goods of higher value.
If a company is within the due date mentioned before, it must file the Income Tax and the Value Added Tax of the bonds granted, plus the compensatory interests and a fine equivalent to 100% of the taxes entered in default.
The enforcement authority will create a Registry of Companies called MiPyMES in which the applicant companies must register. The purpose of the registration is to: i) have updated information on the structure and characteristics of the sector; ii) collect, record, digitize and safeguard information and documentation; and iii) issue certificates of accreditation of the SME status.
Should you require any further information with regard to the Regime, do not hesitate to contact any of our firms.