In recent years, domestic trade has benefited from various sources of investment, both local and foreign, which have allowed for the diversification of developing economic sectors and even promoted and fostered new economic activities that were not being exploited in the country.
This has been achieved largely through tax incentives regulated by various pieces of legislation, such as:
- The Industrial and Commercial Free Zones Act.
- The International Services Act.
- The Act on the Promotion of Innovation and Technology Manufacturing.
Although these laws were approved and enacted in different years and at different times in history, they all have the common goal of economic and social development through growth in production, productivity, and the rational use of resources, which in turn promotes economic growth, employment, and social welfare.
On this occasion, we will focus on the Law on the Promotion of Innovation and Technology Manufacturing (2023), which regulates the activities and tax incentives appropriate to encourage investment and development of the technology industry in the country, thereby promoting the growth of a skilled workforce capable of generating advanced technological products, services, and solutions that are of great interest to the domestic and international markets.
Among the activities encouraged by this law are the following:
- Programming, management, maintenance, consulting, and analysis of computer systems or software.
- Development and marketing of cloud computing and data flow services; artificial intelligence, big data analysis; distributed ledger technology; cybersecurity solutions; quantum computing.
- Technologies based on the manufacture of parts, materials, and equipment or facilities, assembly, including manufacturing plants for technological equipment or hardware, semiconductors, communications technology, robotics, nanotechnology, aircraft, and unmanned vehicles.
- Engineering and system technologies are necessary to integrate basic industrial technologies into global production chains.
- New sources of energy generation and storage that do not currently exist within the national energy matrix, which shall be subject to the corresponding authorizations and concessions, as applicable.
- Research and development of new technologies.
These activities may be carried out by individuals or legal entities, whether domestic or foreign, that make a new investment within the national territory for the purpose of developing one or more of the activities listed above. They may then opt for the application of the following tax incentives with respect to the incentivized activities, which they will enjoy for a period of 15 years from the date of obtaining the Qualification Agreement from the Ministry of Economy:
- Total exemption from income tax.
- Exemption from all types of income tax withholdings.
- Total exemption from municipal taxes on the net assets declared by the beneficiaries.
- Exemption from capital gains tax.
- Total exemption from import duties and taxes levied on the importation of goods, inputs, machinery, equipment, and tools necessary for the development of the incentivized activities.
The text of the law includes certain guidelines and requirements that are truly flexible and attractive to investors interested in developing this type of activity. The most relevant considerations are listed below:
- To meet the requirement of making a new investment, not only are cash contributions considered, but also any type of assets, equipment, plant, and intangible property intended for the execution of the incentivized activities.
- No minimum investment amount is established to qualify as a beneficiary of the tax incentives.
- Beneficiaries may hire domestic and foreign employees and are not required to have a minimum number of employees.
- The activities and services developed by the beneficiaries may be offered to both the local and foreign markets without any restrictions.
- There are no restrictions or minimum requirements for the location and area of the facilities where the beneficiary will operate.
Considering the attractiveness of the tax incentives provided for in the aforementioned law and the solidity it offers together with its Regulations, domestic and foreign investors have a strategic opportunity to actively participate in the country’s technological development, as the activities listed represent high-value-added sectors with international projection and have flexible and accessible conditions for their implementation.
Therefore, investors are cordially invited to explore and develop one or more of the incentivized activities to access the tax benefits provided by the law and thus contribute to national economic growth and position themselves in a competitive and innovative environment. Now is the time to invest in technology, boost the country’s productivity and competitiveness through a dynamic and sustainable economy, and join the group of more than 60 investors who have obtained their Qualification Agreement as beneficiaries of the tax incentives provided for in this law.