New Incentives for Startups and Venture Investors in Argentina

In a much anticipated vote in the Argentine Senate last week, a piece of legislation was signed into law that had entrepreneurs and investors cheering in Argentina. The law consists of a series of measures aimed at increasing the entrepreneurial activity in the country by improving the ease of doing business, providing access to new sources of financing and, perhaps most importantly, offering attractive tax breaks to individuals, corporations, and institutional entities that invest in qualified start-ups and venture capital funds.

The law is particularly important for Argentina’s budding tech scene that, in spite of the past decade’s political and economic headwinds, produced some of the region’s most valuable tech companies, including publicly traded companies like MercadoLibre (NASDAQ: MELI) and Globant (NYSE: GLOB). Indeed, according to a recent study (“Tecnolatinas”) sponsored by the Inter-American Development Bank, 4 of the region’s 9 most valuable technology firms are Argentine and the country ranks second only to Brazil in the overall number of start-ups.

Building on these encouraging statistics and recognizing the country’s potential role as a regional technology leader, the law puts in place three concrete measures to encourage the sector’s growth:

  1. The creation of a new type of simplified business entity (SAS) that significantly increases the ease of starting and running a business. Companies will be able to be incorporated in 24hs, run their books digitally, register with digital signatures, and have minimum employee and salary requirements to start off.
  2. The creation of a government-run fund of funds that will become a limited partner to qualified general partners investing in start-ups and SME’s.
  3. The implementation of specific tax breaks and incentives for individuals and corporate and institutional investors that invest in qualified startups or venture capital funds. Up to 75% of any investment in an SAS or an SAS accredited investment fund is tax deductible for up to 10% of the tax payer’s total income tax due.

Within the framework of President Macri’s recent tax amnesty program which brought an estimated $120 billion of Argentine capital onshore, the “Entrepreneur’s Law” tax incentives will almost certainly have tax advisers and investors looking very closely at how to best take advantage of the newly established tax benefits. At the same time, investors will be seeking for new ways to get their hands on the most promising investment opportunities.

We at NXTP are especially excited about the opportunities this new framework will bring to our portfolio companies and investors. We hope that this law will help lay the groundwork for the country to fulfill its potential and create a new wave of high impact regional and global companies “Made in Argentina”.

This post was originally published on LatAm.VC