Taxation applicable to public-private Partnership contracts in Latin America - 2nd edition – October 2025

A look back at Taylor Wessing's third webinar on PPPs in Latin America 

Webinar on January 14, 2025 – Focus on Nicaragua, Brazil, Puerto Rico, Argentina, Chile, and Costa Rica.

Presentation and moderation:

• Sophie Pignon, Partner, Taylor Wessing France

• Marcos Portela Barreto, Counsel, Taylor Wessing France

Speakers:

• Renaud Bourget, Professor, University of Nice-Côte d'Azur
• Roberto Benard, Lawyer, ECIJA Nicaragua
• Roberto Codorniz, Lawyer, ECIJA Brazil
• Aniris Castellanos and Alejandro Lopez Rodriguez, Lawyers, ECIJA Puerto Rico
• Andrés Chacra, Lawyer, ECIJA Argentina
• Maria Jesus Palacios, Lawyer, ECIJA Chile
• Mariela Hernandez, Lawyer, ECIJA Costa Rica

Introduction by Professor Renaud Bourget

“Since the end of the 2010s, the Inter-American Development Bank has seen a considerable improvement in the quality and average regional score for the transparency and accountability indicator.”

Key points to remember:

• Through its annual reports, the Inter-American Development Bank plays a central role in promoting transparency in the establishment of public-private partnership contracts in Latin America.
• General legal framework for PPPs in Nicaragua: Although no PPPs were implemented between 2014 and 2023 in Nicaragua, there is nevertheless a stable legal framework for PPPs with a law adopted in 2016 on public-private partnerships[1] and implementing regulations from 2017[2] . However, there is no entity specifically in charge of supervising PPP activity; this responsibility falls to the Ministry of Finance and Public Credit.
• General legal framework for PPPs in Brazil: Brazil is the regional leader in PPPs. Between 2014 and 2024, 223 projects were launched in various fields, such as roads, renewable energy, and waste management. In fact, following the "Odebrecht" scandal in 2014, Brazil undertook a restructuring of its market by encouraging the entry of medium-sized and foreign companies. Numerous public instruments have been put in place to support public-private partnerships, including the creation of a Project Support Fund to assist municipalities, a multi-year National Infrastructure Plan, an Investment Partnership Program (APPI) establishing a priority order for projects, and a Credit Acceleration Program for the period 2023-2027. The legal framework is governed mainly by a 1995 law[3] and a law of December 30, 2004[4] supplemented by a law on public procurement and tendering adopted in 2021[5] . Regulations specific to each federal state may also apply. The National Bank for Economic and Social Development is the main lender in PPPs, although its role is tending to diminish with the emergence of other investors.
• General legal framework for PPPs in Argentina: Argentina has a strong tradition of direct state intervention in the markets, to the detriment of mechanisms that enable private investment such as PPPs. However, for budgetary reasons, the state has less capacity to invest in infrastructure on its own. In this context, Javier Milei's presidency could lead to greater support for public-private partnerships, but no significant developments have yet been observed, except for the changes introduced by the 2024 fundamental law on the concession- regime[6] . In terms of the institutional framework, the Undersecretariat for Public-Private Participation plays an important role in promoting and implementing PPPs.
• General legal framework for PPPs in Chile: Chile is very active in the area of PPPs, with 52 projects implemented between 2014 and 2023. The country has a very liberal legal framework, inherited from the Chicago school of economists. It consists of a general law, adopted in 2017, which modernizes the applicable concession regime by creating a General Directorate of Concessions responsible for developing multi-year project planning[7]. Although Chile underwent a major political change following the election of Gabriel Boric on March 11, 2022, the failure of the constitutional referendum sought by his party leaves a very liberal constitution in place.
• General legal framework for PPPs in Costa Rica: Costa Rica's legal framework is based primarily on a general law on concessions dating from 1998[8] and a regulation on public-private partnership contracts published in 2016[9]. Two entities play an important role in this regime: the National Concessions Council, which regulates PPP projects, and the PPP Unit, which reports to the Ministry of National Planning and Economic Policy and provides technical support to the National Concessions Council on PPP contracts.
• General legal framework for PPPs in Honduras: In Honduras, 11 PPP projects took place between 2014 and 2023. The country has had a specific legal framework since the adoption of the 2010 legislative decree promoting public-private partnerships[10]. At the institutional level, PPP supervision is mainly carried out by the Superintendencia de Alianzas Público-Privadas (SAPP), an autonomous authority created in 2010. At the same time, a Fiscal Contingency Unit attached to the Ministry of Finance, created in 2014, is in charge for monitoring financial commitments related to PPPs.
• General legal framework for PPPs in Puerto Rico: In 2009, Puerto Rico adopted a law on public-private partnerships[11], creating a specialized authority attached to the government and responsible for managing them. This law establishes a legal framework organized around several modalities. First, any public entity considering to enter into a PPP with a private entity must submit the project to the authority responsible for public-private partnerships. The latter is then responsible for determining whether the PPP is the best solution for implementing the project. Once signed, the contract is submitted to the governor of Puerto Rico for final approval. In addition, the law pushes PPPs as a matter of public policy and authorizes departments, agencies, public enterprises, and municipalities to participate in them.

Local approach, expert opinion

Nicaragua – Roberto Bernad, ECIJA Nicaragua

"Any decision to develop a public-private partnership project must be based on a sustainable economic and fiscal analysis demonstrating the state's financial capacity to meet its future payment obligations."

Key points to remember:

• Although Nicaragua does not currently have any active PPP projects, it has a law adopted in 2016[12] that covers the entire project cycle: structuring, tendering, awarding, execution, and termination. It guarantees a transparent and competitive procedure and requires the online publication of information relating to the contract. It also provides for dispute resolution mechanisms through mediation and arbitration.
• Articles 4 and 8 of the law require a priori financial sustainability analyses of the project, particularly that of the State. Certain and contingent liabilities must be recorded in the contracting institution's budget for the duration of the project. The Ministry of Finance and Public Credit plays a central role in the control and budgetary viability of projects.
• The project beneficiary must establish a Nicaraguan company with a single purpose, including the words "APP" in its name. Its purpose and duration will be determined in the tender documents in accordance with the characteristics of the project and the commercial legislation in force.
• The selection of projects, as provided for in Article 12 of the law, is carried out according to a rigorous procedure. Projects must be compatible with the country's development objectives and are subject to economic, environmental, and sustainability analyses, coordinated by the General Directorate of Public Investment.
• The Ministry of Finance and Public Credit is responsible for supervising projects during the implementation and operational phases. A project inspector appointed by the ministry may propose fines or penalties to be imposed on the company by the DGIP, subject to the principle of proportionality.

Brazil – Roberto Cordoniz, ECIJA Brazil

“We have a very advantageous tax regime that applies to certain regions of Brazil, such as areas experiencing economic hardship.”

Key points to remember:

• PPPs in Brazil have existed since the introduction of the 2004 federal law[13] . Various sectors are open to PPPs, such as urban transport, highways, health, and energy.
• PPP contracts must have a duration of 5 to 35 years. They must exceed a minimum financial threshold set at 10 million reais, or €1.5 million. They are subject to a public tender process in accordance with a rigorous legal procedure that guarantees free competition.
• In terms of taxation, the standard tax regime applies to PPPs. However, an advantageous accounting mechanism has been put in place: public funding (viability funds) received by the private partner is taxed at the time the services are provided, rather than at the time of construction, thus allowing the tax deferral of infrastructure-related revenues until the operational phase.
• While there is no tax regime applicable to PPPs, there is a special incentive scheme for the development of infrastructure projects called REIDI. It provides tax exemption on the partner's investment expenditure, i.e., on imports and local purchases of goods, materials, and services related to infrastructure investments.
• Private partners are subject to corporate and income tax, as well as social security contributions on gross revenue.
• There are also regional tax advantages available to PPPs, particularly in the Sudam and Sudene regions. A 75% reduction in corporate income tax is available for projects located in economically disadvantaged regions, subject to obtaining authorization from the Federal Union for such location.

Argentina – Andres Chacra, ECIJA Argentina

"The new government's main objective is to use private sector investment as an engine for growth."

Key points to remember:

• Since December 2023, Argentina has had a libertarian government whose goal is to reduce public spending and stimulate growth through private investment. The government is therefore focusing on regulating the economy and streamlining and simplifying business procedures.
• Two schemes enabling public-private partnerships are currently in place in Argentina. On the one hand, the traditional public works concession scheme is used for infrastructure such as roads and ports. Since a recent legislative amendment, the initiative for a concession can come from a private company[14].

  On the other hand, a specific law passed in 2016[15] allows for the establishment of PPP contracts. All projects developed under this law are declared to be of national interest, which gives them a certain degree of tax protection. Under PPPs, obligations can be guaranteed by a trust, which is not the case with concessions. However, this second regime is rarely used in practice, with concessions remaining the preferred option in Argentina.

• Procurement procedures encourage the direct or indirect participation of small and medium-sized enterprises and the promotion of domestic industry in the supply of goods and services. Contract documents must include provisions requiring that at least 43% of the goods and services used in PPP projects must be of domestic origin.
• There is no specific tax treatment for this regime. Co-contractors are subject to national, provincial, and municipal taxes as provided for by law.
  • At the national level, they are subject to corporate income tax, capped at 35%, and dividend tax, at 7%, as well as VAT currently at 21%, wealth tax, and tax on bank credits and debits.
  • At the provincial level, they are subject to, among other things, sales tax and stamp duty, which may, however, be exempt in certain provinces.
  • At the municipal level, PPPs are subject to health and safety inspection tax, among other things.
• However, Argentine legislation provides for advantages such as the early refund of VAT on goods or infrastructure works included in the project, accelerated depreciation of certain assets, deferred taxation of income in the year the project becomes due, tax exemptions for trusts, and possible compensation in the event of a legislative increase in the tax burden after the contract has been signed.
• The government has also introduced a new incentive scheme for large investments (RIGI) for projects worth at least $200 million. It offers significant tax and customs benefits that remain stable for 30 years. Eligible sectors include forestry, tourism infrastructure, technology, energy, oil and gas, steel, and mining.
• While both schemes (RIGI and PPP) aim to encourage private investment in strategic projects in the country, the state does not participate directly in the execution of projects under the RIGI scheme.

Puerto Rico - Aniris Castellano and Alejandro Lopez-Rodriguez ECIJA Puerto Rico

“Act 60, or the ‘incentive code,’ is an excellent tool for economic development, consolidating and codifying the island’s tax legislation into a single code.”

Key points to remember:

• Puerto Rico is not part of the United States and its residents are therefore exempt from US federal tax. This framework offers an attractive tax opportunity for local and foreign companies and investors.
• Act 60, the "incentive code"[16], brings together all regulations into a single code, simplifying the application of tax benefits. It targets priority sectors such as exports, services, finance, tourism, green energy, agriculture, and creative industries. PPP projects can benefit from this favorable tax regulation.
• Entities eligible for this legislation may submit a request for a tax decree to the Puerto Rico Department of Economic Development and Commerce. The term of a decree is 50 years, with an option to renew for an additional 50 years, thus ensuring long-term tax stability.
• The tax benefits applicable under this law may include a reduction in the tax rate on net income from eligible activities to 4%, a total exemption from tax on dividends, an exemption from personal property tax and municipal license fees, and a total exemption from excise tax on certain items acquired for continuous use.
• Certain sectors may benefit from tax credits, such as research and development. Subsidies are also available to stimulate key sectors such as tourism, manufacturing, and creative industries.
• The specific framework for PPPs is governed by Law No. 29 of 2009, which created the Public-Private Partnership Authority[17], known as "P3A" or "P3 Authority." It is responsible for identifying and authorizing projects in coordination with the subsidiary of the Government of Puerto Rico Development Bank.

Chile – Maria Jesus Palacios, ECIJA Chile

"Chile is always striving to promote investment, even though we do not have a specific PPP policy regarding tax deductions or tax benefits."

Key points to remember :

• The 1990s were decisive for the emergence of PPPs in Chile. Faced with an infrastructure deficit and limited public financing capacity, the government established an ad hoc public institution, adopted investor-friendly legislation, strengthened legal certainty, and introduced a more balanced distribution of risks between the public and private sectors.
• The Ministry of Public Works (MOP) is the central authority for PPPs. It is responsible for publishing regulations, technical standards, and guidelines, as well as for monitoring the proper execution of contracts.
• Other institutions are involved on an ad hoc basis in the implementation of projects, such as the Comptroller General, who verifies the legality of contracts, or national economic prosecutors, who are called upon in cases of anti-competitive practices.
• PPPs are present in a wide variety of sectors, such as urban infrastructure, highways, hospitals and health centers, energy, water, education, ports, and prisons. In general, these projects aim to improve the quality of public services.
• The standard duration of concessions is between 20 and 30 years, covering the construction, operation, and maintenance of the infrastructure.
• There is no specific tax regime for PPPs. Consequently, PPPs are subject to general tax legislation with corporate income tax at 25% or 27% depending on the applicable regime, VAT at a standard rate of 19% and withholding tax at 35%, bearing in mind that adjustments are possible depending on the international tax agreements in force. Also, local taxes may also apply.
• There are no specific tax incentives for PPPs, but they can benefit from general mechanisms such as accelerated depreciation of assets, tax credits for research and development, benefits applicable in remote areas, or VAT exemptions on specific equipment or on the transfer of concession rights.
• Chile, despite the absence of a dedicated framework, continues to encourage investment, including through ad hoc support measures. Incentives may also apply depending on political priorities, as may be the case for environmental projects.

Costa Rica - Mariela Hernandez, ECIJA Costa Rica

"Costa Rica has extensive experience with PPP contracts: although our country is very small, we have carried out very successful PPP projects."

Key points to remember :

• Costa Rica does not have a specific legal framework for public-private partnerships. The country relies on several separate sectoral texts that have been adopted gradually since the 1990s. These texts provide a framework for contracts based on various approaches, including BOT (build-operate-transfer) contracts in the energy sector and public infrastructure concessions. To date, five BOT contracts are currently being implemented, including hydroelectric power plants and wind farms.
• The Public Infrastructure Concessions Act, enacted in 1998[18] , is the main legal basis for concessions in the country. It has enabled the implementation of several large-scale national projects such as the extension of Route 27 between San José and Caldera, the Caldera and Moin port projects, and the Juan Santamaría and Daniel Oduber international airport projects.
• With regard to the taxation of PPP contracts, tax advantages granted to both concessionaires and their subcontractors are provided for in the Concessions Act, including:

• Exemption from import duties and excise duties on goods imported or purchased locally, provided they are incorporated into the infrastructure or necessary for the provision of services.
• A temporary import regime for construction equipment, involving the suspension of import duties.
• Accelerated depreciation of infrastructure investments, insofar as the assets are capitalized for the entire duration of the concession.

• The law also allows concessionaires to borrow up to 80% of construction costs and to encumber the concession or assign it as collateral to obtain financing.
• For BOT projects, companies benefit from the same tax regime as public enterprises, including exemption from import duties and excise taxes on equipment necessary for energy production and distribution.

Conclusion by Professor Renaud Bourget

✔️ Since the 2010s, there has been a marked improvement in the legal frameworks for PPPs in Latin America. Corruption cases have led to the adoption of regulations strengthening transparency, accountability, and fiscal control of PPP projects through specific agencies.

✔️ The Inter-American Development Bank plays a central role in this system, financing numerous PPP projects while ensuring their evaluation through a common methodology developed by its economic and legal experts. This methodology, which includes the Infrascope tool, harmonizes the analysis of the political, economic, social, and legal frameworks of PPPs in different countries.

✔️ This common approach has promoted gradual convergence of regulations governing public-private partnerships in Latin America. Although the role of the executive and legislative branches may vary from country to country, the legal frameworks show regional consistency and harmonization both in the vocabulary used in the various texts and in the measures governing PPPs.