Regional governments will increase their capacity to finance their investments through the works for taxes mechanism

The Ministry of Economy and Finance (MEF) published Supreme Decree 011-2024-EF that modifies the Regulation of Law No. 29230, Law that promotes regional and local public investment with participation of the private sector, known as the Law of Works for Taxes (OxI). This regulation includes the changes to the Tax Works Law approved by Law No. 31735, Law that modifies Law No. 29230, and Law No. 31912, Law that approves supplementary credits for the financing of higher associated expenses to economic reactivation.

The regulated measures will allow more regional and municipal governments to participate in the OxI mechanism to execute investments, counting on more sources of financing, facilitating and favoring their effective and rapid use.

Among the regulated changes are the characteristics and conditions for the issuance of the Regional and Local Public Investment Certificate – Public Treasury (CIPRL) and the National Government Public Investment Certificate – Public Treasury (CIPGN), and the possibility that these Certificates can be applied to other tax obligations, in addition to the Income Tax, the collection of which constitutes income of the Public Treasury and which is administered by the National Superintendence of Customs and Tax Administration (SUNAT).

Likewise, provisions are incorporated to prioritize projects that aim to reduce anemia and child malnutrition, as well as the execution of rural housing construction activities in areas of extreme cold and frost declared by the Government; The requirements are established for registration, renewal of registration, modification and updating of the Registry of Private Supervisory Entities and Supervisors for OxI; and, rules are established for dispute resolution procedures and actions for the gradual certification strategy of regional and local government servants in matters of OxI.

In addition, the incorporation of the Regional Compensation Fund in the determination of the maximum annual capacity limits for the issuance of CIPRL for regional governments is regulated. In this sense, in application of Law No. 31912: (i) the use of FONCOR resources as a source of project financing for regional governments that use the OxI mechanism is regulated and (ii) the use of the FONCOR for the payment of debt services as an official credit operation. The extraordinary update of the maximum annual capacity limits for the issuance of CIPRL for Regional Governments that were approved by Supreme Decree No. 138-2023-EF is also provided. This update will be published no later than February 29, 2024.

In the case of regional governments, the amounts of FONCOR will be allowed to be incorporated into the calculation of the maximum annual capacity limit, which during the year 2023 amounted to 5,500 million soles and for the year 2024 it exceeds 8,000 million soles; which will have a positive impact on the reactivation and enhancement of sustained economic growth, as well as the generation of employment and greater well-being in the population at the national level.