Nov
01
2010

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Help for Investors Selling & Buying Real Estate in Buenos Aires

Considerations when buying or selling land or real estate in Buenos Aires

In an earlier article, we advised on ARGENTINA TAXATION FOR OVERSEAS REAL ESTATE INVESTORS. You may well be looking forward to buying an apartment in Buenos Aires, we counsel you to think about the disposal of your assets even before the ink has dried on your title deed (Escritura).

Buenos Aires Real Estate - old and new

This means, if you are buying from an Argentine resident that you have sent your money through an approved bank. Moreover, ensure that you complete the transaction in “white”. Get used to the terms “white” and “black”, respectively meaning legal and illegal, the latter being generally acceptable to some agents and advisors. The black economy is vibrant in Argentina and evading tax is common practice.

You will need to comply with anti-money-laundering legislation and when later disposing of your assets, selling Buenos Aires real estate,  you may need to prove to the Argentine tax authorities (AFIP) the source of the funds to comply with anti-money-laundering regulations. Keep all documentation safe for the duration of the ownership of the property.

In addition, some realtors and indeed property sellers in Buenos Aires might want to involve you in undervaluing your property to avoid taxes, forget it, and refuse to pay money under the table.  There is no capital gain tax when selling a property in Argentina. Your profit on the sale of real estate assets do not attract tax, but some non-domiciled property owners may have to pay capital gain tax on their investments in their country of origin.

Just stop to think about that – it means YOU may pay a capital gain at home on your profits when selling real estate in Buenos Aires. Your profit would be greater if you agreed to undervalue the purchase your property in Buenos Aires and paid money under the table. Talk to Mainline Security about your tax affairs, get good advice and plan ahead to avoid tax legally – don’t evade taxes.

Please note, we meet with many accountants and real estate agents who do not know that in the City of Buenos Aires (Capital Federal) there’s what’s called “VIR” or “Valor Inmobiliario de Referencia” (Real Property Reference Value) that conditions the minimum a property can be sold for to stop sellers and buyers undervaluing property to avoid tax.

If you plan your investment for good annual rent returns and solid appreciation of your property’s value, you need to buy the right sort of real estate in the right barrios of Buenos Aires. Mainline Security can help you make the right choices – talk to us. Our clients do not evade tax and make healthy returns operating in the ‘white’.

If you do not take our advice, watch out, the AFIP get more sophisticated and able to find the tax cheats – Argentina is not the ‘wild south’ anymore, rules exist.

You are responsible for paying taxes the day you sign the escritura

The day you become a proud property owner in Buenos Aires, you become liable to pay various taxes on your real estate in Buenos Aires. As a non-resident property owner you will be required demonstrate that you have paid all taxes on your property asset before the Argentine tax authority (AFIP) will give you a certificate to allow the sale of your property to proceed.

It never ceases to amaze me how many foreigners do not know that, 1/ they should be paying taxes on rents received, 2/ they should be paying an annual tax on their assets.  When we tell them about tax of 35%, only 60% of that 35% attracting tax (therefore 21%), they often respond, ‘how will the AFIP know that I rented my property?’  The AFIP will ask how long you were owner-occupier, ask to see your entrance visa and exit stamp in your passport, check utility bills, etc, etc. Besides, they hold all the cards and if you were not in Buenos Aires and your apartment is used, they will know, and they will tax you as if the property were rented-out.

Unfortunately, you will not be able to apply for this certificate until you have ‘agreed a sale in principal’ and your agent has taken a reserva, and remember there can be long delays.  This may cause problems if your buyer is in a hurry.  Most important is choosing a knowledgeable agent who is able to manage both seller and buyer expectations by planning for delays.

If you are not 100% confident that your tax affairs are completely up to date, we suggest you speak to an accountant or Mainline Security as soon as you decide to sell real estate in Buenos Aires. Your accountant will seek the certificate from AFIP but they won’t issue or give clearance to sell your property if you owe them money.

I recently heard an Argentine agent tell a young diplomat to buy lots of property under AR 300,000 because such property does not require a transfer code “Código de oferta de transferencia de inmuebles” (COTI).

Even if a property has a value less than AR 300,000, an escribano will still require that a foreign seller has tax clearance from the AFIP, and the AFIP will assess your property for tax, and may request a copy of the reserva agreement, sometimes two independent valuations and lots of other information.

The AFIP will seek payment of taxes before they give clearance acceptable to an escribano to transfer a property.  Got yer!

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