View Full Version : URGENT - Warning on capital gains taxes when foreigners sell their properties
This notice was on Craigslist. Does anyone know anything more about this. Sounds like it could be a real problem for expats who buy local property.
__________________________________________________________________
NOTICE:
BE CAREFUL, Americans are being FINED huge amounts when selling!
Reply to: hous-226252253@craigslist. Org
Date: 2006-10-26, 10:39PM ART.
I just thought I'd WARN all you Americans who are buying properties in Argentina. The local tax authorities, (AFIP) are applying ALL KINDS of fines and "surcharges" to foreignors selling there properties. It is EASY TO BUY, all you need is a "CDI", which takes 2 hours to get. BUT, when you go to sell your property. The local AFIP inspector holds onto your title, AND the funds, and starts a LENGTHY legal process, taking up to 6 months, before they "free" the sale of your property and give you "what's left" of the sale.
I am NOT selling anything. Just giving ALL of you a warning. I wrote the procedure on my website, you should read it! www.hereicomeargentina.com
Just 2 weeks ago the "AFIP" sent out a bulletin to ALL "escribanos" and accountants giving them the detailed requirements for foreignors to sell. And it is LONG and requires LOTS of red tape. And added TAXES. JUST because you are foreign!
Hey, thanks for the info Ricardo. I've only been here for a few weeks, but was thinking of buying something later on. Cheers.
Sounds like bullshit to me. To my knowledge, you receive the full sales proceeds in US$100 bills the second you hand over the title. If AFJP wants to claim something on you later on then best of luck to them. They're not like the IRS, an entity I deem worthy of respect regardless of how much you may hate them. AFJP is weak and corrupt just like almost every other administrative/judicial organization in Argentina.
If such a bulletin was sent out to all escribanos then most of them will be willing to look the other way for a few hundred pesos or less. They "certify" real estate transactions for fractions of their true value every day in order to lower assessed tax values. The titles I've seen have had ridiculously low stated transaction values, probably 10% of what was actually paid in front of the escribano 10 or 15 years ago when the property last sold. You can easily find escribanos that will certify anything, and brazenly evading taxes is their specialty.
BTW, I'm fairly certain that capital gains tax does not exist in Argentina.
Thomaso276
10-28-06, 08:48
Concur: I did a search on AFIP and could not find any recent bulletins. No news from the papers. As well these may be moves regarding people who own these apartments for rental purposes and they are avoiding taxes on their "winnings" (ganacias) Gov't knows that many of these foreign owned apts are for short term rentals and foreigners are not declaring them.
I will be talking to my escribano soon. When I gain permanent residence status this may be a moot point.
Moore's explanation sounds logical. If the authorities are trying to assure that apartment owners who are foreigners and rent their properties, pay the appropriate taxes on the rental income, they are in the right. Whether the system lets them do it effectively is another matter given the nature of government management here.
The notice seems to misinterpret how selling a place actually works, assuming it was not used as a rental unit or cannot easily be proven that rental income was ever earned.
Thanks.
Hello Everyone,
Sorry to burst everyone's bubble, but it is ALL TRU. Sad to believe, and some of you will refuse to accept it, but the AFIP is cracking down on EVERYONE, not just foreigners. Here is a "rough" detail of what they do and HOW: (remember that not EVERY local AFIP inspector will apply ALL the same fines and penalties, but the following is a "rough" outline of what they usually do)
When the "foreigner" goes to sell, the Escribano is LEGALLY obligated to submit a special "PERMIT" that the foreigner must fulfill. The "sale" is actually PUT ON HOLD why the local inspector does a THOROUGH audit on the history of the property.
I've seen properties take UP TO 6 months to sell, JUST BECAUSE of this inspection.
Here's what the AFIP inspector looks at:
The ORIGIN of the Funds:
He starts with the ORIGIN of the funds for your purchase. Did you bring the money LEGALLY into the country, passing it through the requirements of the Banco Central? MANY Americans come here, and go to exchange house, get their money and buy the properties WITHOUT ever declaring the origin of the funds or proving how the money was made. I am NOT SURE what the exact penalty is here, but I do know they are asking this question and giving fines!
"Impuesto a los Bienes":
They then look to see if you have paid your annual tax, called, "Impuesto a los bienes". This is a sort of a luxury tax and is usually around 0.75% of the "declared value". MANY Americans confuse this tax with the "ABL" tax paid 4 times a year, (usually received by mail) They are two different things! The yearly tax, "Impuesto a los bienes" usually requires a a document to be filed, by your tax accountant. If you never paid this tax, you can "catch up" at the time of the sale, but you will still need an accountant to prepare and present the docs for you.
Rental Income:
It's not over yet! The AFIP then looks at your passport and asks you, "Did you stay in the property, or rent it out?" If your passport shows you were out of the country, then you will BE REQUIRED TO CLAIM RENTAL INCOME. Even IF you didn't rent it. They will "presume" you did and add some "figures" to your fines and penalties. THIS is an area I CANNOT give exact numbers because I have not met an accountant here that knows the actual answer! (And I've talked with several! They are all taking about it, but the general consensus is that EACH individual AFIP Inspector comes up with his own numbers!
Declared Values on Titles:
The saga continues: The AFIP then checks the original DECLARED value, (what you declared in your title when you first bought it) and compares it with the actual values of properties in that neighborhood. And here, once again, I cannot give you exact numbers of fines or penalties. BUT, I know they are sometimes "adjusting" those figures, causing you to have an increase in both the "Impuesto a los Bienes" AND the "Impuesto a los Sellos", (a "stamp" tax required when bought or sold)
O. K. You can breath now. There are more details, but I am having a hard time getting all the information because it is not consistent between one AFIP office and another. The accountants have access to the information but there is SO much of it that not all can handle it.
Now, if you are actually STILL reading up to this point, wow, congrats! I am the original author of this notice I published on Craigs List. I followed a link to this website to see what everyone was talking about. I didn't know many of you were discarding it as trash and untrue, so I thought I'd ASK A QUESTION TO ALL OF YOU; If you think it is "bull----", then PLEASE TELL ME, if I am wrong, then what information do you have?"
Let me clarify what I said. There are no capital gains tax in Argentina, but thats not the problem. What I am saying is there are all kinds of other fines and penalties that they are applying, ESPECIALLY for foreigners! And they all add up!
Thomaso276
11-05-06, 01:21
Chas: good post and info. My original post was regarding the capital gains tax point, which you cleared up. Most of the issues you discussed have been the topic of many newstories lately. AFIP is going after locals as well, regarding declared values which according to some stories is less than 50 percent of the true sale price. It must have been some system here for years with folks paying 60g USD and the title saying 30G. Did they not think it would eventually boomergang?
When I purchased, I signed a form at the closing saying the money came from my savings (which it did) Depending on the sale price you could simply claim to have brought in under 10g USD everytime you came into the country (6 trips is 60 thousand) as well, you can withdraw dollars from ATM's. Finally, I do not believe it is illegal for a friend to bring in dollars (under the 10g) and they can return with a check to the USA. I guess this explanation would only apply to those who come here alot and have been around for a couple of years.
I hear different things regarding the Impuesto a los Biene. Can't seem to find an accountant who can give good advice on this. If you have one you can PM me and I will give him my business.
Rental income. I agree wholehardily. The gov't believes (with good reason) that many of these foreign (and local) purchases are being used for investments and short term rentals. I doubt many landlords are declaring this income to AFIP. Actually, I think most of the short term rentals are owned by Argies. They will never sell them so the foreigners will suffer to make up the shortfall.
The point on declared value is well taken, but in my case (and a friend who also bought) our numbers are accurate. Misstating the sale price by 40-80 percent seems to be inviting trouble. Like the guy who presents a bill of sale for a 20g corvette as 2g to avoid a few bucks at the tag office. Doomed to fail.
There is a stamp tax exemption for a first time, full time residence bought in Capital Federal (according to my sources) however, the tax may be applied in the Province of Buenos Aires (Vincente Lopez, San Isidro, etc) I had been advised that any other apartments or home one might buy would be subject to the stamp tax with the city limits.
I just read another web page which lists many factors for buying here. Their page has been updated since I last read it to reflect that your points are accurate. AFIP has many rules for foreigners (and locals) selling, some of which I do not think the owners can meet. Bottom line is you can sell but the gov't wants a chunk of your profits.
Looks like the gov't will not allow a recession in the housing market by preventing alot of sales! When this info gets out and more foreigners find it very difficult to sell without giving up alot of their investment gain, new sales will decline - it doesn't take long for a few horror stories to get international exposure, especially when dealing with Argentine economics. Amazing how a month ago the Prez was in NYC telling everyone it is a great place to invest while back home the wheels were turning:
Give us your money so we can grow.
You won't get it back until we say so.
Buying and selling is your inherent right.
Just understand we'll keep it tight.
Puerto Madero, Recoleta, Palermo.
$3000 a square meter is perfectly correcto.
Chas, thanks for the info. Can you tell us how much some of the fines are? Are we talking 5g USD fines for not going through the central bank and using an exchange house?
Rental income. I agree wholehardily. The gov't believes (with good reason) that many of these foreign (and local) purchases are being used for investments and short term rentals. I doubt many landlords are declaring this income to AFIP.If one does go the legal route and declare rental income of say US$ 5,000 to 10,000 a year (and no other income from outside Argentina) what rate of tax will result? Even if the tax bracket is 30% or 35% , are there exemptions or deductions to reduce the amount payable?
As for bringing in money through the central bank, the policy rationale as explained to me by a casa de cambio is to avoid "hot money" inflows and outflows, as in the events of 2001. So 30% withholding is applied on short-term investments held less than a year -- for example, bonds sold 6 months after purchase by a foreign investor. For good reason, the authorities don't want hedge funds distorting Argentina's small capital markets by piling in together, and then bailing out en masse at the first sign of trouble.
After a year, foreign capital is supposed to be free to leave without penalty. Of course, that may not mean a thing to an AFIP inspector.
Funny, an Argentine lawyer told me there were ways to avoid bringing in money through the central bank. True, but perhaps inadvisable. As far as I know, the only disadvantage of bringing in funds legally through the central bank is that the casa de cambio exchanges your US dollars into pesos, then back into US dollars for the cash real estate transaction. Thanks to bid-ask spreads, the back-to-back exchanges can cost you 1% to 2% of the total amount. If you don't ask in advance, the casa de cambio will take as much as they think they can get away with. They will also ask you to sign a form declaring the "clean" origin of the funds, and to provide a copy of the statement for the overseas account from which the funds were drawn.
StrayLight
11-05-06, 13:28
"Impuesto a los Bienes":
They then look to see if you have paid your annual tax, called, "Impuesto a los bienes". This is a sort of a luxury tax and is usually around 0.75% of the "declared value". MANY Americans confuse this tax with the "ABL" tax paid 4 times a year, (usually received by mail) They are two different things! The yearly tax, "Impuesto a los bienes" usually requires a a document to be filed, by your tax accountant. If you never paid this tax, you can "catch up" at the time of the sale, but you will still need an accountant to prepare and present the docs for you. Here's a question for you.
An Argentine accountant told me last year that the "impuesto a los bienes" is computed as follows.
The total value of your property is divided into 80% for the building or apartment, and 20% for the land on which it sits.
The first year, you pay the 0.75% on the total amount that you paid.
Every year thereafter, the value of the building or apartment is decremented by 2% , and that after 50 years (if you keep it that long) you are only paying the tax on the land.
Can you authoritatively confirm or discount that?
Thanks,
SL
All of you have LOTS OF GOOD information. Maybe together we can publish a book! Tomorrow I'll ask my account for the exact formula that is used to calculate "Impuesto a los bienes". It is, I think, just like what is written here in this thread.
Also, when tranfering funds INTO Argentina using the correct, "according to the rules method", YOU WILL loose more $$ by their requirement of converting it to pesos. And then back to dollars. AND they told me that the 6 month waiting period on 30% of the transfer applies to investments OTHER than the purchase of properties. After5 you have good information.
Then, as for declaring rental income, I'll get that tomorrow. But I remember a tax something like 21% of any monthly amount, minus a small exemption you are allowed. This is an area I have been talking with my accountant. He says "one" can just make a rental contract with a friend, for a less amount. BUT, SO MANY Argentines have 2 properties. And don't rent either one. So, my question is. After how many properties does one have to declare rental income?
As for the amounts of fine and penatlies. I'm getting closer! I know 2 that are selling. Soon, I'll have their numbers. ALso, my bother in laws, (argentines) just bought a property of which one of the sellers was a Uruguayan. The purchase TOOK 6 months while they inspected "the hell" out of the property. Applying fines and penalties TO the Uruguayan. (at lest we can assume it's not an "anti-American" thing.
But, it's true what was mentioned in this thread. What will this booming market do if ALL OF A SUDDEN there are NO foreigners coming here to buy? I think they're going to miss us, deeply!
Woops I forgot. Thomaso. Good info. And dam good poetry!
Thomaso276
11-05-06, 20:50
Cascomus: if your accountant wants some business maybe he will permit his contact information to be posted here, as it may open up some new clients for him. I would be interested in hiring him as long as he does not have a gringo price vs. The local price for his services.
Thanks. Tom
Member #1036
11-05-06, 21:16
After asking a bunch of you guys and some others that even live there, finally somebody can verify this tax. I had a doubt when told about this but at least this clarifies some things and hopefully my deal continues forward without some of the problems mentioned here.
Good report.
You people who buy "investment" real estate in Argentina ought to get what you're buying, and you ought to get it good and hard. Rent, if you have a lick of sense in your (big) heads.
It is true, that the central bank withholds 30% of every (legal) money transfer going into the country, with a few exemptions. One of them is buying property. To get this exemption, the amount transferred has to be exactly the amount stated in the escritura, and it has to come from a foreign account owned by the buyer. The withholded 30% are released after a year. Whatever the reason for this might be, it is a real ***** if you have started a business and need money to get it up running through the first years.
The income tax rate for non residents is generally a flat 35%, no progression. Residents have a progressive tariff starting I think around 10% and going up to the same 35%, plus a variety of deductibles. As a foreigner, you have no deductibles - the law however assumes that only a certain percentage of your gross income is taxable net (and the rest deductible expenses) and this percentage in the case of real estate leases is 60%. 35% * 0.6 = 21% - the figure mentioned in another post, your effective tax rate. And, according to most double taxation agreements, including the one between my country and Argentina, income created from real estate lease is only taxable in the country where the property lies. 21% is less than half of what I pay back home.
So, why not just pay that tax and be happy? And have no problems when selling your property at a later time?
Just 2 centavos.
El Alemán
StrayLight
11-06-06, 12:03
You people who buy "investment" real estate in Argentina ought to get what you're buying, and you ought to get it good and hard. Rent, if you have a lick of sense in your (big) heads.Shut your eyes and listen closely. You can almost hear...
You people who buy "willing" women in Argentina ought to get syphillis, AIDS, herpes, and whatever else is coming to you, and you ought to get it good and hard. Get married and stay monogamous, if you have a lick of sense in your (big) heads.LOL!
SL
SL,
How much do you think the typical Yanqui investor in BsAs real estate makes on a triple net basis?
StrayLight
11-06-06, 12:55
SL, how much do you think the typical Yanqui investor in BsAs real estate makes on a triple net basis?Not only do I have absolutely no idea, I don't even know what I "triple net basis" is.
But I do know a preacher when I hear one. LOL!
SL
Not only do I have absolutely no idea, I don't even know what I "triple net basis" is.
But I do know a preacher when I hear one. LOL!
SLI'm glad we cleared this up. If you don't know what triple net is, you have no business commenting at all about real estate transactions.
StrayLight
11-06-06, 13:15
I'm glad we cleared this up. If you don't know what triple net is, you have no business commenting at all about real estate transactions.My comment was about a member monger wishing ill on his fellow mongers. A very nice sentiment.
Furthermore, having bought property in Argentina, I have every business commenting about real estate transactions here. I'm guessing that I know a hell of a lot more about them than you do. Perhaps what I don't have any business commenting on is the investment value of purchasing real estate here. But investment is not why I bought a place here, so you'll get no argument there on my part. Nonetheless, from what I've heard I tend to agree with you that it's not such a good idea. But I'd not wish ill on my fellow mongers who have chosen to do so, any more than I'd want a friend wishing my dick would fall off from fucking hookers.
SL
Stray light,
I just talked with the accountant and she said the impuesto a los bienes is between 0.5 and 0.75% , yearly, and it pretty much goes up according to the "evaluacion fiscal" (fiscal value) that the province tells you each year. She said it almost never goes down. And the formula you mentioned, I think is confused with the deductions, (long term) you can "capture" on a business investment for a "SRL".
The impuesto a los bienes is NATIONAL. Neither province nor capital. Everyone pays.
Here's a question for you.
An Argentine accountant told me last year that the "impuesto a los bienes" is computed as follows.
The total value of your property is divided into 80% for the building or apartment, and 20% for the land on which it sits.
The first year, you pay the 0.75% on the total amount that you paid.
Every year thereafter, the value of the building or apartment is decremented by 2% , and that after 50 years (if you keep it that long) you are only paying the tax on the land.
Can you authoritatively confirm or discount that?
Thanks,
SL
Thomaso,
My accountant is a VERY reliable and trustworthy guy from the town of Chascomus, 1 hour from the city. We worked for the same factory 10 years ago and now he has his own practice. Still doing all the accounting for the entire family of my wife. He said he would be glad to handle cases I bring him. But I think it would have to be by phone as a visit to his office is a bit of a ride. He comes to the city often, once a week. And all our paper work we send with the couriers.
But I'd not wish ill on my fellow mongers who have chosen to do so, any more than I'd want a friend wishing my dick would fall off from fucking hookers.
SLTrue enough, and I see the basis for your point. However, I don't think it's wishing ill on people to warn them against doing something pretty foolish. Which was why I used the hyperbole that I did.
By the way, "triple net" is the operating profit one makes from a real estate investment net of mortgage, net of taxes, and net of maintenance costs. In order for an investment like this to make sense, it ought to be well above the amount one could make from a safe investment, such as bonds, CDs, and the like.
StrayLight
11-06-06, 19:57
By the way, "triple net" is the operating profit one makes from a real estate investment net of mortgage, net of taxes, and net of maintenance costs. In order for an investment like this to make sense, it ought to be well above the amount one could make from a safe investment, such as bonds, CDs, and the like.Thanks. I always enjoy learning something new.
I rented an apartment in Recoleta for a spell, and the woman who owned it told me that from an investment point of view, she could have done much, much better investing her money in something along the lines you mention. For her, it was simply an issue of wanting to have an apartment she could go to from time to time to get away from it all.
I also have a porteno friend who lived in Washington DC at the same time I did, and who saw (and profited from) the phenomenal rise in housing prices a few years ago. He understood that DC was my most recent frame of reference for real estate investing, and warned me in the clearest possible terms not to buy something here for any other reason than to live in it.
Those are my fundamental data points on real estate as an investment here. I personally have no thoughts about owning property here other than from a quality of life point of view.
SL
The AFIP, (Argentinas "IRS") is now claiming that by next year they will require ALL purchases of properties to be paid by "official" bank transfers, (wired or check). Instead of the common method of taking out stacks of 100 dollar bills and counting them one by one. This would mean that MOST AMERICANS will have a HUGE obstacle when trying to buy, since most Americans are doing the wire tranfers of money to "under the table" exchange houses.
The AFIP wants to gain more tax revenues and try to stop the "under-valued" prices put on the titles.
The Argentines will find an easy way around all this. But HOW WILL FOREIGNERS BUY properties if they have to go through SO MUCH red tape to transfer money? Anyone have some actual experiences to share?
The government indirectly and unintentionally legitimized small parts of the economy via the corralito.
The legitimization of Argentine real estate transactions, however, is about as likely as a communist governor of Texas.
The way around it is pretty simple, pay part by wire (taxable) and under the table, ps I have sent at least 20 large transfers to banks with no deductions for taxes at all, not once.
Is it feasible to incorporate locally to bypass some of these issues? I know that in Costa Rica and other places it is a viable option.
I thought I'd make a comment about what I have to go through while buying a property here in Buenos Aires FROM English owners.
The first step, which has started about 30 days ago, was for the English to get a permit from the AFIP. They left a power of attorney to their accountant and he submitted the request right away. They took 3 weeks to give the "o. K." to sell. We are putting the actual REAL price on all the paperwork, so maybe by seeing a rational figure, the inspector didn't take so long. NOW, the "red tape" has slowed down. Thanks to the effect of January, everyone must be on vacation, but supposedly from this point, we will submit all the paperwork to the AFIP and await the final approval. We are trying to do the "Escritura", (signing) in the first week of February. I will keep everyone posted on how this all goes. REMEMBER, this is pretty much what those of you who have purchased props will eventually have to go through. Better learn what you are up against ahead of time!
Paul
Americans who own real estate in Bs. As. Are a subset of those who travel there in the first place, and naturally tend to be pretty independent folks. For some reason, may of them do not seem naturally inclined to pay tax on rental property income. That is Argentine source income, supported by Argentine government infrastructure, and Argentina tax is plainly owed.
You might think the Argentine government inefficient, but that is no excuse not to pay taxes, particularly a country that you chose for your investment. You can deduct the amount of tax or get a credit (I don't know which, I am not sure if its VAT or income tax) against American taxes on the same income, assuming you are honest enough to report that income. I don't rent my place out but generally understand that the rates are low compared to US tax rates.
Yes, AFIP may hold up transfer of funds if you have declared no income. Yeah, you have to prove you were using it yourself (use your passport to show when you were here) or that it was empty ($ 0 or tiny electricity bills will help; save them) This process is a response to fairly open and obnoxious foreign non-compliance with tax laws, and in my opinion it is no worse than having to support deductions with receipts in the USA. Many countries inclduing G-8 members impose restrictions on payments out of country in order to stop tax evasion.
As to requiring wire transfers, that will be great. The counting of $ 100 bills and then moving them by armored car is a pain in the neck and a nerve-racking way to close deals. If it stops underreporting of transfer price so that a comparatively low annual tax of 0.75% of purchase price can be effecitvely collected, more power to them. This 0.75% rate is lower than tax rates in most US cities, I believe. More important for foreign investors, this will likely create demand that will lead banks to make the transfer process practical, even if they act in a conspiracy to hold the line on currency movement / conversion fees or even increase them.
Foreign investors moved funds through private banking houses or by suitcase or whatever because the bank system was cumbersome and unreliable, and I am informed that it is already much better and easier for foreigners to work with. If we lose 1 or 2% in the process, so what. That is in effect a trivial tax on investment.
IMHO all of this relates to legitimate government control of tax revenue and funds transfer, and does not indicate an increase in the chance of expropriation. [[Others may differ, I view expropriation as extremely unlikely for cultural and global economic reasons.]]
The sky is not falling.
Thomaso276
01-13-07, 23:56
HF, I agree with your assesment, but want to point out that AFIP started targeting the Argies a couple of years ago as they were the most agregious offenders of not paying taxes and skirting all normal rules of property investment. In fact there are constant reports about the Gov't increasing tax collections over the past three years, something Kirchener pushed for upon his election.
I think alot of foreigners did not comply simply because their advisers (real estate, lawyers) told them not to because the system was broken and nobody cared.
PS: got a letter from my building administration about AFIP collecting info from their records, I think they are fighting the proposed system based on some constitutional, lack of authority under the law stuff.
See ya soon.
Thomaso:
Your points are well taken, too. AFIP is going after cheating Argies big time, not targeting us in particular. And a lot of basically honest foreigners bent rules or broke them because they were advised as you indicate, and apparently with some cause.
I suppose some penalties will be applied, and that is a risk that rule benders take in the first place.
I think people buying in now will be fine, I understand (for example) that it is not that hard to set up a bank account and transfer funds the official way now. A friend of mine just closed, using Banco Galicia as I recall.
HF
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