Buying Real Estate

[cruizes]

I am considering purchasing two lots in a new development for future building of a house. Will this automatically make me eligible for permanent residency visa?

 

[steveinbsas]

I am considering purchasing two lots in a new development for future building of a house. Will this automatically make me eligible for permanent residency visa?

Unfortunately, it won't make you eligible for permanent or even temporary residency.

 

[2GuysInPM]

it will only make you eligible to pay taxes.

 

[yateveo43]

and dont forget, but there are taxes that are not the ABL rentas taxes, that you have to pay as a foreigner, they are called bienes personales, and an accountant has to help you file them at AFIP. if you dont pay these taxes, and you try to sell, it will come up during the process of the 'escritura'.

 

[STELLA53]

I believe the bienes personales tax on gross property value carries a penalty of 38% per annum on the unpaid tax - not compounded. Upon sale AFIP will claw back unpaid taxes for I believe up to 7 years ( if not 5) , but as inflation will be 25% compounded it may not be a bad idea to allow peso-based taxes to accumulate until sale. And, of course, if you do not sell and the property passes to your heirs, you won't have to worry about paying them...or anything else.

 

[steveinbsas]

I believe the bienes personales tax on gross property value carries a penalty of 38% per annum on the unpaid tax - not compounded. Upon sale AFIP will claw back unpaid taxes for I believe up to 7 years ( if not 5) , but as inflation will be 25% compounded it may not be a bad idea to allow peso-based taxes to accumulate until sale. And, of course, if you do not sell and the property passes to your heirs, you won't have to worry about paying them...or anything else.

As all taxes in Argentina are peso based I wonder which ones you think should be allowed to "accumulate" until the sale. Unless you are getting a 25-38% return on other "investments" why would you NOT pay the taxes on time? In general, property values aren't increasing at anywhere near the same rate as inflation.

Deferred payment isn't really an option and AFIP has become more aggressive in tax collections, especially from foreigners. A friend of mine bought an apartment in BA in late 2009. He was told he was not liable for the bienes personales taxes for that year. That was not correct. In late 2010 he received a letter form AFIP "requesting" payment of the 2009 tax plus 2% (perhaps 3%) interest/penalty per month.

 

[STELLA53]

As all taxes in Argentina are peso based I wonder which ones you think should be allowed to "accumulate" until the sale. Unless you are getting a 25-38% return on other "investments" why would you NOT pay the taxes on time? In general, property values aren't increasing at anywhere near the same rate as inflation.

Deferred payment isn't really an option and AFIP has become more aggressive in tax collections, especially from foreigners. A friend of mine bought an apartment in BA in late 2009. He was told he was not liable for the bienes personales taxes for that year. That was not correct. In late 2010 he received a letter form AFIP "requesting" payment of the 2009 tax plus 2% (perhaps 3%) interest/penalty per month.

Let me suggest the following and you tell me if I am wrong.

The statute of limitations for unpaid bienes personales taxe is 7 years. If one were to own property for longer than 7 years the unpaid taxes for the earlier years would not be collectable by the AFIP. I have also been advised ( but have not confirmed) that if one were to obtain a DNI before sale all past tax could be avoided.
Compounded interest is not the same as interest not compounded or simple interest. The amount of unpaid taxes with penalty of 38% simple interest would not be a large amount of real money if inflation of 25% persists. Inflation of 25% a year is compounded. Here is a simple calculation.
After 5 years on a base of $10 the total tax due for year #1 would be 10 plus 5 (total taxable years) x 38% for a total of $29. If inflation averages 25% compounded over those 5 years then 1 peso of year #1 would become equal to slightly more than 3 pesos at end of year 5. Assumng that foreign currency exchange value tracks inflation and assuming inflation proceeds at 25% there is no real benefit to paying the tax annually. Of course inflation might be greater than 25% per year. What has it been for the last 3 years? What do you think will happen over the next 5 years? Reasonable people can disagree as it is hard to predict the future, but it is not unreasonable to defer payment especially if one intends to hold on to the property for an extended period.

 

[steveinbsas]

How did you get the idea it is possible to "defer" payment? Non payment will probably result in AFIP seeking collection of the taxes, sooner rather than later, especially if you are a foreigner.

As to your inflation argument, a friend of mine sent me this in response you your earlier post:

"I've seen this rate of inflation argument mentioned on baexpats also, and I find it a bit of an over-simplification. The assumption is you have to buy something else that inflates in price in pesos terms and then sell it at the end of the period to pay the taxes -that thing has to inflate in value faster than the rate of pesos inflation after costs. That's a tall order. The correct way to calculate whether its more cost effective to pay now or later is by calculating the NPV of the 2 alternatives, pay now or later. I can do this calculation, and its worth doing. To do the calculation we have to assume in the calculation that instead of paying the tax now, that you store/invest the money in something stable. You're not going to keep it in pesos under your mattress - buried in the ground maybe, so maybe its in a Long Term T-bond (or in gold or Chinese stocks or something else say a German bond), then at the end of the say 7-year period, sell the investment or dig up the pesos, exchange the money after fees into Pesos and pay the BP taxes. By inflation, I assume they mean that the exchange rate will be say 5.5 instead of the 3.99 today - meaning the Pesos will have inflated in value against some base faster than the USD. The best base to pick would be either USD or gold or Rinminbi. But you have to pick one based on what you expect to put your money into. If you leave it in cash, then the base is USD cash."

As to your other question, getting a DNI will not excuse you from paying taxes, though it will expedite the sale of your property. The buyer's escribano may not care if the BP taxes have been paid (I don't think it creates a tax lein on the property) and you may be able to complete the sale anyway.

I know that having a DNI means paying the lowert BP rate, but also believe that a good escribano may be able to "claim" (when he files the escritura) that you are a "resident" who lives here in order for AFIP to charge the lower rate, even if you don't have a DNI. I did not have my DNI when I bought my apartment, but I paid the lower rate that first and only year (2006). The threshold for the BP was raised in 2007 and I have been "exempt" since then.

 

[STELLA53]

As to your inflation argument, a friend of mine sent me this in response you your earlier post:

"I've seen this rate of inflation argument mentioned on baexpats also, and I find it a bit of an over-simplification. The assumption is you have to buy something else that inflates in price in pesos terms and then sell it at the end of the period to pay the taxes -that thing has to inflate in value faster than the rate of pesos inflation after costs. That's a tall order. The correct way to calculate whether its more cost effective to pay now or later is by calculating the NPV of the 2 alternatives, pay now or later. I can do this calculation, and its worth doing. To do the calculation we have to assume in the calculation that instead of paying the tax now, that you store/invest the money in something stable. You're not going to keep it in pesos under your mattress - buried in the ground maybe, so maybe its in a Long Term T-bond (or in gold or Chinese stocks or something else say a German bond), then at the end of the say 7-year period, sell the investment or dig up the pesos, exchange the money after fees into Pesos and pay the BP taxes. By inflation, I assume they mean that the exchange rate will be say 5.5 instead of the 3.99 today - meaning the Pesos will have inflated in value against some base faster than the USD. The best base to pick would be either USD or gold or Rinminbi. But you have to pick one based on what you expect to put your money into. If you leave it in cash, then the base is USD cash."

As to your postulation quoted above in bold and underlined...
No. The increase in value of the "thing" (apt) doesn't have anything to do with one's decision to defer payment of taxes. The determining factor will be whether the amount of dollars one needs to exchange today to pay the tax will be greater or less than the amount of dollars one has to exchange to pay the peso amount of tax with accumulated penalty of 38% per year simple interest. In my example above I think I demonstrated that if annual inflation is 25% per year over the next 5 years and if the exchange rate of the dollar (or euro or pound etc) keeps pace with inflation, then it makes sense to defer payment. Do the math.

 

[steveinbsas]

The dollar simply has not kept pace with inflation of the peso and isn't even close. Do the research.

You may note that my friend included the possibility of just holding dollars.

Are you planning on using your above argument with AFIP when they come after you for nonpayment of the tax (in less than a year)? Do you really expect them to accept your decision to "defer" payment? If they have no collection powers or cannot take any action for a number of years then perhaps you can do whatever you want, but I wouldn't bet that the dollar will increas in value against the peso enough to offset the tax bill after adding penalties and interest.