Let the property buyer beware

[Ries]

Moving local or abroad?

We are considering selling our current apartment and buying a larger one. Both in CABA. At this point we spend six months a year here.

 

[steveinbsas]

For example, you agree to buy a property in BA for an agreed upon price. The owner then asks you to reduce the sale price in your property title. The owner pays taxes on the sale at the stated price in the legal documents.

Then 15 years later, you decide to sell the property. Obviously, the value has increased. So, you will pay taxes on the difference between the stated value in the title of record and the current market value -- since the sale price was reduced for the convenience of the seller, you end up paying taxes on more than the difference between the price you actually paid as buyer and the amount you sold it for later.

I'm taking a wild guess at how the tax system works related to real estate in BA. This seems logical, but the seller always ends up paying more after reducing the price at the request of the original seller.

In 2005, the asking price for a unit was $24.000. The seller asked the buyer to reduce the selling price to $18.000 for the property title. The buyer agreed. The current market value of the unit today is $50.000. Selling the property for today at that price means the owner will be paying taxes on the difference between $18K and $50K, instead of $24K and $50K.

Does anyone know the current real estate tax for this hypothetical sale?

The tax you mentioned is the capital gains tax and, as far as I know, the 15% tac applies to the gain (aka profit) on the sale of properties purchased after January 1, 2018.

The tax is not paid at the escritura and no escribano should collect it. An expat sells a property and leaves Argentina probably would never seriously consider paying the tax, especially If they aren't registered with the Argentine tax authority and donot have to get "permission" to send the proceeds of the sale out of Argentina. If that's the case, it would obviously be desirable for the buyer to send the funds abroad at the tlme of the escritura.

Even if the seller is living in Argentina and has no desire to leave, I can imagine that the declared price on the new escrtura could be a figure that does not show a capital gain. The beat goes on...and on...and on.

If anyone can shed more light on this subject, it would be Perry. He has previously posted about the capital gains tax. Read what he wrote in 2019 in the last page of this thread:

When will property be cheap in Buenos Aires?

When the blood runs in the streets!!

baexpats.org

 

[sergio]

In Argentina, you absolutely MUST employ a good escribano. and the only way to find a good one is to ask an Argentine who has frequently, or at least recently, bought or sold (preferably both) real estate. The more property, the better.
They certainly exist, as they are involved in every real estate transaction.
I would suggest getting a recommendation from the colegio de escribanos- they are not ALL crooked, and the trade organisation is most likely to know a good one, as opposed to your brother in law who has never bought real estate.
Regardless, hire one.
Its the escribano's job to find unpaid bills and taxes, to make sure there are no legal or financial encumbrances, to make sure its allowed use is what you want, and they can tell what the tax would be today- nobody knows about the future, obviously.
The tax you would pay on sale has been around 10% to 12% of the governments value of the property, which is not the sale price...
they have a very complicated system for appraising, which is sort of the ABL assessment, but I sure cant tell you that with any legal backing- only the escribano, and if needed, a lawyer they recommend, can tell you what the tax might be, and what the "value" is...
The system here is based on the French Napoleonic laws, and does not resemble the USA.
I have bought a couple of places here, and am considering moving- and without an escribano, you are lost...

True but in my experience even well respected escribanos can make serious mistakes. Without going into details here, I know of one case in which the property was of relatively modest value. It turned out that the title was not free and clear (only discovered several years later). Apparently the escribano did not do a thorough job. In another case, at settlement the escribano sent a relative in his place without notice to the buyer. It turned out that the escribano had retired but continued showing properties. When it came time for the escritura he sent the relative who was a certified escribanbo. The buyer was in a panic. Called a criminal lawyer for advice. Many calls were made to ascertain that the replacement escrbano was valid. He was and the transaction went through however not without great anxiety.

 

[Mondongo]

I rented a unit for three years before the owner decided to sell it. I decided to buy the unit in 2005. I went into the process blind. I obtained a CDI and transferred payment from my US bank to hers. She asked if she could reduce the purchase price represented in the title. I had no problem with it, but little did I know that she asked so she could pay less in taxes for the sale. Learned my lesson later. The title has a figure that is $6000 less than I paid for the property.

The three sisters who were heirs to their parents' unit next to mine finally sold it a few months ago. I knew that neither the real estate agent nor the heirs would offer any important information to the prospective buyers. I hoped to be able to help in some way, but it didn't come to pass. The new owners bought the unit without knowing what they are getting into. Honesty is not the policy when it comes to real estate transactions in BsAs. One needs to ask lots of questions about every detail of the building property, not only the unit for sale. Knowing the financial situation of the Consorcio (condo association of owners) is of utmost importance. If you don't ask questions, the owners or real estate agent will not offer the information. I met the new owners during a visit, but they already closed the deal. Due to poor management by several administrators, the consorcio has an enormous debt to AySA in excess of four million pesos. If we do not pay the debt in a year, they can obtain a court order to sell the units through public auction in order to pay off the debt. The young couple who will soon be my next-door neighbors knew nothing about the water bill debt. The interest on the debt is $15.000ARS a day!

Ask for a copy of the current monthly liquidation of expenses to get an idea of what is included and how much you will pay. A copy of the internal rules of the consorcio. Get a complete tour of the building in which you may be living before you sign the papers. This will give you a clear idea of whether the building is maintained with repairs, painting, etc. Any debt by the sellers must be paid before closing.

Ask questions. If you aren't fluent in the language and the sellers don't speak English, hire a translator for help. Buying property is too important to overlook any details before signing on the dotted line.

READ BEFORE BUYING PROPERTY IN ARGENTINA

Guide to buying property in Buenos Aires as a foreigner

We will tell you everything you need to know about buying property in Buenos Aires as a foreigner, from legal requirements to finding the perfect neighborhood.

thelatinvestor.com

As the old adage goes, "En todos lados se cuecen habas". Rental scams occur worldwide, not just in Argentina. Argentina should not be singled out as a bad actor, as many professionals—real estate agents, escribanos, and lawyers—conduct honest and straightforward transactions daily. They may take offense at the statement, "Honesty is not the policy when it comes to real estate transactions in BsAs."

 

[Silvie]

Hi,

Thank you so much for sharing your experience. It’s been really helpful! I’ve recently made an offer on a property, and the seller mentioned they wanted to put the purchase price as $130K when I’ll actually be paying $200K. I didn’t like the sound of that, as I’m sure it’s illegal and could possibly cause issues for me down the road.

I’m not sure if insisting on putting the full purchase price on the deed will scuttle the deal, but I feel like it’s the right thing to do. Have you heard of others running into similar situThanks again for your insights!

Most people do that here to lower taxes.

 

[daveholman]

Hi,

Thank you so much for sharing your experience. It’s been really helpful! I’ve recently made an offer on a property, and the seller mentioned they wanted to put the purchase price as $130K when I’ll actually be paying $200K. I didn’t like the sound of that, as I’m sure it’s illegal and could possibly cause issues for me down the road.

I’m not sure if insisting on putting the full purchase price on the deed will scuttle the deal, but I feel like it’s the right thing to do. Have you heard of others running into similar situations?

Thanks again for your insights!

I have no idea about real property in Argentina, but it's fairly common in the US for the seller of an automobile to offer to provide a receipt for less than the actual sale price. The buyer agrees, because it lowers the taxes owed.
The problem comes when there's a problem with the car, or with the title or whatever, and the buyer wants to unwind the deal. He finds out in court he can only get back the amount on the receipt, not what he actually paid.

 

[Ries]

Most real estate closings in Argentina (which are almost always done in cash US one hundred dollar bills, big heads only) are for less than the actual sale price. This is a gesture towards tax dodging that goes back decades, its instinctual.
In reality, at this time, most properties purchased before 2018 are actually exempt from some tax, (there are still some transfer taxes) so its not really saving money on taxes- its more about sheltering money from the government even knowing it exists.
When you have had as many recessions, military coups, multiple presidents in one year, coralitos, inflation, and devaluations as Argentina has in the last 50 years, the idea of cash tucked away, be it in a bank account in Uruguay or Miami, a safe deposit box in Belgrano, or just under the mattress, is comforting.

Eliminaron un impuesto que tenían que pagar quienes vendieran una propiedad comprada antes de 2018

El ITI obligaba a pagar el 1,5% de la venta de una propiedad adquirida antes de diciembre de 2017

www.lanacion.com.ar