Real estate ownershipi Planning
As a federal country, Argentina has three spheres of government that may share jurisdiction over planning control and uses assigned to real estate property. The type of investment to be held on the said properties will determine the jurisdiction entitled to follow and control the developing processes, so establishing the competent authorities.
As an example, planning control issues regarding real estate construction investments are, in general, assigned to local authorities (usually municipalities) who tend to regulate these matters using edification or zoning codes. These regulations determine the possible – and so authorised – uses for the property they control. Sectoring and activity availability are generally defined according to population and geographical issues, providing restrictions within developing businesses and possible changes of use in relation to the original intended use of the properties.ii Environment
Pursuant to the Code, damage caused as a consequence of the development of dangerous activities are subject to a liability regime similar to that applying to damage caused by or with dangerous objects. Anyone who performs a dangerous activity may be held liable for damage caused to the environment as a consequence of such activity.
In that respect, any injured person may seek damages from the owner or keeper of an asset that produces environmental damage. Likewise, the transferor of an asset that has a defect and later causes environmental damage may be liable even after the transfer. A five-year statute of limitations applies to environmental damage.
The owner or keeper of a dangerous object or activity that causes damage to the environment may be excused only in case of force majeure or when a third party or the victim has contributed to the damage. The Code provides joint liability for damage caused by a person who is part of a group or by an activity performed by a group.
Also, under Law 25,675, in the case of collective environmental damage caused by legal entities, liability can be extended to their managers, director, statutory auditors or other officers who participate in the company's decision.iii Tax
In Argentina, there are three different levels of government authorities that can levy taxes, the main ones being the federal government and the provincial government. Hence, the acquisition of real estate property may be subject simultaneously to different taxes imposed by the different levels of government.
Regarding federal taxes, the sale of real estate property is subject to income tax or to tax on the transfer of real estate, as the case may be, as follows:
- sales performed by local legal entities: subject to income tax at a 30 per cent rate (25 per cent rate as from 2020) over the effective net income (gross sale price versus acquisition cost minus the expenses incurred to obtain such gains);
- sales performed by foreign legal entities: subject to income tax at a 35 per cent rate that the seller could choose to apply over (1) a 50 per cent net presumed income, thus reaching a 17.5 per cent effective rate on the gross sale price; or (2) the effective net income (gross sale price versus acquisition cost minus the expenses incurred in Argentina to obtain such gain);
- sales performed by individuals residing in Argentina or abroad regarding real estate property acquired by them before 1 January 2018: subject to tax on the transfer of real estate at a 1.5 per cent rate over the gross sale price;
- sales performed by individuals residing in Argentina regarding real estate property acquired by them as from 1 January 2018: subject to income tax at a 15 per cent rate over the effective net income (gross sale price versus restated acquisition cost minus the expenses incurred to obtain such gain). The sale of real estate used for housing is exempted from income tax; and
- sales performed by individuals residing abroad regarding real estate property acquired by them as from 1 January 2018: subject to income tax at a 15 per cent rate over the effective net income (gross sale price versus restated acquisition cost minus the expenses incurred in Argentina to obtain such gain).
As a principle, the sale of real estate property is not subject to VAT. Nevertheless, if the seller of a construction built on his or her own property is considered to be a 'construction company' pursuant to the definition set forth by the VAT Law, said principle will not apply and the sale of the building on the property may be subject to VAT (the value of the building by itself and not the land could be subject to this tax). The general rate is 21 per cent; however, a reduced rate of 10.5 per cent may be applied to the sale of residential real estate property.
Concerning provincial taxes, the acquisition of real estate property may be subject to stamp tax. This tax is levied on the execution of agreements and is estimated on the economic value of the agreement. The applicable rate differs from one jurisdiction to another, ranging from 2 per cent to 5 per cent. It should be further borne in mind that there is a local tax to be paid on the ownership of real estate property.iv Finance and security
The most common forms of securities granted over real estate property in Argentina are through mortgages or a trust.
According to the Code, a mortgage is an in rem right of guarantee. The mortgage connected to the affected real estate property continues in the possession of the owner of the property. If the owner does not comply with the obligations of the mortgage, the creditor will have the faculties of persecution and preference to collect the credit guaranteed. The maximum term of existence of a mortgage is 35 years, and it can be renewed as many times as needed.
The trust is also regulated in the Code. There is a trust agreement whenever a party (or 'grantor') transfers or undertakes the obligation to transfer the property of certain assets to another person (or 'trustee') who is obliged to manage that property in trust in benefit of another person (or 'beneficiary') who is established in the contract, and to transfer that property in an established period of time or upon the fulfilment of an established condition, to the beneficiary or to another third party. The trust is just an agreement and not an entity (as are the 'trusts' in common law terms). Trusts are just agreements that create a separated patrimony in the head of the trustee, to be governed as per the rules foreseen in the trust agreement. The trust has a maximum term of 30 years after the execution of the trust agreement, and can be renewed as many times as needed. As a guarantee, a trust is more practical than a mortgage, because the terms of its execution may be specifically foreseen in the agreement itself, while the mortgage may just be executed through an auction process.