The real estate value reference (VIR) in Buenos Aires
Looking to avoid tax evasion, among other things, the Real Estate Value Reference is a governing property within eight important districts in Capital Federal, and has set forth some new guidelines. The operations cannot be less than the established figures, which are closer to the true prices today.
To prevent tax evasion when a property is sold, the Buenos Aires government established a tax valuation of the apartments and houses in the capital city, which they say represents 85% of market value. From now on, all purchases and sales made in the city should take on that valuation. Thus, there may now be more expensive operations.
In principle, the real estate value reference (VIR), will run to the properties of Palermo, Recoleta, Almagro, Colegiales, Belgrano, Liniers, Saavedra, Retiro, Puerto Madero and Coghlan. These districts account for 672,300 items of ABL, on a total of 1,697,295. The Government Administration of Public Revenue of the City (AFIP) said in July that will include the remaining neighborhoods, as well.
Each time there is a real estate transaction, 2.5% tax must be paid to the city. There are some exceptions, such as when buying a single property, or buying public land that will be used to build an educational institution, for example, among others.
Historically, this tax has been avoided by stating that the sale price was up to 40% less than what it actually was. By doing this, the tax amount is considerably lower.
To avoid this, the institution has produced an estimated rate of property prices, according to the area, the value of m2, the capacity of the building, and other parameters. This way, there are reference values for each property. According to the tests and research, this value represents 85% to 90% of the real market price, ensuring that most properties will still be sold above the published rates.
For example, if an apartment is USD 100,000, and it appears on the contract as USD 60,000, the tax is only USD 1,500. But from now on, the minimum value for that property is set at USD 85,000, which means the amount payable is UD$2,125. Last year, the city of Buenos Aires raised USD 157 million in taxes on real estate purchases.
Either way, the positive impact to the treasury of Buenos Aires, at least in this year, will be relative. Last year, only 75,950 transactions were made, the lowest figure since 1980, and while experts predict that this year will be much better, it will still not reach the high rates achieved during the housing boom (post-crisis); in 2007, for example, 98,000 transactions were recorded.
Some experts believe that this will not affect the treasury too greatly, as many contracts have been quite truthful in the last two years. In any case, it is sure to affect the treasury to some degree.
The VIR boards will be posted on the AFIP website. These are public figures, and will be checked at various stages along the way. If the value seems too high for any given property, the buyer or seller can appeal to the offices, and an official appraisal will be done. Of course, these appraisals are only available for properties being sold.
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