Buenos Aires Real Estate
OVERVIEW BUENOS AIRES REAL ESTATE GUIDE (STEP BY STEP)
1. Searching for the ideal property in Buenos Aires Real Estate market
When looking for the ideal property in Buenos Aires, there are many things take into consideration:
- Distance from main avenues
- Safety of the area
- Building status and environmental review
- Title free of any legal liaison
2. Making the offer: Reservation
The offer, known as the Reservation (“Reserva”) consists of a document that outlines the terms and conditions of the purchase offer including price, transaction terms, and the relevant payment terms.
The Reservation process requires a good faith deposit of approximately 1% of the ownership value. This deposit credits the buyer as a serious claimant, and secures priority over the ownership before any other subsequent offers.
During the term of validity of the Reservation, the seller cannot offer and/or sell his or her property to any other party. The seller may accept, reject or counter-offer the “Reserva”. In most cases he/she will counter-offer. When both parties agree on the price, you buyer will proceed to sign the contract of purchase.
3. The Contract of Purchase and Sale
Once the two parties agree on the purchase, the next step is usually the Contract of purchase and sale. However, the parties sometimes agree to go directly to the signature of the Title Deed after the reservation.
The Contract of Purchase and Sale (“Boleto de compraventa”) is a contract between the parties where the seller commits himself to transfer the property of the apartment to the buyer on a certain date, and you (the buyer) agree to make the payment/s. The contract regulates the conditions of the property sale.
At the time of the Contract of Purchase signature, the buyer will have to make a down payment consisting of a percentage of the price agreed in the contract. The standard down payment is from 30% to 50% of the property value.
The “Boleto de compraventa" does not transmit the title of the property, but compels the seller to do it, and also obligates the buyer (you) to pay the agreed price. Under this agreement, both seller and buyer can legally force each other to close the transaction.
The parties establish in the contract the name of the Public Notary who will arbitrate and determine time and venue for the Title Deed to be signed. Parties are allowed to choose the Public Notary to execute the Title Deed. However, it is general practice for the buyer to select the Notary.
4. Title Deed (“Escritura”): ownership
Although the Contract of Purchase and Sale of a property will contain valid binding obligations between the parties under Argentine law, it will not be accepted for registration in the Real Estate Registry unless the terms of transfer have been included in a Title deed executed before a Public Notary.
The Escritura( Title Deed) brings the final property title transfer. At this stage, you (the buyer) will pay the remaining purchase price. The Public Notary (“Escribano”) will do the due diligence on the property and will clear the title.
Immediately prior to signature of the Title Deed, the Public Notary will request the Real Estate Registry to issue a certificate ("Certificado de dominio") which temporarily blocks the property in the Register, so that no attachment, mortgage or encumbrance can be filed over the property for a period of 15 calendar days. In the event that the Title Deed is not executed before the Notary during those 15 calendar days, the Notary will ask the Real Estate Registry to extend the validity of the certificate. No Title Deed may be executed unless a valid certificate (i.e. of less than 15 days) "Certificado de dominio" is held.
The Public Notary is responsible for checking the title deed of the property and ensuring that there are no charges or encumbrances over the property of which the purchaser is unaware of. Further, the Notary will have to notify the transaction to the Argentine tax authorities.
The Title Deed does not transfer the ownership rights. The ownership rights are transferred when you receive the “possession” of the apartment (called “Tradición”).The possession is perfected by the Title Deed signature when the property keys are given to the buyer.
Once the Public Notary certifies the price and effective payment under his presence, the seller can acquit of all the rights over the property, and transfer them to the buyer, also giving the possession of the property. As soon as the buyer accepts this transfer he/she becomes owner of the property.
You will be registered by the Notary as owner of the relevant property before the Real Estate Registry of the jurisdiction where the property is located.
The Title Deed allows your property rights to be acquired along with the possession. Afterwards the due registration in the Real Estate Registry (“ Registro de la Propiedad”) makes the buyer’s ownership rights valid for the buyer vis-à-vis third parties.
Title Deed, the effective possession and the due registration in the Real Estate Registry will allow the buyer to become the owner of the property with the transfer of the subsequent rights.Every legal act affecting the property and any related real estate rights (easements, mortgages and other encumbrances) must be registered before the Real Estate Registry of the jurisdiction where the property is located for validity vis-à-vis third parties.
Legal restrictions on ownership for non-resident persons
Foreign ownership is unrestricted except in certain areas of national security, such as frontier zones. A foreign investor who wishes to acquire immovable property in such area must seek the prior consent of the National Commission of Security Zones (“Comisión Nacional de Zonas de Seguridad”).
Investor must provide the Commission with documentation concerning the projected use for the property to be purchased (capital to be invested, nationality of labour to be employed, etc.), and documentation concerning the buyer company (company´s by-laws, latest balance sheet, details of the members of the board of directors, etc.), all of which must be certified by a Public Notary, translated by a public translator and legalized in the nearest Argentine consulate in the country of origin of the investor or “Apostilled” through the systems of the Hague Convention of 1961 on Recognition of Foreign Documents if the country of origin of the investor has adhered to the system of the Hague Convention of 1961.
Although the power of the National Commission of Security Zones to grant approval for a purchase by a foreign investor is discretionary, the Commission’s permission is normally granted.Additionally, due to recent regulations of the Public Registry of Commerce of Buenos Aires, any purchase when made by a foreign company, must be also recorded by the Public Registry of Commerce. Moreover if the Public Registry of Commerce considers the foreign company is not merely acquiring the property, but carrying out permanent commercial activities in Argentina, the Public Registry of Commerce may request also the registration of the foreign entity in the named Public Registry of Commerce.
Transfer Money to Argentina
Transferring money from abroad can become a need and a problem in the process of buying a property in Argentina. Therefore, this guide offers you some suggestions to help you trough this stage.
First of all it is very important to acknowledge that all transactions in Argentina are 100% cash.
If the seller does not have a bank account outside Argentina (most of the times), you will have to transfer the purchase value to Argentina through an Exchange Bureau (“Casa de Cambio”). Usually 1% to 3% of the total amount will be charged to you as the Exchange Bureau fee. In the process, the Exchange Bureau will provide you with an account number in a US Bank so that you (the buyer) can transfer there the purchase amount. Same amount will be available in Buenos Aires for the seller 24 to 48 hours later.
Legal consultancy and the help of a Public Notary is recommended so as to prevent a Central Bank 30% withholding annual tax applicable to any sums entering Argentina, unless performed for capital expenditures (such as buying a property). This legal support will also help to avert future claims of the Argentinean tax authorities in income coming from the purchase amount.
Among the documentation to be supplied under Argentinean Law for the Exchange Bureau you (the buyer) will be required to fax to either the Exchange Bureau or your lawyer, the buying documentation, a copy of your pay slip, a report of your work background in your current position, and eventually your last two tax return forms.
Due to money laundry policy in Argentina, you (the buyer) will also be asked to show "proof of origin" of the funds used in the purchase (W-2 forms, 1040, etc). Money coming from stocks and bonds are considered as cash. When probing the origin of the funds there will have to be a compelling proportion between the transferred amount and the source of income.
Warranties granted to the buyer
The Argentine Civil Code offers certain warranties for the buyer in a real estate transaction. The property buyer warranties embrace the sufficiency of title (“Evicción”), and the lack of hidden defects and encumbrances, including even those defects of which the seller is unaware (“Vicios Redhibitorios”).
If after the sale of the property and during the term of the warranties, the buyer is deprived of the use or ownership of the property because of defects existing at the time of the sale, the buyer is entitled to claim from the seller full or partial reimbursement of the purchase price and other applicable charges.
Since the above provisions are not of mandatory application, the parties may extend or reduce the seller’s liability for those warranties. However, any reduction in the seller’s liability will not be effective if the seller actually acknowledged the defects. Therefore it is common practice in most purchase contracts to include a clause whereby the seller declares he owns due title of the property and that the property is free from any charges or encumbrances.
Furthermore, it is customary for the seller to warrant that the property will be transferred with vacant possession and free of occupants. The purchase contract may include a provision allowing the purchaser to rescind the contract and claim penalties in the event that the seller is unable to deliver the property with vacant possession.
However it is recommended for the purchaser always making a visual inspection for any signs of occupation in the property. Because if there were any tenants, the new owner will have to take the property subject to any rights that the previous tenants might have, and could only submit a personal action against the seller for pre-existing damages or eventually for the rescission of the contract.
Tax Identification Number
Every prospective buyer of an Argentinean property must register for a tax identification number or CDI, which is the basic tax document needed for buying a property if the buyer is not conducting business activities in Argentina.
In order to obtain a CDI, you will need a domicile-certificate reported by the police. To obtain the domicile-certificate you must go to the police station in your area, with a photocopy of your passport, along with the original, fill out a form, and pay 15 pesos ($3,5 U$S) for a domicile-certificate (“Certificado de Domicilio"). In one day time, a policeman will visit you at your apartment or hotel to verify your temporary residence in Argentina. After visual inspection the policeman will provide you with a signed certificate.
You will have then to go to the AFIP (tax authorities in Argentina) agency provided in your certificate, with your passport (original and 2 copies of the first page), and the domicile- certificate. In the AFIP Agency you will have to collect a CDI Form ("Formulario CDI"), and bring it to the Entrance Desk (“Mesa de Entradas”). You will be given a CDI or tax identification number and you will hence have the power to purchase property in Argentina, and pay taxes.
If you do not wish to spend time coming down to Argentina, you can execute a power of attorney so that someone can obtain your tax ID in Argentina. If you wish to grant a power of attorney, you do not need the domicile certificate, because your lawyer or grantor will take care of that.
Again a legal consultant would assist you getting your tax ID and sorting things out with the police and the tax authorities.
Taxes to be paid on a property purchase
a) Taxes to be paid by a foreign purchaser who will not live in the property.
First of all, you (the buyer) will have to pay a value added tax a VAT of 21 % for the closing amount and the relevant charges including the lawyer or real estate agent commission.
In addition If you buy a new apartment directly from the developer or builder company, you will have to pay a VAT of 10.50%. However, such tax amount is usually included in the final price offered by the property developer or the real estate agent. Buyers do not have to pay any VAT on the property price for older buildings.
You will also have to pay a stamp duty on the purchase. In Capital Federal, the duty is 3.6 % of the purchase value. However, this tax is normally split 50:50 with the seller (distribution is normally agreed during the trade). In Buenos Aires province, the stamp tax is of 4 %, which is also normally divided 50:50 between the buyer and the seller.
Provided you rent the purchased apartment you will also have to pay the income tax ranging from 9 to 35 % on all of your worldwide income. Annual income of more than 120,000 pesos (40,000 USD) falls into the top tax bracket of 35 %. Local taxes will be generally charged to the apartment tenant.
b) Taxes to be paid if the foreign person lives in the property he has just purchased
If you are in Argentina for more than six months (180 days) in a calendar year, you are considered an Argentine resident for tax purposes. Otherwise, you are regarded as a non-resident.
As a resident, in addition to the VAT taxes, and the income tax if you do any working activity in Argentina while being a resident, you ( the buyer) ,whether living in the property or leaving it vacant, must pay an annual tax on personal assets, including residential real estate. The rate is 0.5 % on assets valued up to 200,000 pesos (around USD 63,000) and 0.75 % on assets valued at more than 200,000 pesos. However, there is a non-taxable minimum of 102,300 pesos (around USD 30,500).
Finally, be advised that there is a local tax for the city services as street lighting and cleaning the streets known as Alumbrado, Barrido, y Limpieza or ABL. Annual amount only comes to several hundred pesos.
Buenos Aires Real Estate: Intermediaries and rates
Realtors’ commission is of 3% that is charged to the seller and another 3% or 4% covered by the buyer.