Dealing with the AFIP

Certificado de retenciones para residentes del exterior

Non resident property owners cannot sell real estate in Argentina without a ‘Certificado de retenciones para residentes del exterior’.

A Certificado de retenciones para residentes del exterior is issued by Administración Federal de Ingresos Públicos (AFIP) and is always necessary for a non resident to sell their property in Argentina.

The aim of the certificate is to ensure that all taxes levied by the state are paid before an investor sells their real estate in Buenos Aires.

Taxes usually payable by non resident real estate owners are:

• Bienes Personales (Asset Taxes about 1.25% of the purchase price payable each year or in installments)
• Ganancias (Income tax payable on rents received  – 21% of rent  received or deemed received)

In earlier articles, we have explained real estate ownership and taxation many times.

I always advise non residents real estate owners to appoint a fiscal representative and pay their taxes on time, that’s my best advice.

If your taxes are up-to-date, within 20 days of making a request to sell your property, you should have your Certificado de retenciones para residentes del exterior, if you owe tax, do not complain that you might have to jump through a few hoops and pay taxes before you can sell your property.

The Argentine tax authority may not chase you to either appoint a fiscal representative or pay your taxes on time, but they will fine you thousands of pesos and charge you compound interest on money owed when selling property in Buenos Aires.

The cost of not paying taxes on time in Buenos Aires

We recently paid income tax, asset tax, fines and interest for a client who had used a property management company who got into arrears with income tax and never paid asset tax. The real estate was worth about $110,000 and owned for about five years – her tax bill was around $79,000 pesos, nearly half of this were fines and interest.

Here’s the problem.  You can refuse to pay tax, fines and interest if you think the AFIP assessment unfair, but whilst you ‘argue the toss’, you cannot sell your real estate and the buyer disappears.

To simplify my advice:

Pay your tax, sell your property, but reserve your rights. Particularly, if you intend to reinvest in real estate in Buenos Aires and remember that you can avoid transfer tax if you intend to reinvest your money.

Please note:

The requirement for ‘certification’ is quite separate to COTI, but many people and indeed advisors mix the idea of COTI with paying taxes – so even if your property falls below the COTI threshold, non-residents must still have a Certificado de retenciones para residentes del exterior issued by the AFIP to sell real estate in Buenos Aires.

If taxes are due and unpaid in Buenos Aires, non-residents cannot sell their real estate

The Certificado de retenciones para residentes del exterior must be given to the Escribano handling the sale. The Escribano cannot complete a sale without this certificate.  That’s why the transfer of property from foreign investors to buyer sometimes come to a complete standstill – no certificate, no transfer of a property – it’s that simple and it’s this process that most real estate investors in Buenos Aires and some brokers fail to fully understand.

Finding a fiscal representative in Argentina

Even if you are in Buenos Aires or Argentina you will no doubt need to find a resident to act as your fiscal representative.  One AFIP office told us recently this was now the law.  Another told us non-residents can deal direct and pay via their CDI.

We think foreign investors do better in Buenos Aires with the right advice

Your fiscal representative will need to be a ‘resident taxpayer’ with a CUIT or a CUIL number to assume full responsibility for your tax affairs in Argentina. That means, until your taxes are paid in full, your fiscal representative is liable for money owed – this is a significant responsibility.

Any self-respecting agent or consultant handling your tax affairs will require complete control over the property sale and your money to meet these expenses, or a significant indemnity.

In addition, dealing with estate agents, buyer’s advisors and the AFIP can be very slow – the representative will no doubt ‘clock up’ at least fifty-hours and probably more like eighty-hours acting for you.

When your representative is paid by a buyer they will either receive cash or better still a bank transfer – it’s safer.

Make sure that your representative has a bank account and is prepared to receive and send the proceeds of sale via their bank account – expect fees of around three percent for this operation.  If you money is transferred in the grey market expect costs of 5-7% and expect that to go higher if dollar restrictions are not eased for property transactions some time in the future.

In addition, choose a representative that’s operating in ‘white’ and paying their own taxes – this is very important.

When thinking about instructing someone to help you, remember that being your representative is a big responsibility and time consuming, so if someone is offering their services on the cheap, be careful, they may neither have current experience nor understand how tough their role might be.

Real estate owners must sign a declaration for the AFIP and register at the address of their representative for tax purposes.

Real estate owners must to also swear a power of attorney for their representative with a public notary.

If you are not in Argentina, all signatures must be verified by apostille subject to the Haig Convention.

Choose a fiscal representative that’s not a friend and knows what they are doing or you may lose a sale and your costs will increase – selling a property in Argentina is not cheap.

You will also need an accountant, as much of the work is completed online and one needs to be familiar with the AFIP software to complete forms and ensure the AFIP has all the documentation necessary to make a tax assessment.

You are given deadlines by the AFIP to make submissions and pay your taxes when selling real estate, fail and the process starts all over again.

You cannot apply for the certificate until you have a formal offer from a buyer.

Once you have a formal offer, your accountant must first go online and complete a form, and then attend the AFIP’s local office to supply supporting documentation.

There is no consistency between one AFIP branch/office to the next and sometimes one meeting to the next, it’s really that bad and the AFIP’s staff are prone to giving misinformation. Before you think, ‘well there must be published rules’, information online and even the fact sheets handed out in branches/offices are either incomplete or out of date.

Your impression might be that the AFIP is currently making it difficult for sellers in the hope they lose their buyers.

At this time the AFIP is much more difficult than in the past, unfairly so with foreigners in our opinion, but we do not believe their aim is to stop dollar outflows. They need your tax money more urgently than you might think – in addition, with both import and currency restrictions being managed by the AFIP, they are ‘run ragged’.

We often find the staff at the AFIP poorly trained and the systems employed rather archaic. There must be better information and uniformity for foreigners investing in Argentina, ‘the goal posts must stop moving’ and the correct and current requirements must be published with more care. That’s just not the case – hence it’s most unfair.

In general you will need to provide the following:

1. Contract of sale, this need not be full boleto but must be signed before an escribano.
2. Power of Attorney for representative
3. Proof of  sellers residency in another country
4. Original escritura (deeds) to the property
5. Copy of all ABL paid bills paid
6. Copy of all electricity, telephone, water and gas bills
7. Copy of  all rental contracts which may exist on the property
8. Proof of all tax payments made on the property
9. Proof of address in Argentina of representative
10. Copy of Identification of seller and representative

All of these should be originals and take photocopies for the AFIP to retain, also retain one or two copies, they lose stuff.

The AFIP will check electricity bills to determine when the apartment was occupied, and you may need to prove that you were the person using the apartment.  If you cannot do this it will usually be deemed that you were renting out the property and a tax will be assessed – even if that’s not true. Again, you pay and claim. You will need to show/photocopy your passport as proof of entry and departure.

Even if you have a DNI, the AFIP will still ask to see the passports of a foreign resident of Argentina, remember your DNI is slightly different and your passport WILL be requested.

The AFIP state that they will process your request within 20 days

It is unlikely that the AFIP will be satisfied with the documentation that you gave them the first time around, so after about two weeks they may write for supplementary information.

When the AFIP request further and better information they give you 10 days and if you fail in your task, they will close your file and you will need to start the process all over again.  They often write to the wrong people or letters fail to arrive.  Try to visit or call the office weekly when selling so that you can ask what’s current on your file.

It is likely the AFIP will ask for something you have already provided, but they won’t explain why they want ‘that something’ a second time, it often becomes farcical.

It is worth pointing out that front-desk AFIP employees seem like box tickers, bureaucrats with no authority to make actual decisions and no latitude to use common sense. If they can’t tick a box they just shrug their shoulders and pass the problem back to the seller. Do not get annoyed, take a chill pill smile and work with them.

I suggest that you meet with a suitably qualified advisor well before you are due to sell a real estate in Buenos Aires, to ensure that as far as possible all taxes have been correctly assessed and paid.

If you instruct an accountant, please ensure relevant experience working with non resident clients, as the tax arrangements for foreigners are more complicated and involve them paying a higher rate of tax.

If the accountant does not have relevant experience, expect a learning curve and lots of wasted time. Often we get calls from accountants who are acting for clients and we have to go along and help them.

It is likely that you won’t have paid the correct taxes and in that case there will be fines and interest. Interest is charged at a compound rate of 3% each month.

Dealing with the AFIP can be a frustrating process; you may be employing an accountant who will need to attend AFIP offices several times or more pushing up fees.

Eventually, usually after a lot of time and effort, you will be given your certificate – it will happen if you follow instructions carefully and patiently.

Got your Certificado de retenciones para residentes del exterior?

You can now sell your real estate in Buenos Aires!

The certificate is valid for 60 days from issue, if you lose a buyer work fast to find another.

Foreign Investors Selling Real Estate in Buenos Aires

Need help selling a property or dealing with tax issues, contact us…

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What’s really happening in the Buenos Aires real estate market

You may remember that we took issue on reports that seemed to indicate all was well in the real estate market in Buenos Aires.

Owners and Realtors try to ‘buck’ the market with price increases!

A national newspaper with usually rather hawkish views reported rapid real estate price increases at the end of last year and at the start 2012 – we told you that we’d seen that ‘game’ before…

We get more than our fair share of complaints about our honest views regarding the real estate market in Buenos Aires – we write for investment clients – they want facts not fiction.

A recent and very interesting article written by Bloomberg’s Camilo Russo supports our view of what’s happening in the real estate market in Buenos Aires.

Real estate transactions in Buenos Aires have fallen to a three-year low. We believe that’s probably just the start unless the government reverses recent legislation that stops peso to dollar exchange.

Although it’s been reported that real estate prices increased by around 8% last year and the average price of a dwelling in Buenos Aires costs US$116,000, that’s probably spot on.

The most important points from the Bloomberg article are:

1. Real estate prices have increased nine out of the past 10 years in Buenos Aires.

2. During that same period, Argentine dollar bonds posted annual losses four times.

3. Fewer transactions do not equal a fall in real estate prices.

That’s what most interesting about the real estate market in Buenos Aires: prices will not fall.

The silly real estate pricing by owners and Realtors, which we saw at the end of last year and the start of 2012, no doubt hit the reality barrier.

Having said all that, some foreign investors are running scared and screaming ‘Argenzuela!’ at the top of their voices – I have come across a couple of cash-strapped and more-than-a-little worried foreigners selling their properties at around 10% below the market value to get out quickly. Of course, I had waiting clients – we are always interested in the right deal.

Find out why real estate prices hold their value even when the Argentine economy crashes

In 2009, during a mild recession (cold), the real estate market was dreadful. Better economic fundamentals enabled Argentina to emerge relatively unscathed from its ‘cold’ during the last worldwide economic slowdown.

Today, the poor state of the Argentine economy, which we believe will fall into recession some time soon, is causing Argentines, who do not believe everything is as rosy as President Cristina Fernández de Kirchener states, a great deal of concern.

Albeit, nobody’s 100% clear as to the true economic picture in Argentina – too much smoke and too many mirrors, and nobody trusts Argentina’s ‘official’ economic reporting courtesy of INDEC – it’s a joke.

Bloomberg states the main culprit for the fall in real estate transactions is foreign exchange controls.

Hopefully government will allow peso to dollar exchange for real estate purchases – it’s essential if real estate transactions are to increase.

I think the Bloomberg view correct, but there’s also the fear factor.

Never underestimate the fear factor in Argentina – everyone I speak to thinks that Argentina is about to catch a bad dose of the flu.

The foreign-exchange controls make Argentines fear another corralito – in 2001-02, bank withdrawals were limited to around AR$1,000 a month, saved US dollars were exchanged by law to pesos and then the peso lost 75% of its value against the dollar – ouch! Argentines called this measure the ‘small corral’.

In the real world, the peso has a value of 4.8 (ish) against the dollar. In the real world, inflation has been calculated at 22% over the past 12 months – it’s not the time to be saving in pesos but most Argentines, particularly the poor, have little choice.

In 2001-02 we saw a ‘corral’ and today – well it’s more like a paddock (portrero). You can walk around, but only eat Argentina’s rapidly yellowing grass; but you can’t escape the currency controls that seek to ‘pesify’ Argentina!

Argentines cannot buy dollars, even if their money is clean, meaning their earnings are taken white and taxes paid on income. Many Argentines watch in horror as inflation and devaluation erodes the value of their peso savings.

The AFIP (IRS or Inland Revenue) has a remit to help the government protect the value of the peso and stop capital flight. Its restrictions have been very successful – there’s simply a ‘say no to peso to dollar exchange’ policy.

In addition, peso-to-dollar exchange has been forced underground and a very healthy back dollar market (you have to pay between 4.8 and 5 pesos due to the lack of dollars today) probably means Argentines are mattress-banking. Many Argentines I know are certainly hoarding their dollar stash, waiting for what they see as an inevitable crash.

There are a number of reasons why real estate transactions could fall further, but our clients who own real estate in Buenos Aires will hold their nerve. Our experience tells us the real estate market will continue to function in an orderly manner and real estate will hold its value.

Poor governments come and go in Argentina, bricks and mortar are constants and so is real estate price appreciation and good annual returns on investment.

Our real estate owner clients are still making dollar rents and benefit from a stable real estate market, annual real estate price appreciation and healthy annual returns on investment.

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Palermo Hollywood Buenos Aires

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Luxury Penthouse Apartment in Palermo Hollywood Buenos Aires

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