Capital Gains Taxes when Selling

Capital Gains Taxes when selling

One of the true benefits of exiting your investment and selling your property once you want to sell it is that there is a 0% Capital gains tax here in Buenos Aires. Yes, you read correctly. There is no capital gains tax. There is a 1.5% tax called the "Transfer tax". It is 1.5% of the sales price listed on the title deed. Locals can get this waived if they are using the proceeds immediately and purchasing another property here in Buenos Aires. For foreigners it's almost impossible to get the 1.5% transfer tax waived so expect to pay this when you sell.

Remember that the 0% Capital gains tax is only if you purchased the property as an individual. If you purchased the property as a corporation, your capital gains tax is as high as 35% of the capital gain on the real estate transaction.

People often ask me why a country that is in desperate need of cash does not have a capital gains tax. You have to keep in mind the system here. As I mentioned earlier in my report, the one thing the affluent have in common is that they own multiple properties.

The other thing to keep in mind is that even if there was a capital gains tax, the locals are masters at tax evasion. I mentioned this before but I'll repeat it. Many locals do not report the actual purchase/sales price on the title deed. Many will only sell their property if you agree to record a false, lower amount. There is not a huge risk to you and in fact you will pay less property taxes but I recommend against this as the upside benefit is not significant.

Property is property though so when you go to sell it, odds are it will be sold for the going rate of the price per sq. meter and not the purchase price that you paid. This is just one of the examples of the "white" and the "black" system. The "black" system is so embedded into the society and especially the real estate community that sometimes it's impossible to avoid. I've walked away from several deals because the owners would not sell the property unless you recorded a much lower price on the title deed. I wasn't willing to do that.

Still, in each instance that I passed, another foreigner was happy to purchase the property. In fact, several times through 'it's a small world' - I have run into the buyers of each respective property and they are often surprised and amazed as I know the exact terms of their deals and what they falsely recorded the property for as I passed on the deal.

Keep in mind as a foreigner you also must get a special permit from the AFIP office when you decide to sell your property. You can't just sell your property when you are ready to sell if you don't have residency here. As long as you are up to date on all your tax obligations it will not be a problem. There is a mountain of paperwork that you will need to provide to get the permit. You must have an accountant working on your behalf to file for the permit.

AFIP will check to make sure you are up to date on your required asset/property tax (1.25% of the price listed on the title deed when you bought it) each year that you owned the property, as well as rental taxes if you have been renting out the property. I have seen it take as little as 30 days and as long as 75+ days so keep this in mind when you go to sell a property as a foreigner. You can't apply for the permit until you have an offer to purchase the property.

If you need a referral for an expert accountant, please email us as we work with the best accountants in Argentina that can usually get this permit in 30 days.

Remember that as a foreigner, you must have a local or a local Argentina corporation registered as your local tax representative. It's very important that you are up to date on all your required tax payments while you own your property. Many foreigners don't know all the tax requirements and they mistakenly think they are being taxed to sell when that is not true. They simply were not making the required tax payments so AFIP is requiring all back taxes plus penalties and interest fees.

Our office has handled several transactions for clients selling their properties. All our clients have successfully sold their properties as our office was also the registered agent on record for them and we have been paying their property/asset taxes each year as well as their rental income taxes. This has enabled them to successfully sell their property with no problems. There is a lot of misinformation out there about capital gains taxes or special taxes for foreigners. If you follow the law and pay your proper taxes, have a registered agent to pay your taxes then it will speed up the process and help eliminate problems. I have sold many properties here and by following the laws described above I have not had a problem and did not have to pay any penalties or additional taxes.

AFIP is also changing the way they deal with the locals as well. As I mentioned before, most locals are masters at evading taxes. Before November 1, 2006, a local owner of property at the closing could tell the Escribano (lawyer) that they are using the proceeds to purchase another property and avoid the 1.5% transfer tax. The law never made the Escribano ask for any kind of verification and most people didn't pay this 1.5% tax at the closing of their property. Now, when the sellers go to sell, unless they have a special permit from AFIP showing they are buying another property, the Escribano is obligated to withhold the 1.5% transfer tax at the closing. Also, many locals have never paid their asset taxes on their property and AFIP is cracking down to make sure they have paid all past asset taxes on their property.

Also, keep in mind there is 0% Capital Gains taxes only if you purchase as an individual. Many foreigners are advised to purchase as a Corporation but their lawyer or realtor never explained to them they will face a 35% Capital gains tax when selling if they purchase as a corporation. Keep this in mind when you go to purchase your property.

There is a stamp tax "impuesto de sellos" that is 2.5% when you go to purchase a property and it is split 50% with the buyer/seller. Each sides splits 1.25% for the seller and 1.25% with the buyer. Some sellers ask the buyer to pay for the entire stamp tax and they have that right. If nothing is specified on the offer, the tax is legally split between both parties.

For the most updated information and updates on tax laws, visit our direct website at www.mikesapartmentsba.com

© The content on our page is copyrighted material. Please do not try copying it and pasting it to your own website and trying to pass the content off as your own work. Please email us to request permission to repost the material and you must cite our website and President of our company as the source of the material.

Annual Property Taxes

El Cabildo

For those of you that aren't familiar with Argentina and the local Porteños, they HATE paying taxes. None of us likes paying taxes but these Porteños tax tax evasion to a new level. I have traveled around the world but I've never seen anything like the system here.

Basically there is a "white" system and a "black" system that the locals talk about. Many businesses in Argentina have two sets of books. A "white" one which is the legal income they make; and a "black" system which is undeclared income. I can't say that I blame them for their thinking. The government has been stealing from its own citizens for centuries. The locals tell me that if they actually saw the money going towards legitimate projects then they would pay their fair share. Instead, they feel like any money they pay will only go into the pockets of the government and its politicians.

Again, I don't blame how the locals feel. Transparency International is a well respected organization that is devoted to combating corruption around the world. It is a non-governmental agency that is known for helping to improve against corruption in civil society, business and governments. Transparency International lists Argentina as one of the most corrupt countries in the world to do business in. Only worse are countries like: Libya, Ethiopia, Zimbabwe, Iraq, Angola, Congo, Nigeria and Haiti. Argentina always tries to compare itself to Europe but they are listed with some fairly shady countries in this survey.

Before I moved to Argentina I saw this survey and told myself there is no way that report could be accurate. After moving here and doing business here I am wondering if Nigeria and Haiti should be rated higher than Argentina. Yes, it is that bad.

When I asked many locals about the annual property tax (asset tax), they told me they don't pay an annual property tax (asset tax). It was mind boggling to me that there was a property tax (asset tax) that some locals seemed to pay and some did not. It's technically an "asset tax". It doesn't really matter what you call the tax, there is a tax that is due each year based on the value of your property or assets owned in Argentina.

As amazing as it is to think about, there is no actual property/asset tax bill that you get in the mail or delivered to your property. In the USA, we dread getting that property tax bill every year at the end of December or the beginning of January. Those of us with no children (or those that have children and sending them to private schools) always complain about how life is unfair and we are paying too many taxes. Complain as we might, we are still accountable to pay our fair share of our property taxes. Here in Argentina, you don't get an actual property tax bill. It is YOUR responsibility to pay this tax to the AFIP (tax office).

As a foreigner that is purchasing property in Argentina, it is ESSENTIAL that you pay this property tax. When you go to sell your property you must get the blessing of the AFIP office via a certificate/permit saying you are up to date on your property taxes. If you aren't up to date you will not be given this certificate. Not only do you have to pay the back taxes but there is a penalty of up to 25% for each year that you didn't pay the property taxes.

For all the economic problems in Argentina going on, one would assume the government would make paying this tax very easy. WRONG. The government won't allow you as a foreigner to pay this tax. Yes, you heard this correct. You must hire an accountant to prepare this property tax for you. Most of these accountants can easily prepare it for not a huge sum of money but not cheap either. I use one of the most respected accounting firms in town and I was charged about u$s 500 to prepare mine.

There are cheaper accountants out there but I tend to use the best in the business when I do business in Argentina. You might think you are saving money by using someone with a cheaper fee but more times than not it will come back to haunt you when it's all said and done with most professional services here in Argentina.

As a non-resident you must have a local resident or corporation in good standing assigned as your local "tax representative". Our company can recommend ethical accountants that can act as your agent.

The property tax is 1.25% of the fiscal value of the property (based on what amount is recorded on your title deed). Here is where things get tricky. You might be asking yourself, "what is the actual fiscal value of the property"? That is a good question. You will find this phenomenon when purchasing property here. The sellers many times don't want to record the actual purchase price on the title deed.

They want to evade paying taxes on the actual amount so many times I have had the seller tell they wouldn't sell the property without recording a title deed of as low as 50% of the purchase price! I don't feel comfortable doing this and I've always paid the full price I paid. A few times I have actually had to pay the seller more just so I could close at the legal price I paid of the property.

So assume you purchase a u$s 100,000 property. You would be paying a 1.25% property tax bill. So you would pay an estimated $1250 per year in property/asset taxes, which is quite affordable compared to many places around the world.

Also, keep in mind there is an annual Tax called ABL Tax which you can pay annually in January of each year or if not it is billed 5 times a year split up in payments. It's easier to pay it once per year. The tax is not much. A few hundred dollars per year. This tax is charged to all properties in Buenos Aires. It goes towards garbage pick up, street cleaning and lights in the street. See the actual ABL bills from 3 apartments in Buenos Aires below.

I never liked paying taxes but always paid a lot of taxes in the USA. I use to always complain in my early years after graduating college. Then one day it dawned on me that if I was paying a lot of taxes it meant I was making a lot of money. I would rather make a lot of money and pay taxes then make no money and pay no taxes.


* I must point out that no realtors told me about this property/asset tax or explained this annual tax. Like most things, I had to research things myself to find out the answer. You will find that most realtors don't want to say or do anything that would cause you not to purchase property. I like to lay all the cards out on the table with my clients and explain everything in detail to them.

Some clients have read this website and thought I was foolish to explain everything in detail. I'm charging money to provide consulting where I give all my clients this information. If you are reading this website in detail, you will understand why it's important to have expert consultation when buying real estate here. You need someone to assist you so you don't overpay, refer you to ethical realtors, lawyers, money transfer firms, furniture stores, architects, plumbers, and painters.

Here in Argentina, you are a victim waiting to be scammed by each of those people that I mentioned. Paying an expert for consultation to avoid problems is the best money you can spend. Read our testimonials section to see how satisfied my clients are.

For the most updated information and updates, visit our main page at www.mikesapartmentsba.com

© The content on our page is copyrighted material. Please do not try copying it and pasting it to your own website and trying to pass the content off as your own work. Please email us to request permission to repost the material and you must cite our website and President of our company as the source of the material.

--- Monthly Condo Fee Bill

Condo Fee Breakdown


This is a monthly building "condo fee" bill that every apartment in Buenos Aires has. It lists all the property owners in the building by their name and apartment number. A bill comes every month and is given to the property owner. This is an unedited bill except for editing out part of the owner's names.

As I mentioned earlier, all the affluent families that I know here in Argentina have one thing in common. They all own multiple properties and most of them are renting them out. This is very evident when you look at a monthly expense from each building. On this one you will notice several people or familes own several apartments in the building. In this particular building, one person owns 5 individual apartments and another property owner owns 4 with a few people owning 3. I myself am in the process of attempting to purchase an entire building. I have made offers to every tenant in the building to purchase their property. It will take some time but slowly I believe it will happen over the next several years. I already have purchased several in this building. I approached the individual owners privately thus avoiding the 3% realtor's commission.

Something interesting to note on a condo fee is that it lists the "saldo anterior" (previous unpaid balance) for each property owner. It's a way to basically shame the owners into paying on time. If your neighbor is behind on his bills, everyone in the entire building will know. Of course, some owners simply don't care what their neighbors think. I own a few apartments where the owners haven't paid a condo fee in several years. It is frustrating dealing with these kind of people. They don't pay it because they know that if the building condo association wants to take legal action they must initiate a suit in court. The legal system here is so slow that it would probably take 2 or 3 years before it would be heard.

As I noted previously, the bigger the apartment the more you will pay. In this particular building I pay 204 pesos (u$s 71) per month. All monthly condo fee bills are very similar to this one.

___________________________

This blog is many years old. If you want to see an updated page with recent examples of bills from November 2010 you can see them at this link below:

http://mikesapartmentsba.com/buenos-aires-real-estate-consulting-on-buying-and-selling-69/monthly-cost-of-condo-fees-&-utility-bills-114/

--- Telecom (Telephone) Bill

Telephone Bill


This is my last statement for an apartment I own in Recoleta. It is unedited except for removing the personal information and the phone number from it. The two main phone companies in Buenos Aires for residential and business service are Telecom and Telefonica. Both are priced similarly. Both companies are a nightmare dealing with if you are having a problem or trying to get something changed on your account. I will go into an experience I had below. First the important details of this bill.

The phone bill is billed monthly. You can see this one is 40.54 pesos (u$s 14) per month. My phone bills are usually exactly the same every month because I have what is called a "controlled line". I lease out my properties so it's important that I block my clients from making calls to cell phones and long-distance calls. We provide a cell phone for those type of calls. Only calls to local numbers are permitted with this kind of system. There is a pre-determined credit every month (usually around 30 pesos). Once that credit/time is used, the guests need to buy pre-paid calling calls to make calls but they can still receive calls unlimitedly.

Dealing with the phone companies is a frustrating process. When I first moved here, even though I had met some local friends that could do things for me, I purposely did everything myself so that I could learn how the system works here in Argentina. The system is broken. Just to make a simple change like getting a controlled line you would think you could request that over the phone. That would be logical. Right? Very few things are logical in Argentina. You must go to the Telecom office where you don't even talk to a representative. You go to their office and guess what? They send you to stand in line so you can use their phone to call in to their office and request the change.

YES, you heard that right. You can't call to request the change from your home/office but you must go to Telecom's office to get on a phone. Ridiculous but this is how many things are done here in Argentina.

--- Edesur (Electricity) Bill

Electricity Bill


This is an actual bill from my last statement for another apartment I own in Recoleta. It is totally unedited except for removing the address and the account numbers.

You can see that the utility bill format is quite similar to a typical electricity bill you would receive in the USA. (Of course the utility bills in the USA are much more expensive). The electric bill is billed every two months so you can see that the past two months of usage was only 75.85 pesos (u$s 27) for TWO months of usage. This is for an apartment that is about 750 sq. feet. It has an average monthly occupancy of about 23 days per month with short-term rentals.

Notice the usage bar chart on the bill. If you are wondering how much the former utility bills were. In March 2005, I received the two month cyle and it was only 96 pesos (u$s 33) which covered the hot summer months. I had high occupancy those months as well so the Air conditioner was running everyday. The two month cycle before that was 69 pesos (u$s 24).

--- Metrogas (Gas) Bill

Gas Bill



Above is an actual gas bill I just received for one of my properties. It is totally unedited except that I deleted the name on the bill and the account number. The gas bill comes every two months. Most apartments have a gas water heater in the apartment that heats the apartment and also the hot water. Some apartments have central services that control the heat and the hot water but moretimes than not, it is individual.

You can click on the photo to enlarge it. Notice the very affordable fee of 25.79 pesos which is less than u$s 9 for two months. Keep in mind that it is just starting to get cold now as our seasons are reverse of that in the USA. Look at the usage bar chart on the bill. You can see the high usage months are July/August and September/October. Even then, the total gas bill is very affordable.

Monthly cost of Maintenance & Utility Bills

As if the cash flow from rentals and the capital appreciation potential weren't enough, another amazing benefit is the monthly expenditures of owning a property here are extremely low. In fact, my company has been contacted by several REIT's (Real Estate Investment Trusts), corporations and individual investors throughout the world. Although my company initially specialized in purchasing real estate to use as short-term rentals for foreigners, these investors realized that my company is highly respected in the real estate community in Argentina. We understand the real estate market and are able to evaluate fair prices for a particular property. A realtor's goal is to get you to spend the most money possible. After all, they receive a percentage of the total purchase price. My goal is to help you save the most money possible.

Many investors and corporations that purchase real estate around the world are recently flocking to Argentina and purchasing real estate. These investors have made it clear to me they have no plans on purchasing expensive furniture and lighting and furnishing their apartments. They have no desire to rent them out. Their goal is to simply purchase the underlying property for the capital appreciation potential. They are just starting to see what I realized several years ago. The real estate market here has tremendous upside potential for capital appreciation. The beauty is that because the utility rates are so low and the property taxes are only 0.75% per year, they can simply buy and hold for a few short years and then sell at a tremendous profit.

I personally know several people that are buying and selling and making 10% - 20% profits after only a few months. I have publically posted on various messages boards that I believe real estate prices will continue to go up over the next decade. People in Argentina have called me a visionary for what I am doing. To me, it's very clear and so plain to see. No matter what problems or crises occurs (and Argentina seems to have one about every 10 years), real estate has always been a safe haven if it is purchased in the right areas and you are not overpaying for that piece of property. I believe that traditional mortgages will become available in the future. When this does, property prices are going to continue to escalate just as it has done all over the world. I have traveled all over South America and there is nothing like Argentina. Buenos Aires is a special city.

Add in the fact that investors from all over the world (especially the USA, UK, Europe and Asia) are coming to Argentina and driving up prices. Property owners in the USA and UK have experienced tremendous capital appreciation on real estate they bought several years ago in places like London, New York, California and other cities. They believe the upside potential is limited and have sold their properties and now are looking for the next good real estate play. It's no coincidence that they all are coming to Argentina. The British Sterling and the Euro are extremely strong right now. Consider that all property here in Argentina is priced in u$s and the property is extremely affordable for these Europeans.


Remember that all utility bills and monthly expenses are in Pesos. The exchange rate will NEVER go back 1:1 against the u$s. I believe it will never go 2:1. I publically posted back in 2002 that I believe a fair value was between 2.75 to 3.25 against the u$s. That has remained true. When the exchange rate went as high as 3.8 against the dollar I saw that the dollar was artificially too strong just as the peso had been artificially too strong for over 10 years. I took a significant portion of my savings and I started purchasing Pesos. That proved to be a good strategy. After I moved to Argentina in 2004, I converted all those Pesos back to u$s dollars at an exchange rate of less than 2.95. The exchange rate can't be artificially high with the dollar or the peso. A free floating currency system will always balance itself out over time.

All apartments in Buenos Aires have a monthly maintenance fee. A sort of "condo fee". The monthly fee covers any building repairs, security or doorman expenses, upkeep of the building or painting of general areas, cleaning of the building, insurance and any other general fees. The apartments are individually owned but the tenants all split the expenses based on how big their property is. If you own a garage, you will be expected to pay more than someone that doesn't have a garage. Condo fees range on average for a u$s 100,000 apartment from 125 pesos (u$s 43) to about 500 pesos (u$s 173) for a building with a lot of amenities like a pool, gym, jacuzzi, etc. The average range is around 300 pesos per month.

Some utility bills like the telephone, cable bill, and high-speed Internet bill (if you choose to get that service) come every month. Other utility bills like the water, gas and electric bill come every two months. There is something called an ABL tax that all property owners pay. It comes quarterly and on average it is about 350 pesos (u$s 121) per year for a property valued at $100,000. You have the option of paying it quarterly or yearly. There is also a property tax that I will go into in a separate section.

Make sure you buy property insurance immediately after signing the boleto. Property insurance is inexpensive and will cover you if there is a fire. The building maintains insurance to reconstruct the building but I still always purchase insurance on my apartments and the contents of my apartments. I spend about u$s 25,000 on average in each apartment so this is essential that insurance is purchased from a reliable company. We provide all of our consulting clients with referrals to dependable and affordable companies. The typical cost is about u$s 17 per month.

A phenomenom very strange here in Argentina is that many utility bills come in the name of the previous owner maybe 5, 10, 15 or 20 years ago. Since there is no credit system in Argentina, people aren't worried about leaving their name on their utility bills. If you don't pay for a utility bill, they simply shut it off. That simple. I have changed many utility bills in my name once I buy an apartment but several still don't have my name. Why? Because these utility companies make changing them a nightmare. You have to wait in line personally for up to hours. I can't send an employee to change some of them. I have to do it myself. I don't have time to wait in line hours. The system has been like this forever so people never bother to change their name on their utilitity bills.

These companies make it impossible sometimes. Case in point, dealing with the phone company is a frustrating process. When I first moved here, even though I had met some local friends that could do things for me, I purposely did everything myself so that I could learn how the system works here in Argentina. Simply put...it doesn't work. The system is broken. Just to make a simple change like getting a controlled line you would think you could request that over the phone. That would be logical. Right? Very few things are logical in Argentina. You must go to the Telecom office where you don't even talk to a representative. You go to their office and guess what? They send you to stand in line so you can use their phone to call in to their office and request the change. YES, you heard that right. You can't call to request the change from your home/office but you must go to Telecom's office to get on a phone. Ridiculous but this is how many things are done here in Argentina. It's managable if you know how to deal with these companies and know what to expect. Many foreigners are deluded into thinking everything will be the same as their country. They couldn't be more wrong.

You will notice on almost all utility bills there is a code to pay electronically. Once you open a local bank account you can pay all your bills online instantly. Most people stand in line and pay their bills and it can take hours. It's a very primitive process. I am set up to pay all my clients bills online for them quickly and instantly. You can print a receipt to document that you paid the bill. It's advantageous to set up directly debit with you credit card or debit card with as many utilities as possible.

Several times I have received a notice they were going to shut off my electricity or gas within 24 hours. I never received the bills. It doesn't matter to these companies. In the beginning I did not know how it all worked out. Now I have employees whose only job is to pay bills. It can be a full-time job.



* All u$s price amounts are at the current exchange rate which is 2.89 : 1 with the u$s.