Implementing Regulations of the Rural Lands Law

After the repercussions generated by the approval of Law No. 26,737 (the “Rural Lands Law” or “RLL”), the President has enacted the implementing Decree No. 274/2012 (the “RLL Regulation”), which was published in the Official Gazette on February 29, 2012.

The RLL Regulation clarifies the scope of some of the RLL’s provisions but maintains some of the questions that arise from the RLL and, at the same time, raises new issues.

1. Main provisions of the RLL Regulation

Below is a brief summary on the main provisions of the RLL Regulation.

a) For the purposes of determining the extension of the rural lands located in Argentina, the Provinces shall provide the following information to the National Registry of Rural Lands (the “National Registry”), within 60 days as from the date of approval of the RRL Regulation:

1. Its total surface and that of its departments, municipalities or equivalent political divisions, discriminating between rural and urban lands. In the absence of such information, the Inter-ministerial Council of Rural Lands (the “Inter-ministerial Council of Rural Lands”) shall determine the rural lands.
2. The total amount of rural lands owned by foreign individuals or legal entities, or possessed by foreigners.
3. The list of foreign companies or local companies with foreign shareholders, registered in their jurisdiction.

b) For the purposes of the obligation to inform any modification in the capital stock of foreign legal entities that are owners or possessors of rural lands, the following is provided:

1. Any modifications in the capital stock shall be reported by the entity’s board, and, in the case of foreign companies, by its legal representative.
2. The obligation shall be fulfilled by means of the filing of a sworn statement form which is attached to the RLL Regulation.
3. In case of breach of this provision, the National Registry shall report this situation to the Federal Tax Authority and to the Financial Information Unit in order that these agencies investigate the fulfillment of all tax and money-laundering prevention obligations of the legal entities or individuals and assets involved. In the case of legal entities, this investigation shall be extended to their shareholders/partners, managers and legal representatives.

c) It provides for the districts that comprise the “core area”, in which, according to Section 10 of the RLL, ownership or possession by the same foreign owner shall not exceed 1,000 hectares of the “core area”.

d) Regarding the “equivalent surface” in which the 1,000 hectares cap established for the “core area” is applicable, it is repeated that the Inter-ministerial Council shall define, at the Province’s proposal, the equivalences to the core area. As long as the equivalent surface is not determined, the 1,000 hectare cap shall be applicable to the whole territory.

e) Regarding the prohibition of ownership or possession by foreign individuals or legal entities of rural lands that “comprise or are located beside permanent and significant bodies of water” provided by Section 10 of the RLL:

1. The definition for permanent and significant bodies of water is provided.
2. It is pointed out that the enforcement agency will employ restrictive criteria when granting certificates in the case of lands that involve bodies of water, even if they do not respond to the definitions provided.

f) For the purposes of the obligation to inform the ownership or possession of rural lands by foreign legal entities, it is established that:

1. The obligation will be fulfilled by means of the filing of a sworn statement form which is enclosed in the RLL Regulation.
2. If a same foreign individual or legal entity owns or possesses more than one estate, it shall have to file a sworn statement for each estate.
3. In case of breach of this provision, the National Registry shall report this situation to the Federal Tax Authority and to the Financial Information Unit, to the same ends and with the same scope as was pointed out in point b) iii) above.

g) Regarding the validity of the authorization certificates and the granting of acts transferring property rights or assigning possession rights over rural lands, it is established that:

1. The certificate will be valid for 60 days as from its granting.
2. The notary public or intervening professional shall report the transaction performed during the term of validity of the authorization certificate, within 20 days as from its execution to the National Registry.

h) Lastly, it provides for the administrative procedure by which the investigation of breaches shall be substantiated, and it sets forth the following penalties in the event of breach of the requirements and/or obligations of the RLL or the RLL Regulation, as well as for the obstruction of the National Registry’s auditing:

1. Warning: when the breach is not significant, as long as there is no record of a prior breach that might have taken place in the immediate past 2 years.
2. Fine: for up to an amount equivalent to 1% of the transaction value or the tax value of the property, whichever is higher.
3. Disqualification for a term of 6 months to 2 years to request authorization certificates from the National Registry, applicable to intervening professionals.

2. Pending issues

The RLL Regulation has not clarified certain issues that were, for the most part, ambiguously regulated by the RLL, and which needed and continue to need clarification.

In particular, the RRL Regulation has not specified the scope of Section 3 of the RLL or of the information obligations provided in said Section 3 and in Section 12 of the RLL.

Additionally, the Federal Government has not yet informed the effective set-up of the National Registry, which is the enforcement agency of the RLL.

In these circumstances, in order to better understand the scope of the limitations imposed on foreign individuals or legal entities, it will be very important to follow the criteria that govern the application of the RLL and the RLL Regulation closely, along with the complementary regulations that the competent authorities may enact.