New Regime Aims to Promote Real Estate Projects

The Regime aims to promote the development of or investment in real estate projects under Law No. 27,613 published in the Official Gazette on March 12, 2021. Under the new law, applicable real estate projects are defined as private works (constructions, extensions, installations) starting March 12, 2021 or that are less than 50% complete on that date and which, pursuant to construction codes, are subject to authorization or approval from the competent authority.

The Regime grants investors certain benefits and includes a program to voluntarily submit a statement of assets in national and/or foreign currency for real estate investments.

1. Investor benefits

The law grants investors a Personal Assets Tax exemption for real estate investments made by December 31, 2022, either directly or through third parties, from the fiscal period in which the investment is made until the end of the project, its adjudication or the alienation of the investor’s right and/or participation, whichever occurs first, up to a maximum of two fiscal periods.

The exemption includes assets whose possession, as of December 31 of each year, represents an investment, as long as those investments have been made in duly declared national currency and/or result from the purchase of national public securities in duly declared foreign currency.

In addition, the equivalent of 1% of the value of real estate investments may be computed as advance payment of the Personal Assets Tax if certain standards are met. These standards include the ban against generating tax credits and the possibility, for the fiscal periods of 2020 and 2021, of transferring any remaining balance to any fiscal periods thereafter.

Likewise, owners of property or rights over real estate will enjoy the deferral of the payment of the Transfer of Property Tax for individuals and undivided estates or Income Tax, as appropriate, when the taxable event is triggered by the transfer and/or alienation to companies that develop real estate projects, between the date of entry into force of the Regime and until December 31, 2022. This will be completed when the project effectively begins within no more than 2 years from the time the property or the right over it is transferred and/or disposed of.

The tax payment will proceed at the time or fiscal period in which the holders: (i) receive compensation in national or foreign currency; (ii) assign or transfer in any way the participation or rights that they received as compensation; (iii) the project finalizes; or (iv) the unit they received as compensation is granted; whichever comes first.

2. Normalization of the possession of national and foreign currency for real estate projects

The law includes a program for individuals, undivided estates and companies to voluntarily submit a statement of assets in national and/or foreign currency for real estate investments, within 120 days of the Law’s entry into force.

These funds must be deposited in a special account, known as the “Cuenta Especial de Depósito y Cancelación para la Construcción Argentina (CECON.Ar),” pursuant to the terms established by the Argentine Tax Authority and the Central Bank of Argentina.

The funds must only be used for the development of or investment in real estate projects throughout the country. In addition, those funds can also be temporarily used to purchase national government securities for the purpose of their immediate investment in one of the promoted projects.

In addition, a special tax is established, which will be determined on the value of the declared possession, expressed in national currency at the time of deposit in the special account. The applicable rate is variable and time-dependent: (i) for those who submit their statement from the time of entry into force of the law and within the following 60 calendar days, the applicable rate is 5%; (ii) once that 60-day period has lapsed and within the following 30 days, it is 10%; and (iii) thereafter and for the following 30 days, 20%.

The tax will not be deductible or considered as an advance payment for Income Tax purposes.

Any party joining the program will be required to previously waive the right to file any prior judicial or administrative tax claim. Similarly, those who have filed prior claims must withdraw all actions and waive any rights therein invoked.

Those who join the regime are not obligated to provide information to the Argentine Tax Authority about the purchase date of the assets in their possession or the origin of the funds and will enjoy the following benefits:

 

• Exemption from section f), article 18 of Law No. 11,683 on unjustified estate increases;
• Release from all civil, commercial, criminal tax, criminal foreign exchange, criminal customs, and administrative penalties, if any;
• Exemption from paying unfiled tax statements, according to the standards established therein and concerning the following taxes, as appropriate in each case: Income Tax, Property Transfer Tax of Individuals and Undivided Estates, Tax on Credits and Debits in Bank Accounts and Other Operations, Internal Taxes, Value Added Tax, Personal Assets Tax, and Special Contribution on the Capital of Cooperatives.

The voluntary statement submitted by companies established in Argentina releases their partners from any corresponding Income Tax. The same applies to settlors, beneficiaries, and trustees of trusts established in the country.

Certain individuals and entities are excluded from the Regime, such as bankrupt individuals, those with standing tax and/or customs convictions, and public officials and their families, among others.

Lastly, the Regime was regulated on April 27 through (AFIP) General Resolution No. 4976/2021. For a detailed overview of the regulation, read the following article.