What You Need to Know before Buying Agricultural Land in Argentina
Argentina is one of the world’s breadbaskets. Blessed with mild climate, fertile soil and abundant water, it has become an increasingly attractive opportunity for investors. Before you buy your crop farm or cattle ranch in the Pampas, the sheep ranch in the Patagonia, the resort in Bariloche or the winery in Mendoza, you need to understand a few things specific to Argentine law and practice.
We offer answers to eight questions as a starting point.
As with anywhere else in the world, before you buy, seek the advice of knowledgeable tax and legal counsel.
Are there restrictions on foreign lands ownership?
Yes but the Macri administration has taken action to relax them somewhat. Let us take a closer look. The Rural Land Law (Law No. 26,737) * was enacted in 2011 and supplemented by Executive Decree No. 274/2012 during the height of the Kirchner government’s frenzied nationalism. According to this law:
• No more than 15% of rural land within any national, provincial, county or municipal boundary can be owned by foreign persons, whether natural persons or legal entities.
• Natural persons or legal entities of the same foreign nationality cannot hold more than 30% of the preceding 15% limit. The definition of “foreign legal entity” includes entities with more than 25% of its capital owned by other foreign legal entities. A recent executive decree from the Macri administration has changed this to foreign persons directly or indirectly holding a majority of the votes.
• Rural lands owned by the same foreign investor may not exceed 1,000 hectares (2471,05 acres) in so-called zonas núcleos or “core zones.” These core zones represent the most fertile agricultural lands located in the pampa húmeda (provinces of Buenos Aires, Santa Fe and Córdoba). This 1,000-hectare limit may be apportioned among different core zones.
Subject to the above restrictions on foreign ownership, can I buy property anywhere in the country?
Not exactly. Foreign persons may not own land:
(i) located in “security zones” (unless authorized by the federal government or within 150 km. of a border or
(ii) containing or adjacent to a large water body.
Can I move money in and out of Argentina?
Yes. As of June 2017, individuals and legal entities may freely access and transfer or repatriate foreign currency.
What taxes can I expect to apply to my purchase and to my eventual sale?
At the time of purchase, a provincial stamp tax applies with rates varying between 1% and 4% of the sales price.
During possession, the owner (whether a legal or natural person) must pay a “minimum presumed income tax.” This tax is calculated as 1% over the value of the estate in excess of AR$ 200,000 (about US$11,500). This minimum presumed income tax can be credited toward any income tax payable in the next 10 years. Unlike residential property, agricultural land is not subject to personal assets tax.
Upon sale, the transaction will be subject to stamp tax (1% to 4% of the sales price) and federal income tax. For individuals, that federal income tax is levied in the form of a property transfer tax at the flat rate of 1.5% rate of the sales price, if the seller is not engaged in the business of buying and selling real property. Otherwise, the transaction is taxed at anywhere from 9% to 35%3. For legal entities, income tax is levied at a 35% rate over the capital gain. If the seller is a non-resident company or individual in the business of buying and selling a property, the applicable income tax rate is 17.5% over the purchase price (not the capital gain). Valued Added Tax (21%) does not apply to the sale of land but would be levied on the value of improvements on the property. Other tax info.
Is there title insurance?
No. Title insurance is not currently offered in Argentina. In the event of a seller’s failure to deliver clear and marketable title to the property, the buyer is limited to a claim for damages against the seller. If there is a defect in title due to an error in the official registry of title, the buyer is further entitled to sue the escribano (public notary) and the local government for damages.
What is an escribano and do I need one?
An escribano is a civil law official serving in the capacity of a public notary (for purposes of attestations) and as a public official (with the power of conferring deeds of title). In Argentina, the escribano acts as a combination of attorney (drafting the documents of title), title insurance company (assuring quiet title based on the escribano’s review of public records and registration of the deed) and escrow agent (charged with collecting and prorating all costs and taxes). And yes, you will need one when purchasing land in Argentina. 2 Communication “A” 6244 of the Central Bank of the Argentine Republic. 3 A current tax reform bill intends to replace the property transfer tax with an income tax at the effective rate of 15% over the capital gain.
Should I worry about expropriation or discrimination?
Like many other places in the world, the government retains the power to expropriate for public use. But “public use” must be determined in accordance with Argentine law and the owner must be compensated for the expropriation. When it comes to private property in the form of land ownership, Argentina ranks reasonably well on the Rule of Law index. Except as noted above with respect to acquisition, Argentine law does not distinguish between national and foreign ownership and discrimination based on nationality is not a concern.
Is there anything else I should consider before buying?
Yes. A foreign buyer of rural land must obtain a certificate from the Registro Nacional de Tierras Rurales (the National Rural Lands Registry) as a condition to the acquisition of the property. This certificate is not required if the property is conveyed by inheritance to a statutory heir.
Purchases of rural lands are not covered by Argentina’s bilateral investment treaties. This means that any problem encountered by the investor will be subject to the Argentine courts, instead of an international arbitration tribunal.
The foregoing article is based on publicly available information and given for informational purposes only. It is not intended as legal advice or as a comprehensive analysis of the matters referred to herein.
Source: Wiener Soto Caparros
1 The law specifically excludes those individuals who can show (i) 10 years of continuous residence in Argentina;
(ii) having had children born in Argentina and 5 years of continuous residence in Argentina or
(iii) having been married to an Argentine citizen for 5 years and 5 years of continuous residence in Argentina.
2 C communication “ A ” 6244 of the Central Bank of the Argentine Republic .
3 A current tax reform bill intends to replace the property transfer tax with a n income tax at the effective rate of 15% over the capital gain.