Bids, negotiations or transfers of real property for a price above AR$ 300,000 must be notified to the Federal Tax Authority

Resolution AFIP No 2,371 (the “Resolution”) requires individuals or companies which offer, negotiate or transfer real property to make a notification under the Property Conveyance Code (“Código de Oferta de Transferencia de Inmuebles” or “COTI”).

The Resolution aims at enhancing the already existing controls over the different stages involved in a real estate transaction to thereby reduce tax evasion, mainly relating to Transfer Tax and Personal Assets Tax.

The Resolution repeals the former information regime (as to real property) provided by Resolution AFIP No 3,580, as amended. As opposed to the repealed resolution whereby the information duty was only triggered when a transfer took place, pre-contractual stages also fall within the Resolution’s scope.

Accordingly, owners must make the COTI notification before making any offer, including offers published in any newspaper, on the internet or by any other means. In addition, the duty to make the COTI notification is also triggered by other acts capable of transferring ownership, such as “in kind” contributions (of real property) to companies, distributions as a consequence of a company’s winding up, or distributions from a trust in favor of its beneficiaries.

It must be noted, however, that cash contributions in favor of trusts (even if the trust has been created to buy land) need not be notified under the COTI because no ownership of real property is transferred. In addition to this, the Resolution expressly provides for certain exemptions from its regime, such as sales in the context of judicial proceedings, sales performed by foreign service personnel or governmental expropriations.

The owners of real property – or rights over real property in construction – the price of which exceeds AR$ 300,000 may choose to file the petition to obtain the COTI telephonically, over the Internet or even by sending a short message text (SMS). To such end, the owner must provide AFIP with data including the following, which will have the status of a legal declaration:

(i)                 individual or corporation tax ID (C.U.I.T., C.U.I.L. o C.D.I);

(ii)                sellers’s name (person or company name);

(iii)                percentage of ownership and percentage of the real property to be transferred;

(iv)               property type (house, condominium, garage, rural estate, etc.); and

(v)                location.

Owners may state that one or more real estate brokers have been involved in this transaction who, in turn, may accept or reject this statement. If involved, brokers must inform AFIP if a document providing the commitment to transfer the ownership has been executed and, if so, its price (for example, boleto de compraventa or reserva).

Once AFIP has received such information from the owner, AFIP will provide the owner with a unique code identifying the prospective transaction, with a 24 month validity period as from its issuance. During this period, the owner may modify the data or inform AFIP that the prospective transaction has been aborted.

Once the transaction is closed, the notary, when executing the deed, must verify that the COTI notification has been made and, if applicable, complete or amend the information that had been previously informed by the seller. In this regard, the notary must inform as to the data arising from the deed (basically, its date, deed number and agreed price).

The Resolution will be effective as from April 1, 2008, although bids, negotiations or transfers carried out beforehand also require the COTI notification as long as they are still in force (for example, if a pre-sale agreement has been executed and the deed is still pending).

The lack of the COTI notification does not prevent a transaction’s validity. Nevertheless, the Resolution instructs notary publics to acknowledge this fact in the deed and give notice to AFIP.

Furthermore, persons or companies (i.e. the seller, the notary and/or the broker as the case may be) which do not abide by the Resolution are subject to fines imposed by Law No 11,683 of Tax Proceedings, reaching AR$ 20,000 for each event of non-compliance.