Trusts and stamp tax in the City of Buenos Aires

On March 17, 2004 Tribunal “A” of the Argentine Tax Court (Tribunal Fiscal de la Nación) solved the case “Banco Hipotecario S.A. s/ recurso de apelación – Impuesto de Sellos”, where it was discussed the applicability of the stamp tax to a public deed by which the title (dominio) of real estate units located in the City of Buenos Aires was transferred.

As stated in the summary contained in the sentence, the facts and circumstances were as follows: an entity (in its character of trustor) transferred to Banco Hipotecario S.A. (in its character of trustee) the title of certain real estate units located in the City of Buenos Aires, under the provisions of Law No 24,441 (“Trusts Law”). Some of the real estate units were going to be used for residential purposes and others for commercial purposes.

Taxpayer’s main argument to hold that the deed was not subject to the stamp tax was that it was not an onerous transaction, because its purpose was to secure a construction project. Furthermore, it argued that all the real estate units were to be used for residential purposes. On the other hand, the tax authority argued that the deed was subject to the stamp tax on the grounds that it was a transaction under which title of the real estate units was transferred. Furthermore, the tax authority accepted to apply the exemption to the portion of the deed related to the real estate units to be used for residential purposes.

The Argentine Tax Court supported the tax authority’s position, holding that the deed was subject to the stamp tax except for its portion related to the real estate units to be used for residential purposes. The main arguments of the sentence are:

(i) According to the nature of the trust and of the transfer itself, the trustee held title to the real estate units, having the power to administrate and/or dispose of them. Following this, the Tax Court concluded that under the stamp tax law, any instrument by which title to real estate units is transferred is subject to tax, even if what is transferred is the “fiduciary ownership”.

(ii) The trust agreement was not neutral because it provided that the trustee would receive a payment, consisting of a percentage of the value of the real estate units.

(iii) The exemption applied to the portion of the deed related to the real estate units to be used for residential purposes.

This case confirms the position of the same Tribunal held in the case “Grupo República S.A. – Tachella Costa, Alejandro s/apelación – Sellos”, in its sentence dated April 8, 2002.