Rental income taxes are punitively high in Argentina
June 12, 2018
Effective Tax Rate on Rental Income
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Foreign nationals residing for less than six months per year in Argentina and who do not have any visa (permanent or temporary) are taxed only on Argentine-sourced income. Nonresidents do not enjoy the standard income tax deductions. Married individuals are assessed and taxed separately but income from property acquired during marriage is allocated to the husband, except in certain special cases.
National tax collection is the responsibility of the Federal Administration of Public Revenue (Administracion Federal de Ingresos Publicos). The Argentine tax system is based on self-assessment. Individuals with significant non-wage income are required to make five advance payments towards their final tax liability, bi-monthly, from June to February, calculated as a percentage of the previous year's payments.
The tax laws establish very detailed rules on how tax is to be calculated. It is important to keep records. Penalties for failing to make tax returns or omitting tax income can be 50% to 100% of the tax obligation.
INCOME TAX (Impuestos a las ganancias)
Nonresidents' income is subject to a withholding tax of 24.50%, calculated on presumed revenues, in a manner that varies depending on the type of income.
Real estate rental income from property located in Argentina is subject to tax at a flat rate of 24.50%, withheld by the tenant. The taxable income is presumed to be 60% of the gross income; therefore, the effective rate is 14.70% on gross rental income (i.e. 24.50% tax on 60% of the gross income).
The taxpayer may choose to be taxed on the actual net income. The actual expenses incurred which are necessary for obtaining the rental income, or preserving its source can be deducted. Expenditures are deductible only if they are properly supported by valid documents. The withholding tax is 35% of the amount thus established.
Depreciation is deductible on a straight-line basis; the normal annual rate for real property is 2% of the building or construction costs plus expenses incurred in connection with the purchase of the property, such as taxes, realtors' commissions, etc. Improvements carried out on rented properties are also subject to depreciation, in which case depreciation will be computed as a deductible expense by the renting party, as opposed to the owner of the building.
Gross Revenue Tax (Impuesto sobre los ingresos brutos)
Gross revenue is taxed by the Provincial Government.at rates ranging from 3% to 5%, depending on the jurisdiction. However rental income paid to individuals is exempt from this tax, provided the maximum number of rented real properties does not exceed the maximum established by each jurisdiction, i.e.
- Buenos Aires City: two properties, provided the rental value does not exceed ARS1,350 (US$47)
- Province of Buenos Aires: two properties, provided the rental value does not exceed ARS7,000 (US$241)
Rental contracts are subject to stamp duty by the Provincial Government at rates varying between 0.5% and 2.5%. In Buenos Aires City, the tax rate is 0.5% but rental contracts of real properties that are not used for commercial activities are exempt.
VALUE ADDED TAX (Impuesto al valor agregado)
Rental value corresponding to real estate properties belonging to taxpayers exceeding ARS1,500 (US$52) a month is assessable at 21%, except for rentals of residential properties, properties rented to the Argentine State or rural properties related to farming activities.
Sale of real estate properties is subject to capital gains tax at a flat rate of 15%. Acquisition costs and related expenses, which may be adjusted for inflation, are deductible when calculating the taxable capital gains.
Tax on Personal Assets (Impuesto sobre los bienes personales)
Aside from income tax, nonresidents pay personal assets tax to the national government on their assets owned in Argentina, except on urban properties used to generate profits. The tax on personal assets is levied at a flat rate of 0.25%.
The threshold amount was ARS950,000 (US$32,759) in 2017, and will be increased to ARS1.05 million (US$36,207) in 2018.
Business Net Worth Tax (Impuesto a la ganancia minima presunta)
Urban properties used to generate profits owned by nonresidents are subject to business net worth tax at 1%.
Local governments also assess the cadastral value of the real estate and levy a real estate tax. The taxable base for the local taxes will not exceed 80% of the property's market value. The tax rates are 1.20% for rural properties, 1.35% for sub-rural and sub-urban properties, and 1.50% for urban properties.
The municipality also imposes a charge of 0.55% for lighting, sweeping and cleaning services.
Income and capital gains earned by companies are subject to corporate income tax at a flat rate of 30%. Income-generating expenses are deductible when calculating taxable income. When calculating taxable income, income-generating expenses are deductible, such as advertising costs, amortization, depreciation, interest expenses, local and property taxes, insurance premiums, bad debts, gifts, and representation expenses.
The corporate income tax rate is 30% for the two fiscal years beginning 01 January 2018, and it will be reduced to 25% for the subsequent periods.
Gross Revenue Tax (Impuesto sobre los ingresos brutos)
Gross revenue is taxed by the Provincial Government. at rates ranging from 3% to 5%, depending on the jurisdiction.
Business Net Worth Tax (impuesto a la ganancia mínima presunta)
Companies are subject to a minimum deemed income tax on their properties at a flat rate of 1%. Immovable properties used to generate profits up to ARS200,000 (US$6,897) are exempted from this tax. The value of investments on the construction of new business properties and the improvements on existing properties are not taxable. This tax can be credited to the company's income tax.
Capital gains earned by companies are subject to corporate income tax at the rate of 35%. Deductions that are allowed for the capital gains tax must be wholly and exclusively incurred for the purpose of the company's trade and be related to the taxable profits.
For nonresident companies, the taxable income is presumed to be 50% of the gross capital gains; therefore, the effective withholding rate is 17.5% on the gross gains (i.e. 35% tax on 50% of the gross income).
Nevertheless, nonresident companies can choose to deduct, from the gross income, the actual expenses incurred in producing the capital gains and be taxed at the 35% rate on the net income.