On October 10th, the Congress passed Law No. 27737 (the “Law”) which amends the Argentine Civil and Commercial Code concerning lease agreements. Likewise, the Law brought tax modifications linked to the lease of real estate, regarding the Simplified Tax Regime for Small and Medium Taxpayers, personal property tax, tax on credits and debits, and income tax.
Subsequently, on October 17th, the National Executive Power published the relevant notice in the Official Gazette, stipulating that the effective date of the Law was October 18, 2023, and that it must be in force from fiscal year 2023, onwards.
Among the main reforms to lease agreements, we can highlight the following:
- The minimum term for the lease agreement of real estate is three years, unless: (i) the parties have expressly agreed a longer term; (ii) the property is an embassy, consulate, or headquarters of an international organization, or is occupied by consular or foreign diplomatic personnel; (iii) the real estate is leased for tourism, rest or similar purposes or any other temporary purpose in the interest of the lessee. It is presumed – unless proved otherwise – that, if the term of the agreement exceeds 3 months, the agreement was not made for such purposes; (iv) the property is used for storage of goods; (v) the property is used as a stall at markets or fairs; or (vi) the agreement was executed for a specific purpose set forth in the agreement, which must normally be fulfilled within a shorter period than the term agreed upon.
- Concerning the conservation of the real property, the Law provides that the lessor must conserve the property so that it is used in accordance with the purposes set forth in the agreement and is also responsible for the repair of any deterioration caused in its quality, or defects, originated by any reason which is not attributable to the lessee If the lessee notifies the lessor of the need for urgent repair, and the lessor refuses or fails to respond within 24 hours of being notified, the lessee itself may carry out the repair and at the lessor’s expense. If it is not an urgent repair, the lessee must call upon the lessor to make the pertinent repairs within a period of not less than 10 calendar days from the receipt of the notice (once such term expires, the lessee can make the repairs at lessor’s expense). All notices sent to the address provided by the lessor in the agreement will be deemed valid (even if the lessor refuses to receive them or if the lessor cannot be notified for any reason attributable to the lessor).
- Regarding early termination, the Law proposes references to be considered when calculating the sums of money to be paid by the lessee to the lessor.
- Regarding adjustments to the rental price of residential real estate, the Law provides that it must be stipulated in national currency and for monthly periods. Adjustments may be made to the stipulated price and the parties can determine their periodicity and in terms of no less than a six-month period. Adjustments must be calculated a coefficient formed by the smallest variation that arises from comparing the average of 0.9 of the variation of the Coefficient of Salary Variation (CVS), published by the INDEC and the variation of the Reference Stabilisation Coefficient (CER), published by the Central Bank of Argentina.
- Regarding the advertising of the rental price of residential real estate, the Law determines that it must be made in national currency (i.e., preventing it from being made in dollars or in any other foreign currency).
- Regarding the publication of statistics, the Law provides as a new obligation for the Secretary of Housing, the periodic reporting, updating, and dissemination of statistical information related to the status of leases with residential purposes, identifying the rental demand and the number of tenant households, housing demand for social rent, beneficiaries reached, and the measures adopted for its fulfilment
With regard to the tax reforms, the Law amended the following:
- Simplified Tax Regime for Small and Medium Taxpayers: Within the limit of 3 simultaneous activities carried out by a taxpayer in order to be included in the Simplified Regime (“monotributo”), if one of them is a property rental activity under registered contracts, it will only be considered as a single operating unit, regardless of the number of properties affected. The Law also establishes that those persons whose income comes only from the lease of up to two properties will not have to pay “mono-tax”.
- Personal Property: The Law adds a new exemption to the payment of such tax for those properties that are intended to be rented as homestead through registered contracts, provided that the value of each one is equal to or less than the amount contemplated in the second paragraph of Section 24 (Title VI of Law No. 23966). In other words, providing that the value of each one is less than or equal to thirty million Argentine pesos (ARS 30,000,000).
- Credits and Debits: The Law incorporates a new exemption to the payment of credits and debits tax on credits and debits in bank accounts (Caja de Ahorro and Cuenta Corriente) used solely to carry out transactions associated to the activity of renting real estate as housing (when those agreements are duly registered).
- Income tax: The Law incorporates a new deduction assumption: 10% of the total annual amount of rentals of real estate leased for homestead purposes may be deducted from the profit for the tax year. This deduction may be made by both the lessor and the lessee, in addition to other applicable deductions.
It is worth noting that those lease contracts executed before the entry into force of the Law will still be governed by the previous regime, undergoing an annual update in its price.
