The draft Tax Law for 2022 was recently submitted to the Chamber of Deputies of the Province of Buenos Aires, which contains several reforms to the Tax Code, and among them, to the tax liability modification regime in the Real Estate Tax, for the case of possessors in title of owner.
The current tax liability modification regime of Art. 169 bis of the Tax Code, was a novelty introduced as from 2019 by Law No. 15,079, replacing the previous “tax linkage/disassociation” regime, regulated by the repealed Normative Resolution (ARBA) No. 63/10.
The implementation of Article 169 bis of the Tax Code and its regulations (Regulatory Resolution (ARBA) No. 45/19) implied a transcendental change, since it determined the date from which the taxpayer status of the owner as taxpayer is recognized as of the date on which the procedure of communication of this circumstance is initiated, and also, conditioning this procedure to the non-existence of Real Estate Tax debt.
This significant change caused a “fictitious” Complementary Real Estate Tax to continue to be accrued, since the existence of the acquiring holder as owner (through a purchase and sale ticket, participation in a trust, assignment, etc.) was not known and the property was kept within the remaining set of properties taxed by the Complementary Tax on the head of the owner of the property. This situation was aggravated at the time when, in order to carry out the procedure of communication of the existence of the owner as a new taxpayer, the non-existence of this “fictitious” debt for Complementary Real Estate Tax was required, the payment of which was repudiated both by the owner who had lost the economic availability of the property, and by the owner to whom the debt was alien. Finally, this rejection of the communication process became a vicious circle, which continued to accrue more debt with the passage of time, aggravating the situation.
According to the amendment intended to be introduced to the Tax Code by means of art. 99 of the Draft Tax Law for 2022[1], art. 169 bis would be worded as follows:
“The possessors as owner are taxpayers of the tax from the moment they acquire possession of the property in question, as long as they reliably communicate such condition to the Collection Agency of the Province of Buenos Aires, proving the date and the title by which it was acquired, in accordance with the procedure established for such purpose by the Enforcement Authority. It will be a condition for this that there are no debts accrued for the tax in its basic component as of the date of the communication.
The owners of the property may disassociate themselves from the tax by reliably communicating before the referred Collection Agency, the transfer of their possession as owner. It shall be a requirement to make such communication not to register, as of the date thereof, debts referred to the tax in its basic component and its accessories, and to comply with the other forms and conditions established for such purpose by such Authority.”
New rules for the modification of tax liability.
The new amendment proposed to article 169 bis proposes an intermediate change between the situation before and after its original introduction, with different effects and scope for the non-existence of debt requirement:
On the one hand, it is again considered that the character of taxpayer of the possessor as owner -and consequent loss of liability as taxpayer of the owner of the property- is acquired at the moment of possession of the property.
On the other hand, although the requirement of non-existence of debt is maintained, it is now specified that it refers to the debt accrued only for the Basic component of the Real Estate Tax.
From a harmonic interplay of both rules, it could be inferred that by recognizing the taxpayer status of the possessor as owner “retroactively” from the same date in which he acquires possession, and conditioned only to the payment of the Basic component, it should automatically imply the ‘elimination’ of the debt for the Complementary component that had generated that property, since this recognition would entail the “exit” of the property from the group of properties that it was part of until the date of delivery of possession. In other words, a successful communication process would imply the retroactive “elimination” of the “fictitious” debt for Complementary Real Estate Tax attributed to the owner of the property.
Temporal validity of the proposed reform
According to Art. 100 of the Draft Tax Law for 2022, the new wording of Art. 169 bis would be applicable only for tax liability modification proceedings initiated as from January 1, 2022, even if the possession to be externalized was acquired prior to that date.
In a first reading, this would seem to lead to the interpretation that the legislative change would not give the right to request the reimbursement or repetition of the “fictitious” Complementary Real Estate Tax that would have been paid in the framework of the communications that have been processed between January 1, 2019 and December 31, 2021, since the character of taxpayer would have been acquired -and lost, for the holder of ownership- in accordance with the regime currently in force.
Additional considerations
It should be noted that, according to the proposed new legal text, there would be a differentiation in the extension of the free debt requirement, depending on who is the subject initiating the communication procedure.
In this sense, according to the comparison of paragraphs 1° and 2° of the new article 169 bis, if the communication is initiated by the possessor as owner, only the payment of the debt for the accrued Basic Real Estate Tax would be required. However, if the procedure is initiated by the owner, the accessories, potentially including interest and fines, would also be demanded.
On the other hand, it is pertinent to point out that there is a potential risk of encouraging an eventual delay in the initiation of the procedure for the modification of the tax liability, since once enough time has elapsed, this could have the effect of prescribing the potential debt for Complementary Real Estate Tax that could correspond to the holder as owner, in the event that upon incorporation as taxpayer for that property, it is necessary to integrate it to a group of two or more properties previously owned, thus accruing -retroactively- a higher Complementary Real Estate Tax from the date of possession of the new property incorporated.
From the point of view of the owner of the property, in a similar situation and in the event that he/she has been sued for the collection of a debt for Complementary Real Estate Tax that includes the property sold, the eventual “retroactive” modification of the tax liability should lead to the abandonment of the judicial collection actions initiated.
Finally, and notwithstanding the proposed reform described above, the Complementary Real Estate Tax remains in force until 2022 and the Collection Agency is authorized to regulate the manner of its implementation.
Therefore, the constitutional questions related to the validity of this form of application of the Real Estate Tax, which has already been the subject of certain judicial pronouncements against its application, remain fully relevant.
[1] Bill according to the text presented by the provincial Executive Power before the Chamber of Deputies in the Elevation Message No. 3993, Expte. No. PE 15/21-22.
