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ARGENTINA: NEW REGULATION ON RURAL LANDS  

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By Alfaro Abogados

Argentine Executive Branch has recently enacted Decree 820/2016 which amends former Decree 274/2012 regulatory of Law 26.737 of “Protection of National Estate Property or Possession of Rural Lands”. Law 26.737, enacted in 2011, regulates the property and/or possession of “rural lands” by foreigners. Rural land is defined as all property that is outside the urban area, regardless of its localization or destination. The main purpose of the law of rural lands is to ensure that natural resources ownership remains in Argentineans citizens’ hands. In this sense, the law sets forth three limits to foreigners to own or possess rural lands:

·        Foreigners will not be entitled to own or possess above 15% of the total rural land in the country.

·        Foreigners of the same nationality as a whole shall not be entitled to own or possess more than 30% of the total allowed surface (15%). As well, such 15% and the 30% thereof will be applicable to provinces, municipalities or equivalent administrative entities where the rural property is located.

·        Rural land belonging to the same foreign owner shall not exceed 1000 hectares or equivalent surface according to its localization.

Law 26.737 was regulated by Decree 274 in 2012. The new Decree 820/2016 sets forth certain amendments to that regulatory decree. Among others, the following are the most important amendments:

·         The ownership of rural lands will be determined as from the correspondent Real Estate Registry.

·         In case of condominium, the surface will be considered pro rata of the respective portions of the co-owners.

·         In the case of foreign companies, the limit of 1000 hectares established by Law 26.737 will be considered applicable to the controlling foreign human person or legal entity pro rata of their participation in the controlled entity, or to the foreign controlling human persons or entities in case of joint control, or to human persons and legal entities in case there is no control.

·         It will be considered as foreign legal entities those in which foreign human persons or legal entities can control directly or indirectly the majority decisions regardless their participation in the capital stock.. It is presumed as foreign, unless otherwise demonstrated, the legal entity in which no less of 51% capital stock is owned by a foreign human person or legal entity.

·        All modifications in the participation in the capital stock of a legal entity owning rural lands must be informed to the National Registry of Rural Lands provided that:

·         As a consequence of the modification, the direct or indirect control of the legal entity has changed.

a)      It is a legal entity directly or indirectly controlled by Argentinean nationals and as a consequence of the modification in the participation it has become foreign legal entity.

b)      It is a foreign legal entity that as a consequence of the modification it becomes controlled by other foreign human person or entity.

c)      It is a foreign legal entity that as a consequence of the change in control it becomes directly or indirectly controlled by Argentinean nationals.

Public notaries who intervene in the transfer of rural lands contemplated in Law 26.737 must obtain an authorisation for such purpose granted by the National Registry of Rural Lands.

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