Here you will find more information on : Taxes in Argentina; the Peso; Mortgages and Insurance; Transferring Money from other countries; Why Invest in Argentina; Services we provide to Investors.
A. Why Invest in Argentina - INVESTING in Bricks and Mortar
INVESTING IN REAL ESTATE To state the obvious is to say that Real Estate has been and will continue to be one of the most stable, reliable and secure forms of investment, in any country. History shows that with increases in population and with much of that population concentrated in key urban centers, a demand increase will force price rises and gains in value. Furthermore, barring environmental disaster, most properties will exist long after most new start-up ventures have come and gone.
Buying real estate carries fewer risks than most investment strategies and is often more readily controllable by the investor. Few shareholders can exercise control over the company in which they have bought 1000 shares. Fewer investors still can stop dishonest executives from absconding with or completely wiping out their life savings, when the often seen schemes involving fraud, or false accounting practices come unstuck. How often has this become a reality recently ?
Banking in Argentina has also had its impact on customers who have lost significant sums of money in the closures of banks or the forced pesification of deposits previously held in dollars. Such an impact has driven many Argentines back to invest in real estate, as the ultimate secure investment.
Of course the property market is like any market. The ideal is to buy on a low and sell on a high.
However short term or long term your strategy may be, whether the plan is to do so within months or years, the aim should be to benefit financially from the investment. While enduring market lows, there are few other investments which can provide a secure roof over the head and a place to sleep whilst the investor waits for the cyclical recovery. Traditional real estate markets (family residential dwellings) show an almost constant and upward improvement and value gain over 5 years - in any country. If the investor has the ability to ride the lows, and wait for the highs, the potential gain can be almost be guaranteed.
INVESTING IN ARGENTINA An investment property has the potential of providing a significant income stream which can not only cover all the costs of carrying the property, but also a net positive cash flow during its ownership. Apartments now provide an intelligent accommodation alternative to traditional and expensive hotels for those people who would normally stay in a luxury 4 or 5 star hotel : business travelers and holiday makers alike. Of course, there is an up front investment in furnishing and fitting out an apartment that is to be rented to tourists. But, when done well (and this is a must), the benefits can be great both financially and moreso: an investor will always have a free and comfortable place to stay when in town.
Of course, an investor may decide to lock up a property and not rent it, perhaps not even furnish it, just await until he decides it is time to sell and reap a capital gain. Low property taxes and holding costs, along with the low costs of utilities (see the section on taxes) make this a very viable option.
Property values in Argentina over the years to come will continue to climb, given the basic facts that the country is one of the few remaining large, unspoiled, under populated, primarily democratically governed, resource rich countries which offers much as yet untapped opportunity to immigrants and investors from all over the world. And the government is keenly aware of this fact and, in some aspects is developing a progressive plan to provide investment opportunities to non-Argentines. In other aspects, the government of the day has a long way to go for the international investment community to breath calmly, without murmurs and questions about the reasons behind President Fernandez-Kirchner’s desire to be bossom buddy with the likes of Hugo Chavez (Venezuela).
B. RECENT CHANGES in Argentina
Tourism in Argentina has grown since 2001 to become one of the largest growth areas and a huge factor in the economic recovery of the country. A strong Euro, Dollar and Sterling has lead to an unprecedented boom here. As a result of this tourism, the world is becoming aware of the existence of a recovering Argentina and attention is turning to how this can be tapped into. Small and large scale investments involving major car manufacturers, hoteliers, crop producers, mineral extractors, food producers, retailers, technological research and development companies are constantly being announced and even state governments are investing in joint ventures. The Argentine medical profession is highly regarded in the world and has attracted much interest recently, offering a platform for great things in the future. Argentina has almost completed its negotiation and payments of its disastrous bond issues from the pre-2001 crash. And the IMF and international financial community, whilst a little perturbed by the governments firm intolerant attitude in negotiating, cannot deny that economic recovery and timely debt repayments has gone a long way to reaffirm Argentina’s position as a country heading in the right direction.
All this has positive and serious long term economic and social benefits for Argentina and the investors alike.
Today there is no simpler way to be an investor in Argentina than by buying real estate.
C. Services for Investors
Even before purchasing, investors should seek assistance by drawing on experience and the help of experts and professionals to aid in the purchase process via property lawyers (escribanos), accountants and tax advisors and even assistance in the complicated money transfer process.
We will personally assist in the identification of suitable properties, site visits, negotiations with real estate agents and the complicated process of making an offer through to the completion and purchase (escrituration).
A certain amount of documentation is required in Argentina before a foreigner can buy here and we will ensure that a client obtains the required documents needed.
Thereafter we can continue to assist in a hands-on manner, in such activities as the redesign of an apartment, decoration, renovation, redevelopment, furnishing, management and maintenance of a property. Sadly, part of the disadvantage of being a foreigner is that, if not careful or not well represented, many locals will and do seek to benefit from your naivety. We can eliminate that problem.
OWNING A RENTAL PROPERTY IN ARGENTINA - Investing to Rent
For clients that chose to rent out their apartments and others who have stayed in a luxury rental apartment, all know that there is the absolute need for providing a top quality apartment in an ever more competitive market.
For design and redevelopment, redecoration and furnishing, we work on an individual basis depending on the clients needs and objectives.
For examples of redevelopment projects we have carried out, see the section on Renovation and Decoration services.
FURTHER INFORMATION :
1. Taxes in Argentina
Taxes on Residential Properties
The information provided here is provided free and comes with a proviso that no liability will be taken for uptodateness of the information, as governments are want to change tax laws when they like.
This information has been gathered after much experience and after much learning since arriving here in 2002. No-one, especially the first real estate agents, ever explained to me clearly and concisely how the tax system in Argentina works and what taxes are payable on purchase, during ownership and on the sale of a property. There have been many tax law changes since 2002 as well, mostly tightening of loopholes and checks and balances and reporting methods, which till now hardly existed. I provide this information here so that an investor can benefit from upfront and frank advice and not suffer from any shocks or surprises. I can tell many war stories, and believe that the benefit I offer is that from such experiences, my clients benefit, as they do from an open and honest relationship.
As a client, I offer the service of providing to you the confidence and the protection necessary by using only reputable professionals.
Argentines are known to be masters of tax evasion. But as a foreigner I bring a different mentality to the country and believe that to pay all taxes as and when they are due is to assure me that there will be no nasty surprises down the road. That being said, as a foreign investor in Argentina, taxes on property are remarkable low compared to most other countries, and so there is no reason to feel that avoiding taxes is a great benefit.
And it is already evident how the government is changing its ways to clamp down on those who fail to declare properties and pay taxes. As such my advice to any investor is to be upfront with the tax department and avoid any problems or complications down the line, especially when it comes time to sell. We employ professionals who will ensure the complete and correct registration of property investments with the Argentine authorities, thereby ensuring painless property ownership.
TAXES in detail
Capital Gains Taxes - On Sale of a Residential Property Capital Gains tax on the sale of a residential property in Argentina, is at present 0%. That represents a large benefit. If you invest in a portfolio of properties for instance and decide to “fix and flip” them on a regular basis, then you may come under the scrutiny of the tax department as a speculator and in such cases, capital gains tax may be payable. Each circumstance of course depends on the investor and his or her needs, as such we work with experienced professionals to advise our clients, given their particular circumstances at the time of their initial investment and over time, as needs change and desires develop.
For clients who wish to invest in and create a portfolio of properties, we offer individual tailored advice, specific to the needs of that client.
Transfer Tax (ITI) There exists a Transfer tax called ITI, that is payable on sale, which amounts to 1.5% of the sales price. This is waived by the Tax Department if the seller can demonstrate that the property being sold is his unique property and declares his intention to use the proceeds for the purchase of a replacement property in Argentina and so demonstrates with a subsequent purchase within 12 months.
Stamp Duty (Sellos) The stamp duty tax, known as Sellos amounts to 2.5% of the purchase price and is usually split and paid by both parties at 1.25% each (buyer and seller), but this tax is not payable by either party, if the buyer is buying his first property AND he declares that he will live in the property.
Property Ownership Tax An annual tax called Bienes Personales, amounting to between 0.50% (for residents) and 1.25% (for non-resident foreigners) of the fiscal value of the property (usually determined to be the purchase price), and is levied on any property held by anyone on December 31 of any given year, payable in April of the following year.
On a US$100,000 property that amounts to about US$1250 per annum tax for non-residents.
Unlike in other countries, no such thing as a “Tax Due Advice Notice” arrives by mail. It is the responsibility of the owner to notify the tax office each year of his holdings and make the appropriate tax payment. Penalties for non-payment for locals and foreigners alike can be high, up to 30% penalty of the amount of tax payable in a year, and so it is a wise person who ensures that they are up to date with payment of this tax.
TAXES - IN SUMMARY
This Tax system too may change, but for now, part of the service we provide an investor is a professional accountant who handles such matters as timely payment of property taxes, thereby avoiding any unwarranted and unwanted problems.
2. The Argentine currency : the PESO
Since the crisis of 2001, the peso was liberated from it’s fixed ratio to the US dollar, and has since late 2004 held a relatively stable rate of 3.0 - 3.10 pesos to the dollar (on average). The government has stated its intention to maintain the rate at about the $1 = $3 peso level for the foreseeable future.
3. Mortgages and Insurance
Mortgages
Since the 2001/2 crisis, even though the government is boasting loudly about the economic recovery, the banks (international and local) have yet to truly return to the market offering mortgages to mere mortals. Most lenders advertise their mortgage lending packages, but the average Argentine does not qualify yet…the banks are merely building back their image and credibility in the eyes of a very sceptical public. As a foreigner, if you do not have a DNI number, you are not normally able to open a bank account in Argentina. And obtaining a DNI number is a process rather like learning how to put together a dismantled car engine. It can be done but it takes time and must be done in the correct way.
Therefore obtaining a bank mortgage to buy a property here or finance some of the purchase costs is basically not possible. There are private lenders who will lend, taking first mortgages on the property by registering a lien on the property title, but average lending rates in Argentina are at present about 18%. So few investors are keen to go down this road. Some foreigners have borrowed at low interest rates on the equity on their home properties in their countries of residence and used the cash to buy here (much to the dread of the bank manager transferring the money) but that was before the emerging financial crisis looming in the world and as such may no longer be an option.
When mortgages become more readily available in Argentina, there will be a rise in demand for properties and as such investors will be set to benefit even more in increased property values. At present, rental prices continue to rise, attracting much attention in the local press, as locals without access to mortgage funds face little alternative than renting.
Insurance
There are many reliable insurance companies in Argentina that provide basic to all inclusive comprehensive cover for contents and the property itself. We recommend insurance to cover costs of damage for fire (after all risks in an apartment building are greater than a house), flooding from broken pipes, and theft. We can recommend insurers. Costs vary but a good cover on a US$100,000 property should work out to be about US$300 per annum.
4. Transferring Money from abroad
Despite being a technologically sophisticated country, the most surprising fact for any foreigner when buying here, is that the purchase is made in CASH on the table, at the time of the signing of the Escritura (title deed and contract). This is almost without exception. A foreigner who wants to buy a property, must find a way of getting his cash into Argentina from abroad AND then bring the CASH to the meeting with the Escribano (property lawyer) and the seller present, to complete the purchase.
Argentina, to date, does NOT have an easy system to facilitate this transfer of money. Meanwhile, the government via the Central Bank is putting in many controls that previously did not exist, and passing laws, to monitor and control the ingress and egress of funds and attempting to eliminate the ingress of funds “in black” or via unofficial channels.
The alternatives when sending money into Argentina are:
1. Using a local bank, perhaps part of an international bank (HSBC, Chase, Lloyds and many others have affiliates in Argentina). However, non-residents without a DNI number, by law, cannot (today) open a bank account in Argentina, and therefore that route of transferring funds is cut off for most people.
2. Opening an offshore bank account with a private Argentine bank. There are few banks that offer a service of creating a bank account offshore (for example in New York – therefore evading the problem that foreigners cannot have Argentine bank accounts). By transferring funds into an account in the clients name in the NY for example, the local branch can recognize the funds and provide them to the client in Argentina. An introduction to a private bank is essential otherwise you will not be received. Time to transfer and receive funds using this method is normally between 4 – 8 days. Charges vary but usually a “transaction fee of around 1.0 - 1.5% is incurred.
3. Providing a reliable Currency Change Agent with a foreign Bank Cashiers Cheque/Check or Bank Draft, which can be changed on the spot. Usually some documentation will be required to be presented to show the source of the funds. This process usually arranged in advance, by introduction, is done on the spot.
4. Travelling with cash or cash equivalent (travelers cheques) is possible but international laws prohibit adults from carrying more than US$10,000 without declaring it to local tax and government authorities. Risks of not doing are the possible confiscation of the amount over US$10,000 with no chance of devolution of the funds, and theft. This is called bring in funds “in black” or unofficially / illegally.
5. Wire transfers into the owners bank accounts are almost unheard of. 1 because Argentines prefer not to pay the tax on deposits, especially large deposits; 2 because most don’t want to declare the sum gained from sale of properties; and 3 because Argentines have a deep seated distrust of banks. Hence all transactions to date are done in cash on the table in front of the Escribano.
There are Issues and Costs with ALL of the above methods :
Costs: ALL transfers of money into Argentina of any other currency other than Argentina pesos, must be converted into pesos, by law. ALL property transactions here are made in US Dollars, and so, once again the currency transferred which has been changed into pesos, must once again be changed into US dollars. Obviously there are the costs associated with the selling and buying of currency.
Banks and change agents all charge a commission for changing funds ranging from 1 to 2% on average. This is in addition to the costs of currency conversion.
Issues: Argentina is constantly changing laws to tighten the free flow of money into the country without identification as to its intended purpose. This is mainly to prevent international money laundering. It is also designed to eliminate the movement of funds “in the black” using methods which the government cannot measure and/or control.
Recent law changes have imposed two levels of control against money laundering :
Property purchases over $200,000 pesos (approx US$ 66,600): the purchasor must sign a DECLARATION stating where the funds came from and how they arrived.
Property purchases over $500,000 pesos (approx US$ 166,600): the purchasor must provide a DECLARATION with PROOF as to the source of funds. This means that foreign investors must provide the escribano (property lawyer) with specific statements from the remitting bank that made the transfer, as well. It has been known that some banks and some Argentine escribanos ask for proof of the foreigners source of income or funds, as well.
Taxes, Money, Mortages & Insurance
Additional information
