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Se VendeSome readers believe that our writings approach the level of ramblings or disgruntled babble because in many instances we display vitriolic hatred towards all the damage that governments have caused, continue to cause and will cause to peoples' lives. The point is well taken. We are livid and without speech. This much is unquestionable. However, having said that, we must also point out that everything in our writings is simply a distillation and clarification of reality as we see it. We are not making this stuff up. We wish we were. We wish we could just wake up from this nightmare. But we cannot. Indeed, this is reality.

Today we are going to provide you with a small (tiny) sample of the Kafkian environment prevalent in a country where the government attempts to know everything, does not respond (in the least) to their citizen's wishes and has an insatiable thirst for money (your money). Yup, we are talking about Argentina.

FOREIGN INVESTORS NEED NOT APPLY

As you may know, any politician who is the proud owner of more than two neurons working together (not many can say so), will realize very quickly that if the internal economy of a country is weak for lack of investment the only solution left is external investment. In other words, lure foreign investors to come in, bring money and invest in the country. Even the revolutionary communist China knows this much and did so. Well, not Argentina. If you are a foreign investor, Argentina does not want you.

REAL ESTATE IS FOR DUMMIES

One of the simplest foreign investments that is always popular is real estate (we are not talking about the 2008 debacle or post-debacle - we are talking about a trend going back at least 200 years). This is so because real estate tends to retain its value as fiat money devaluates. You see dear reader, it is rather hard to "print" bricks or be housed in "virtual" apartments. A Central Bank finds it rather difficult to raise plumbing interest rates or to issue electric appliances bonds. What a drag.

And of course, people not being stupid caught-up with this trick long time ago. It is quite simple, really. If everything collapses around you, buy wealth, not price. Real estate is wealth, not funny money.

Yet, in Argentina, the land of the upside down and then some, in the twisted government mentality, taxation comes first, investment second… perhaps… actually third… no, scratch that…a close fourth… not really… fifth? Sixth? Oh well… who knows or cares. The golden rule is: pay up and front and then… keep paying. And the people? Fuck-you very much!

The entire foreign investment taxation system is designed in this manner, particularly when it comes to real estate. It is not designed to lure foreign investors in but to squeeze them if they are stupid enough to invest in Argentina. Is it then a surprise that so very few people bother?

SO, YOU WANT TO INVEST?

Who are you?

The first thing you need to do if you want to invest in real estate as a non-resident in Argentina, is to register yourself with the Administracion Federal de Ingresos Publicos (Federal Administration of Public Income or AFIP). Also known as the tax organization. That's right. And you thought that the first thing you need to do is to actually find an interesting real estate to acquire. Silly you.

What are you doing?

The next thing you need to do is to clarify to the AFIP what is that you will be doing with the real estate, particularly if you are going to make improvements. That's right. The tax people want to know exactly what it is that you are doing with your real estate. Did you understand? They are not interested in public safety, building codes or zoning laws. They are only interested in how much money, potentially, they may squeeze out of you. More on this later.

Official rats

You don't feel like releasing any of this information? Though luck! Argentine law declares that the following people must rat disclose this information to the AFIP:

  • You
  • Your representative
  • The public notary

And if the transaction is "suspicious" (whatever that may mean) then the list grows with the following draftees:

  • Financial entities
  • Authorized money changers
  • Money transport companies
  • Money wiring companies
  • All economists (that's right - isn't this ridiculous? We are not making this stuff up)
  • The Central Bank
  • Other organizations

In other words, the law forces everyone to be a rat. How do you feel operating in the midst of rat nation? Now you know how German citizens felt during the Nazi regime. Again, we are not making this stuff up. It is recorded history.

Your filthy money

Then, there is the proviso (a fancy name meaning clause) stating that if your money is coming from so-called "tax heavens" then... well… you are SOL. The AFIP will automatically evaluate your purchase (this is, they will evaluate a private contract between parties) assuming that:

The sale price is not in line with "normal" market prices (whatever that may mean)

Your money was generated inside Argentina, somehow magically transferred to a tax heaven and now repatriated, and hence you automatically owe a boat load of money to the AFIP due to unpaid taxes on profits.

Presumption of innocence? What's that?

Proof? Proof? What's that?

Just raise your hands and fork over the money!

You want to buy real estate? How dare you!

If you would to pay for a real estate purchase, you must demonstrate that you have brought in money from abroad. Let's say this again: you must demonstrate. You are automatically believed to be some sort of tax evader if you do not. But let's be fair. There are three exceptions to this rule:

Investments taking place immediately after getting into the country, provided that you did not do this investment before are excempt. In other words, if you are a real estate investor, you are SOL. How dare you?

Proof of a decrease of your assets abroad in roughly the equivalent amount of money for your purchase. That's right. You must prove and disclose your private finances outside Argentina. Obviously Argentina must know of all your private dealings outside of its territory. How dare you have private financial affairs!
Account(s) variation inside or outside Argentina in the amount equivalent to your purchase. In other words, cash transactions are verboten! Strange, considering that the country makes all financial transactions mandatory in Argentine currency. Yet, it would seem that cash, the very keystone of such currency is not accepted.

You are guilty until proven innocent… perhaps

What happens if you cannot "prove" where the money comes to AFIP's satisfaction? Well, well, well, then the entire purchase price (plus penalties) are assumed to be untaxed gains. And so you need to pay:

  • Tax on profits on the purchase price + 10%
  • Value added tax on the purchase price + 10% times the number of transactions

Of course, you can submit proof to the contrary, but it is up to you to do so and to prove to AFIP's satisfaction where the money came from. What are the chances?

This is interesting considering that Argentina has a civil and penal system where one is innocent until proven guilty. Well, not when it comes to the AFIP! Normal rules do not apply.

Money changers

Let's assume now that somehow you can convince the AFIP that your money is legitimate. You are all set, right? Well, no. If you bring in currency, it will be "officially" exchanged at the "official" exchange rate by "official" institutions. How nice. Through this simple and expedient transaction you just lost anywhere between 10 to 40% of your purchase power. Why is this? Ahhh… grasshopper… you see… the government must control all transactions in hard currency so that people have no choice to keep using the Peso, which since Jan 2014 has a yearly devaluation rate of "only" 40%. In other words, thank you for your generous forceful donation. Next!!!!!!

Let's rent

Assuming that you can somehow survive all those burdens, make the purchase (paying all the stamp, transaction, vat and other taxes), you are now ready to rent the property. And here is where the fun begins. You must do the following:

  1. You must pay Income Tax
  2. You must pay Presumed Income Tax (that's right, you must pay the AFIP an assumed income equivalent to 1% of the market value of your real estate per year!!!). Who cares if you actually had any income! How dare you not to pay for the privilege of investing in Argentina!!!???
  3. You must collect Value Added Tax from your tenant and pass these monies to the AFIP. That's right; you now work for the AFIP for free! How lucky you are. You are now part of the brotherhood of tax collectors.

But this is not all. You must also pay municipal taxes, taxes on services, and many other added-on taxes. In addition, you must hire a certified tax accountant to file the taxes for you (you cannot do this by yourself). You must also retain a "representative" in Argentina for "taxation purposes" (whatever that may mean).

How lucky you are!

Oversimplification

Of course, the process described up to this point, is a gross oversimplification of the real one, which is shrouded in mystery, fees, taxes, bureaucratic burdens, insults and injury to your pockets. Still feeling like investing in Argentine real estate?

CONSEQUENCES

Hummmm… what do you think the consequences of such "progressive" system may be? Well, let us described them in the manner in which Argentines put it: Real Estate used to be an OK investment, now is better than nothing… barely.

Actually, the situation is so bad for citizens, that real estate produces an income of about 2% per year, best case scenario. The ROI (return on investment) is in the order of 27 years!!! Speaking about long-term commitments... And don't forget that this happens in a country where defaults occur every 5 to 7 years. This means that you will be waiting for a ROI through 3 default cycles (give or take). You must really have an iron stomach to do this.

But going beyond this point, it so happens that with all the "special" taxation rates for foreigner investors, the real estate income is negative in any stable money you may care calculating it. That's right. The government of Argentina makes sure that if you invest your money in the country, you will lose it.

Is then there a surprise that the real estate business is tanking? Even without considering the default?

Be serious now, you, being a sane person, would you invest in real estate in Argentina? Of course not!

Most people in Argentina do what any sane person would do: go black market… the blacker the better. Can you blame them? Of course not.

CONCLUSION

Argentina's taxation system is designed to separate people from their money as fast and as ruthlessly as humanly possible and then some. Why would this be the case? Because politicians need money; so-called "hard currency". They need so to stay in power. Therefore their tunnel vision paints all investors as money cows. They are there to be milked until they die. The case of foreign investors we outlined above is a very clear and unquestionable example of the priorities politicians have: they first, friends second and people last. Which people? Their people; the suckers that voted them into power. There simply is no other explanation. The only reason for somebody to kill the golden goose is if they, personally, profit from its death. The rest? The rest does not matter. Don't believe us? Then please, please, please feel free to provide a simpler and better explanation. Your choice. We will be waiting. Seated. Or better yet, reclined. It will be a long wait. Meanwhile we have a question: What is the proper name for an all-seeing system that subjugates people? Answer: Tyranny.

This is what awaits all peoples from all nations. This is the future you won't be looking forward to.

Note: please see the Glossary if you are unfamiliar with certain words.

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