Argentina: Overview

RENTAL YIELDS

Yields are moderate to high for Buenos Aires apartments

Landlords and investors in Buenos Aires can expect yields of around 5.3%, according to Reporte Inmobiliario. However in downtown Buenos Aires, the Global Property Guide found yields of about 8% to 10% for high end apartments, and in the suburbs, yields of around 6% to 8%.

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TAXES AND COSTS

Numerous, high rental income taxes

Effective Tax Rate on Rental Income
Monthly Income	US$1,500	US$6,000	US$12,000
Tax Rate	21%	21%	21%
Click here to see a worked example
Source: Disclaimer

Rental Income: Rental income is taxed as regular income. For non-residents, it is at 21% of the gross annual rent. Rental value exceeding ARS1,500 (US$487) a month is assessable with 21% VAT. Non-residents also pay a tax on Personal Assets, Real Estate Tax and other charges.

Capital Gains: Capital gains earned by nonresident individuals are not considered as income and are not taxed at the standard income tax rate. However, capital gains earned by companies are subject to corporate income tax at the rate of 35%.

Inheritance: There are no inheritance or gift taxes in Argentina.

Residents: Residents individuals in Argentina are liable for income tax at progressive rates on their worldwide income.

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BUYING GUIDE

Low transaction costs but with several complications

The total roundtrip transaction cost is between 6% and 8.35% of the property’s value. This includes notary fees (1% - 2%) and the real estate agent’s fee (3% to 4% plus a VAT of 21%). For middle to high-end real estate, property transactions are done in US dollars with the amount paid in cash. However, getting US dollars is costly. It is possible to lose 1% to 2% of money value going through the official conversion process.

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LANDLORD AND TENANT

Pro-tenant rental market

Argentina’s rental market is pro-tenant.

Rents: Rents can be freely negotiated. Rent must be payable on a monthly schedule and cannot be indexed for inflation during the lease term.

Tenant Eviction: Amendments approved in 2002 have greatly shortened the time for landlords to recover property from non-paying tenants. Tenants can only be evicted through judicial proceedings, even at the end of the lease period.

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ECONOMIC GROWTH

Strong

Argentina faced economic disaster in 2001 when the Argentine peso was forced off the previous 1-to-1 peg with the US dollar, after a decade of excess government expenditure followed by a regional economic downturn.

The subsequent dirty float at around 3-to-1 pesos ruined many fortunes, but the economy’s performance has been impressive. From its 2002 lowest point, Argentina’s GDP per capita has grown an estimated 40.6%.

The man at the helm during this period has been left-leaning Justicialist President Nestor Kirchner (President May 2003-December 2007). Kirchner was successful in steering the country through the crisis, simultaneously reducing poverty and unemployment and, in 2005, taking the historic decision to pay off the country’s debt to the IMF.

In addition, Kirchner stood up to the military and overturned previous amnesty laws for military officers who committed abuses in the 1976-1983 ‘dirty wars’ under military rule. Kirchner’s combination of active measures for social justice, support for human rights, and budgetary restraint, has been exactly what the country needed.

A weak spot is continuing inflation. Kirchner imposed price controls to alleviate the problem, but these have not been as effective as hoped. Despite lagging behind its neighbors in fighting inflation, Argentina is still one of the richest in the region with a GDP per capita of US$6,549.

Kirchner’s attractive and popular wife Cristina Fernandez swept to victory in the first round of Argentina's presidential election in October 2007 - fighting the election largely on Mr Kirchner’s record.

Ms Fernandez is the first woman to be elected president of Argentina. She is expected to devote more attention to foreign policy, maintaining close ties with other Latin American countries such as Brazil and Venezuela, while at the same time seeking to ease the at times strained ties with Washington.

A Kirchner in the office will mean continuance of current policies. Foreign investment will still be warmly welcomed and the real estate sector will be pretty much left alone by the Government.