How has the high end luxury property market been affected by Black Monday?

[MorganF]

In spite of what others have recently posted, in one respects, the "crash of 2001" has already been repeated, at least in terms of the massive devaluation of the peso. Fortunately, this time it didn't happen overnight.

PS: As Perry has recently noted, the new capital gains tax (which apparently will not be adjusted for inflation) will probably wipe out any long term gains and quite possibly result in a long term capital loss.

Does anyone have a link to information in the media about this new capital gains tax? I only saw it mentioned here and want to learn about it. Thanks Perry and all!

 

[perry]

This is a link that clearly defines the law for purchases from 2018 . There is no considerations in this law for devaluations that affect greatly the tax paid as you pay on the peso value even though the transaction was in us dollars

Cambios en la venta de inmuebles: qué impuestos se pagan tras la reforma tributaria

Es para las propiedades compradas a partir de 2018. Cómo se paga, caso por caso.

www.clarin.com

 

[MorganF]

Thank you, Perry!

 

[Musicman]

This is a link that clearly defines the law for purchases from 2018 . There is no considerations in this law for devaluations that affect greatly the tax paid as you pay on the peso value even though the transaction was in us dollars

Cambios en la venta de inmuebles: qué impuestos se pagan tras la reforma tributaria

Es para las propiedades compradas a partir de 2018. Cómo se paga, caso por caso.

www.clarin.com

I believe they will make necessary adjustments for devaluations at the time. They want your money. Would be prudent to assume this in your calculations

 

[FallenAngel]

This is a link that clearly defines the law for purchases from 2018 . There is no considerations in this law for devaluations that affect greatly the tax paid as you pay on the peso value even though the transaction was in us dollars

Cambios en la venta de inmuebles: qué impuestos se pagan tras la reforma tributaria

Es para las propiedades compradas a partir de 2018. Cómo se paga, caso por caso.

www.clarin.com

I do not think you have read your own link:

El Impuesto a las Ganancias se calcula aplicando la tasa del 15% sobre la diferencia entre el valor de venta actual menos el de costo actualizado por el índice IPIM (INDEC) y los gastos de la venta

You can see that they do make consideration. Sure, it is not exactly related to the ARS:USD rate, but it follows the same curve and in general will follow very closely over anything but the very short term.

To keep implying that people will pay a tax on the devalued peso amount is ridiculous. In fact, this is better than the home country of most people on this board (USA). Looking at US capital gains laws someone may be paying as much as 22% with no consideration for inflation whatsoever.

Some people may be strong believers in government propaganda that inflation is 0% in the US. Okay, sure, but it has not always been and it will not always be. Periods between the 70s/80s it was getting damn near close to 20%. Imagine paying property taxes on that! That will be avoided in Argentina due to the adjustment of inflation.

 

[garryl]

To keep implying that people will pay a tax on the devalued peso amount is ridiculous. In fact, this is better than the home country of most people on this board (USA). Looking at US capital gains laws someone may be paying as much as 22% with no consideration for inflation whatsoever.

This can not be better than US capital gain law. In US, if the property you selling is a rental, you can do 1031 exchange, avoid all the gain tax (defer), if the property is for your own use, you can wave half a million dollars of gain (for a couple), for average people, you keep the property for a few years or 10 year, you can walk away 500k dollar gain with zero tax. And you can claim repairs and upgrade, maybe can get away of 700k-800k. The best part, it's all self report at the end of the year, there is no AFIP to control you every step you are preparing the sale.

For example (real story), you buy a house in San Fran area for 250k in 1995, and sell it in 2008 for 750k, without paying any tax, buy another for 800k in 2008, by now the house is probably worth 1.6m. You can sell your house for 1.6m with almost zero tax, take the 1.6m as your retirement money and move to a different house in a different state. All together, you avoid paying tax for 1.35m capital gain. The two houses talked here are humble houses of Cali middle class house, small and average looking.

If you do this once, you have save yourself 1m for retirement, if you do this 2/3 times, become an active small time real estate investors, you get yourself a few m dollars easily over the course of 25 years, while you work on a normal job.

 

[manqo]

What % discount can one get over existing asking prices?

I've been asking around in Santa Bárbara, Tigre and some of them are willing to negotiate 15-20% lower than the asking price.

 

[perry]

[/QUOTE]

Yes they allow deductions for the costs of the sale as is the case in every country in the world that has a capital gains tax . Clearly there is no deductions for devaluations and this is definetely the case as i know many people that had to pay this tax in the last 12 months .

The costs you can claim for deductions can be up to 15% of the value of the property in pesos for transaction costs . Taken into consideration that the peso has devalued since 2018 over 200 % this tax is unfair .

Regarding the USA there capital gains tax is based on their money in circulation where In Argentrina it is based on fiction as noone buys properties in pesos in Capital Federal .

Once again the link states only deductions for costs of the sale and does not consider the peso devaluation . Even if it considered inflation which was 50% since last year . The devaluation of the peso was over 200% meaning that the seller is being penalised for the economic situation in Argentina

 

[steveinbsas]

Yes they allow deductions for the costs of the sale as is the case in every country in the world that has a capital gains tax . Clearly there is no deductions for devaluations and this is definetely the case as i know many people that had to pay this tax in the last 12 months .

If I understand correctly, the capital gains tax applies to properties purchased since the law went into effect in 2018. We are not quite two thirds of the way through 2019.

What I would like to know is why "many people that had to pay this tax in the past 12 months" turned around and sold their properties so quickly.

PS: And approximately how many is many?

 

[perry]

This can not be better than US capital gain law. In US, if the property you selling is a rental, you can do 1031 exchange, avoid all the gain tax (defer), if the property is for your own use, you can wave half a million dollars of gain (for a couple), for average people, you keep the property for a few years or 10 year, you can walk away 500k dollar gain with zero tax. And you can claim repairs and upgrade, maybe can get away of 700k-800k. The best part, it's all self report at the end of the year, there is no AFIP to control you every step you are preparing the sale.

For example (real story), you buy a house in San Fran area for 250k in 1995, and sell it in 2008 for 750k, without paying any tax, buy another for 800k in 2008, by now the house is probably worth 1.6m. You can sell your house for 1.6m with almost zero tax, take the 1.6m as your retirement money and move to a different house in a different state. All together, you avoid paying tax for 1.35m capital gain. The two houses talked here are humble houses of Cali middle class house, small and average looking.

If you do this once, you have save yourself 1m for retirement, if you do this 2/3 times, become an active small time real estate investors, you get yourself a few m dollars easily over the course of 25 years, while you work on a normal job.

If I understand correctly, the capital gains tax applies to properties purchased since the law went into effect in 2018. We are not quite two thirds of the way through 2019.

What I would like to know is why "many people that had to pay this tax in the past 12 months" turned around and sold their properties so quickly.

PS: And approximately how many is many?

Steve I know of two cases of profesional investors who buy to flip . They understand the market very well and buy properties in succession that can offer a great discount . When they sold even though the amount in dollars on the deed was the same they both paid a million pesos of capital gains tax. Please note that also you need to pay stamp duty of 1.8percent on the deeded price.

Up to now I know of no expats that have paid this tax as none buy for flipping and also most brought many years ago. Those considering buying today must take into consideration the huge tax implication that a sale can imply due to the possibility of a massive devaluation of the peso in the coming year. I would not buy in Buenos Aires at the current time and would consider only Peru and maybe Chile in South America