A feasible legal structure to invest in real estate in
In recent years the construction industry has grown, fuelled
by various internal and external factors. Intense economic
activity since 2003, in particular the agribusiness sectors,
have had a strong influence in our region. The structural
housing deficit, added to the lack of other alternative
investments all conform to a positive real estate scenario.
This sector is not affected by the sub-prime world crisis or
the credit retraction, because of the low participation of
banks in financing this sector.
The proliferation of real estate developments and the
incorporation of non traditional investors have brought a new
legal structure to the construction industry, referred to as a
trust structure. This vehicle has been used in many cases where
the land owner prefers not to sell, but rather become part of
Historically, the ordinary vehicle used for real estate
development has been the condominium structure, which is a
fragile legal vehicle. In this structure the common assets are
exposed in the event of insolvency, death or divorce etc. of
any of the parties to the condominium. Furthermore, there are
no precise limits that allow for quarantining of certain assets
from the rest of a project.
The financial accounting concepts in a construction trust
are similar to a commercial corporation.
Notwithstanding the construction trust is not incorporated
or a legal entity, it is considered a "tax entity"
under Argentine tax law. As such, it will be a "tax
contributor" and be subject to various imposts and taxes
in respect of any activities carried out. Specifically, the
construction trust is subject to income taxation. In a
construction trust, the trustee is solely responsible for
debts, tax calculations, filings and payments (exceptions may
apply). The responsibility can also be extended to the
The construction trust is also liable to a presumed minimum
income tax. This is calculated annually as a percentage of the
asset value and consideredan advance payment in respect of its
All goods and services purchased by the construction trust