Construction Trust

Author:Ms María Castro
Profession:Moore Stephens

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

the project.

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

income tax.

All goods and services purchased by the construction trust


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