Work Abroad but earn in USD

Tuesday, October 11, 2005

Qualifying for the Financier / "Rentista" Visa

When I applied for the rentista visa, I was told by the folks over at ARCA that it was the easiest and quickest visa to obtain. Here's a question by a reader regarding this visa and my answer:

Reader's Question

You mention the rentista visa. Which state did you incorporate? Nevada? Do you then have the corporation wire the $1k per month to your account in an Argentine bank? Was that the basis of your obtaining a Rentista Visa? Also, am I correct in assuming the income has to be passive (like rental income, investments or simply money your US corp makes that doesn't require your actual labor)? Thanks.

About the Rentista Visa

First off, it doesn't matter what state you are incorporated in. It doesn't matter what form of business you're using either. You could have an S-corp, C-corp, LLC, partnership, whatever. The only thing you need to get a rentista visa is a letter from a CPA that simply says you have income over $1000 per month from investments.

In this case, as the shareholder of a business, your business is your investment. The income has to be dividends or distributions of profit, however. It can't be salary. For those of us that own our own business, it really doesn't matter much. You can tell your accountant how you want to be paid -- either in salary, distributions or a mix of the two.

At first you might think this precludes income that requires your labor, but that's not the case. Let's suppose you're a consultant who earns $60/hr. Instead of having your clients pay you personally, have them issue a check to your company. From your company, then pay yourself distributions of profit of over $1000 USD per month. That allows you to take income that would have been associated with labor (which doesn't qualify for the rentista visa) and turn it into business profits, which most certainly do qualify.

U.S. Tax Consequences

If you plan on applying for the expatriate tax exemption, make sure you only take the minimum amount of profit this way. Business profits don't qualify for expatriate tax relief -- only salary does. Talk to your accountant, but the best setup is probably to take a little bit of your income as profits to keep your rentista status and take the rest as salary so that you can get it exempted under the expatriate tax rules.

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Friday, October 07, 2005

Argentina & USA Tax Issues (Double Taxation)

Throughout the world, the U.S. has established "double taxation" treaties with a number of countries. These treaties ensure that when nationals from one country are working in another, they are not subjected to taxation in both countries.

The reason for these treaties is simple -- to promote trade and ease the ability for companies to send their workers abroad. After all, who would accept a foreign assignment if you had to pay taxes twice on your income? Not many, I suspect.

Today's question comes from a reader who is concerned about that exact issue.

Reader's Question

I'm interested in visiting or perhaps getting one of those dual citizenship things, if there is little or no double taxation?

Argentine & U.S. Taxes

First, you should realize that the U.S. taxes its citizens on all income generated worldwide, regardless of whether a citizen is living in the U.S. or in a foreign country. Most other countries, including Argentina, only tax citizens while they are living in that specific country. This is a key difference. As a result, the U.S. has double income tax treaties with a number of countries. It does not, however, have one with Argentina.

The system of taxation is much different in Argentina. You don't submit yearly income tax returns to the government and then pay your share. Apparently the government doesn't put the burden on people to calculate their own income taxes. Instead, your employer prepares your taxes for you and pays them on your behalf. You only sign a statement and away your taxes go, deducted directly from your salary.

In addition, you won't bother with refunds, claim deductions, or deal with any of that. Your employer just calculates what you owe, depending on a schedule put out by the economy ministry, and pays your taxes. So, if you don't work for an Argentine company, you won't be paying income taxes here. The main tax is the IVA (value added tax) which is 21% on all the goods you buy.

This means that as a foreigner living here, you can just continue to generate your income from abroad from investments or whatever and introduce the money via wire transfer to Argentina. You'll pay no income tax on these funds. You'll just pay 21% IVA when you spend the money here. This is the same tax that nationals pay when they buy everything. So, it's not a special tax for foreigners.

There's even a visa called "visa de rentista" for this exact purpose. You generate $1000 USD or more of monthly income from outside the country and transfer the funds into the country via wire transfer. This qualifies you to live here and have a visa. You can get more info about this visa from ARCA.

Tax Relief From the U.S.

If you're employed abroad and you plan to spend less than 30 days per year in the United States, you can get an $80,000 exception from your U.S. income taxes by filing as an expatriate. This is only available on income derived from work abroad and won't apply towards taxes on dividends or capital gains.

If you're living abroad and working, yet not taking advantage of this provision of the tax code, you're missing out on thousands of dollars of tax savings. Make sure you talk to your accountant right away. If you'd like the name of my accountant, who prepares my expatriate returns (which have to be prepared differently than a normal return and sent to a special IRS processing center), contact me and I'll be more than willing to refer you.

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Thursday, October 06, 2005

Argentina and Private Property

As part of this continuing series of questions, we move on to the next one about private property in Argentina.

Reader's Question

Does Argentina respect private property like it says in the Constitution? No taking of property, or is this a "wink-wink" unless somebody who has money and power wants the property, or a person commits an unpopular crime? Is it common for people to loose their homes because they can't pay property taxes?

In General, Property is Respected

Argentina has not seen the kind of nationalization and redistribution that is going on in Venezuela and Cuba. An ordinary person or small to mid-size business could come here, invest, and not worry about losing their home / business to government confiscation. Foreigners are legally permitted to purchase property and if you have a DNI, you are entitled to all the same rights as citizens (except voting), which includes the right to private property.

Probably the two biggest mistakes you can make is to either not pay your property taxes or not use a good notary when closing on your property purchase. If you don't use a good notary and there is a problem with the title that comes up later, you can lose the property. A good notary will do his research and find out anything funny with respect to the property.

On the other hand, if you don't pay your property tax, then you'll also be in trouble. Property tax is about 1% of the property's value and is paid annually. Where people get in trouble is that they forget to pay this. Unlike the U.S., you don't get a property tax bill in the mail here. You have to hire an accountant to submit a property tax return for you.

Just like all taxes, you get interest and penalties if you don't pay your property tax on time each year. So, suppose you bought a property, didn't pay property tax for 10 years, and then you go to sell it and oops, you have a mountain of penalties, interest, and late fees to pay that have totally eaten up the value of your property. It may look like "confiscation", but you wouldn't have owed all that money if you would have paid your taxes every year.

The Largest Private Property Confiscation

The largest confiscation of private property happened during the economic crisis when caretaker President Eduardo Duhalde confiscated $17.8 billion dollars of foreign reserves from the Central Bank of Argentina. These foreign reserves did not belong to the government, however. They were the legal property of all peso holders, who had the right to exchange their pesos with the Central Bank for dollars at any time they chose.

This wasn't the worst of it, however. The government later confiscated all dollar deposits at all banks and did a forced conversion to pesos at an artificial exchange rate. This action was later overturned by the Supreme Court and the government was ordered to pay back the dollars. The Supreme Court did not overturn the devaluation, however, despite the fact that it was legalized theft.

This is why I advise all foreigners here not to put their nest eggs in Argentine banks. Keep your money back in the U.S., where it is safe. In summary, I think its safe to say that there won't ever by mass confiscations of real estate -- people wouldn't stand for it and you couldn't cloak the taking of real estate as a financial austerity measure designed to spur a nation's economy.

I'll also point out that Title 22, Section 2370 of the U.S. Code provides for the total suspension of U.S. assistance to any country that seizes property owned by U.S. citizens. So, I do think this provides another measure of protection. If your goal is simply to buy some property here, an apartment, a vineyard, a farm, or just a place to call home, I wouldn't worry. Just make sure you have a good notary and pay your taxes and you'll be fine.

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Wednesday, October 05, 2005

Bringing Your Gun, Pets, Furniture, Car, etc. to Argentina

This is a follow-up to yesterday's question about gun ownership in Argentina.

Reader's Question

As regards gun ownership in Argentina, do you know of laws/regulations applicable to foreigners bringing guns in to Argentina ? I own a handgun and would like to bring it with me when I relocate to BA in the next few months. I assume, after reading your comments, that I would have to acquire a DNI, and then meet the other qualifications prior to owning a handgun in BA. Any light you can shed would be appreciated. Thanks!

Work With A Professional

My best advice to anyone considering bringing in items like your gun, pets, furniture, a car, etc. to Argentina is to get the advice of a professional. Bringing things to Argentina is very different than bringing things to the United States. This is not a free-trade country.

As a foreigner with a residency visa, you are entitled to bring certain things into the country without paying the staggering 50% customs tax. The one thing I do know is that you will need to get professionals working on your side if you want any hope of taking advantage of these laws.

I also know for a fact that if you try to bring things into the country without a visa, they'll be quarantined and held in customs indefinitely until your residency visa is processed. In the meantime, you'll be racking up storage charges and with every day that goes by, the possibility that something gets stolen or broken increases. This is one of the reasons I got my visa and DNI a full year before I actually moved to Argentina -- so there wouldn't be any possibility of problems or delays.

If you haven't already, contact ARCA and let them know your situation. They can handle your visa and DNI and they'll refer you to reputable companies here in Buenos Aires that can import your belongings (including pets, guns, cars, etc.) without problems. Don't just put your stuff on a ship or in a suitcase and hope for the best. There is customs paperwork that needs to be done here if you ever want to see your stuff again. You can't just bring a gun into the country, since it'll have to go through whatever import procedure has been established so that the serial number can be registered in the national database. Good luck!

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Tuesday, October 04, 2005

Gun Ownership in Argentina

I received an e-mail from a reader with about 5 or 6 questions. I'm going to address each one over the next few days as blog entries so that people have the benefit of understanding how things work here. The first one was related to gun ownership.

Reader's Question

It seemed to me that weapon ownership was almost demanded of the citizens. Is this true? Are there lots of laws against certain people having the weapons; with special licenses, photos, DNA samples and fees needed?

The Gun Ownership Process

At first I was going to plead ignorance to this question, since I've never owned a gun in my life, but I asked a friend who knew the answer, so here is the process:

  1. Pass a psychological test
  2. Provide fingerprints and proof of no criminal records
  3. Pass a shooting test
  4. Provide an income statement
  5. Present your DNI and fill out an application form
  6. In 20 days the government gives you a license as a gun user
  7. With your license, you can then purchase a firearm.
  8. There is a 15 day waiting period while the serial number of your gun is matched to your gun user's license number in a central database. Anonymous gun ownership is not permitted. All guns are registered.
  9. After this 15 day waiting period, you can take your gun home and the process is finished.

There's the process right there. Only foreigners with legal temporary or permanent residency who have a DNI may purchase a gun. If you don't have legal residency, you will not be allowed to purchase a gun. Other than that, there are no other restrictions on foreigners owning guns.