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Wealth preservation takes centre stage in Latin America

30 June 2021

Armando Gutierrez

Head of Private Wealth for the Americas

Armando Gutierrez

Head of Private Wealth for the Americas

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Political and fiscal change in Argentina and across the region means business owners and Family Offices may need new wealth planning solutions

For business owners, high net worth individuals (HNWIs) and Family Offices in Latin America, this is a time of flux. The challenges of the pandemic, as well as recent political change, have highlighted both opportunities and challenges in the region, prompting many investors to pivot their strategies.

There is no doubt that this is an exciting place in which to do business. Blessed with a range of sectors including agriculture, mining, mineral and fuel (with soya, beef, copper, lithium, cement, and petroleum the key resources and products), it offers low production costs at a time of rising commodity prices.

Domestic and foreign investors alike are hungry to invest in infrastructure projects, with the potential for job creation, economic stability and favourable returns.

But potential investors will also be keeping an eye on new political developments, which may lead to rising import costs, as well as currency fluctuations. Turning to private wealth specialists for assistance with wealth structuring, tax and legal advice – both in their native countries and beyond – can offer valuable reassurance and insight.

The challenges facing businesses in Latin America

Tax reform is a common political thread across the region. Argentina has introduced a “wealth tax”; Peru is raising corporate tax on multinationals and a reform bill in Colombia is causing social unrest. Rising living costs are affecting all demographics across the region.

Asset protection solutions, such as offshore trusts, private trust companies and foundations, can be good options for Family Offices. Wealth planning solutions such as relinquishing control of assets to younger generations through irrevocable trusts may be another option. Others, looking for more lasting measures, may be considering changing their citizenship along with a complete restructuring of their liquid and non-liquid assets in a new jurisdiction or offshore financial centre.

Preserving multi-generational wealth can generate challenges, sometimes sparking family conflicts, especially over succession planning.

For older generations in Latin America, adapting to global fiscal transparency may be a big change. Yet many are coming around to the younger generation’s more accepting attitude, partly for the benefit of family legacies.

Government initiatives have also generated change. In Argentina’s 2016-17 tax amnesty scheme, for instance, the government waived civil and criminal prosecution for tax and customs-related violations against all taxpayers disclosing both local and foreign assets. This involved almost 245,000 individuals, declaring close to $117bn – six times the figure expected from unregistered funds abroad, according to Bloomberg.

Some multi-generation Family Offices across Venezuela, Argentina, Colombia and Peru are considering moving their wealth to offshore financial centres. There are alternatives, though, that give businesses and families greater confidence. Irrevocable trusts (whereby control of assets is handed over in full to the next generation, providing valuable tax savings) is one. It should be noted, however, that Argentina’s tax agency, the AFIP (Federal Administration of Public Revenue), may challenge irrevocable trusts under tax fraud provisions, according to the International Bar Association.

Specialist providers such as Intertrust Group can guide clients through their tax reporting, financial and physical asset structures so they are not only compliant, but also protected in the event of any government inquiry.

Tax changes in Argentina

Following the Argentinian tax amnesty, a series of tax rises for the most wealthy have made business challenging for some clients, according to tax and legal advisers in the country.

In neighbouring Uruguay, meanwhile, there is a contrasting picture. Its new conservative administration is offering tax breaks to newcomers. Many wealthy Argentines are moving across the river Plate permanently, according to the Financial Times.

However, in the longer term there are hints of future opportunities in Argentina. Energy Secretary Dario Martinez said in June that US$580m from the new tax will be allocated to building new natural gas projects to avert shortages and decrease reliance on imports.

As the region continues to adapt to political shifts and the pandemic, Latin America’s mix of possibilities and challenges looks set to endure, making careful planning and expert advice more important than ever.

Why Intertrust Group?

We can provide support even in uncertain times. Intertrust Group Americas can advise Family Offices, companies and HNWIs on how multi-generational wealth can become compliant and secure in a choice of jurisdictions as well as on tax and financial structures to suit family and business asset needs.

  • Seasoned wealth managers: an expert will help manage wealth, tax reporting and protect clients in difficult times.
  • Creating viable Family Office structures: our Family Office service combines expertise in funds, corporate services and capital markets to navigate the complexity of private wealth.
  • Shaping your international presence: our international network of domiciliation and management services and local experts will work to shape your official presence abroad.
  • Asset and tax structuring: family businesses built over generations may benefit from succession planning, a Private Trust Company structure, Foundations, philanthropic endeavours or irrevocable trusts.