Episode Summary
In this episode of The Expat Files, Johnny Mueller dives into the complexities of importing goods, vehicles, and managing customs procedures in Latin America. He discusses the challenges of bringing in vehicles such as ATVs, electric golf carts, and Teslas, noting that these items may not be on the Aduana (customs) list and could result in arbitrary tax assessments. Johnny emphasizes the importance of hiring a lawyer to navigate the system, as attempting to do so on one's own—even with good Spanish—can be risky. He also warns about the potential for bribes at customs, which he refers to as a 'cash incentive' to expedite the process.
Johnny highlights the harsh environmental conditions at the docks, where goods are often left exposed to the elements, leading to deterioration and potential damage, especially for delicate items like carpets. He advises expats to monitor their shipments closely using tracking numbers and to be proactive if delays seem unreasonable. He also notes the lack of indoor storage space at ports, which can lead to goods being left outside for extended periods and the risk of damage from forklifts or environmental factors.
In another segment, Johnny discusses the process of shipping personal items, such as household goods, to a foreign country. He explains that while the shipping company will handle much of the process, the Adwana officials may not be as thorough as customs officials in the first world. He emphasizes the importance of being present during the inspection of the shipping container at the customs office to ensure that all items are intact and properly documented. Johnny also mentions that the shipping container is sealed and can only be opened at the destination, and that the Adwana officials will inspect the items and compare them to the packing list. He stresses the need for a lawyer to be involved in the process to protect the expat's interests.
Johnny also talks about the logistics of moving to Latin America, focusing on the use of Chiquita Banana trailers for shipping goods. He explains how these trailers are used to transport fruit from Latin America to the U.S. and then return empty to be rented out to expats. He provides practical advice on wrapping furniture and soft items in plastic to protect them during transport, emphasizing the importance of this due to the lack of care from local movers. He also discusses import taxes on vehicles, noting that certain types of cars like pickup trucks and station wagons are taxed at lower rates due to their perceived utility for business and agriculture, while other vehicles face higher taxes.
In another segment, Johnny discusses the complexities of import taxes and vehicle classifications in Latin America. He explains that certain vehicles, like station wagons, are often categorized as agricultural and thus subject to lower import taxes, while 4x4s and SUVs face higher taxes. He highlights the confusion in categorization, especially with vehicles that have similar features, such as all-wheel drive or 4x4 capabilities. Johnny also mentions the unpredictability of tax laws, which can change frequently and sometimes include short-term tax breaks that only a few are aware of. He further explains the value-added tax (VAT) that applies to car purchases, which varies by country, and notes that some countries have more reasonable transfer tax rates for older vehicles.
Finally, Johnny discusses the informal and often illegal methods used in Latin America to avoid taxes when buying and selling used cars, particularly among lower-income individuals. He explains how sellers and buyers often bypass official registration and paperwork to avoid value-added taxes and transfer fees, which are prohibitively expensive for those purchasing cheap, junky cars. He highlights the legal loopholes that allow these transactions to proceed without official documentation, and the risks involved for both the buyer and the driver of these unsafe vehicles. Johnny also notes that these practices are common in the lower classes, where the cost of taxes and fees is a significant barrier to car ownership, and that such cars are often not insured, making them dangerous for other road users.
Topics
Customs procedures in Latin America, Importing vehicles and goods, Potential for arbitrary tax assessments, Importance of hiring a lawyer, Risks of shipping delicate items, Environmental conditions at docks, Potential for bribes at customs, Shipping personal items, Customs inspection, Adwana officials, Legal representation, Container inspection
Chapters
00:00:00 Opening 00:00:47 Importing Vehicles and Goods into Latin America 00:01:49 Bribes and Customs Delays 00:02:49 Dangers of Leaving Goods Outside at Docks 00:05:08 The Possibility of a Short Wait at Customs 00:05:20 The Importance of Being Out of the Container Quickly 00:05:45 The Inspection Process at Adwana 00:07:37 The Inspection Process and the Importance of Being Present 00:09:51 The End of the Inspection Process 00:10:10 Customs Process and Tax Bill Payment 00:10:28 Private Delivery Individuals and Their Risks 00:11:02 Importance of Monitoring Delivery 00:11:39 Bonded Truckers and Insurance 00:12:05 Transnational Trucking Companies 00:12:46 GPS Stickers and Their Misleading Nature 00:13:53 Storage Fees and Security Concerns 00:14:52 Chiquita Banana Trailers in the U.S. and Latin America 00:15:07 The Return of Empty Containers and Expats 00:15:36 Chiquita Banana Trailers and Expats 00:15:56 Wrapping Furniture and Soft Items 00:17:25 Import Taxes on Vehicles 00:18:09 Taxation of Pickup Trucks and Station Wagons 00:19:30 Luxury Cars as Station Wagons 00:19:41 Import Tax Variations for Vehicles 00:20:08 High Import Tax Brackets for 4x4s and SUVs 00:21:30 Government Tax Policies and Uncertainty 00:23:53 Value-Added Tax on Car Purchases 00:24:25 Tax Avoidance in Car Sales 00:25:01 Informal Car Sales and Tax Evasion 00:27:29 Safety Risks of Unregistered Vehicles
Transcript
Automatically transcribed from the original recording; names and wording may contain errors.
[00:12] Hi everybody, I'm Johnny Mueller, and you're listening to The Expat Files, living in Latin America, the one of a kind show that tells you what it's like to live, work, play, and or retire in Latin America. So let's get started. On my last show I was talking about driving a car down here to Latin America. The pros, the cons, the costs, and everything else involved. Well, not quite everything, because I didn't really finish it up. So now I will. Now I mentioned that when you bring a car, a truck, or any kind of vehicle down here, you have to pay the taxes on that vehicle according to a predetermined price schedule that they have down at customs, which they call the Aduana down here, and if your car
[01:00] truck or other motorized vehicle is not on the Aduana's list and they have no reference point because it's a custom or not very common item, let's say you're trying to bring down a four-wheel drive Yamaha ATV, or an electric golf cart, or a minibike, or a WaveRunner, or even a Chevy Volt, or a Tesla electric car, then the guys at the Aduana might come up with an arbitrary figure right off the top of their heads, and you're stuck with it. Well, don't panic right away because the air might be in your favor, you never know. But it might not be in your favor, so that's why it's a great idea to have your own personal lawyer on hand, and never try to go through that Aduana business on your own, even if you think your Spanish is great. Just remember, you're a rich North American gringo, or Canadian, Australian, or European. Anyway, they think you're rich, and down at the Aduana, that's not in your favor.
[01:47] And do remember this. Anytime you go down to the Aduana, or customs office, it might or might not involve paying a bribe. And of course, the people at the customs department will never call it a bribe. You just have to look at it as a kind of a cash incentive, a cash incentive to get them working in your favor. And oh yeah, just one more thing. When you make a trip down to the docks by the customs port, in whatever Latin American country you might be moving to, you'll notice there's a lot of activity going on, and there's huge buildings, and Quonset huts, some just loaded to the gills with pallets and boxes and barrels and skids and containers. And you'll notice, outside of those buildings, exposed to the weather, there are a lot of boxes and containers and pallets too. And you can't help but notice that a lot of that stuff is just sitting there deteriorating
[02:33] in the rain and the heat and the sun. And it goes through your mind that you don't want your stuff sitting out there, baking away in the sun 12 hours a day, or molding in the rain if it's the rainy season. Especially if you're shipping down a lot of delicate household items like furniture, clothes, and carpets. Anyway, as you walk along the docks at the Aduana, the customs office, you can't help but thinking that a lot of poor sap stuff is rotting away out there. And it gives you a kind of uneasy feeling that if the ball takes a bad bounce, you're going to be that next poor sap. And once again, this is another good time to remind you not to ship your carpets down here to Latin America, because the humidity and the heat, not to mention the insects, creepy crawlers, and even scorpions, they just love to wander in and set up housekeeping in a warm bundle like that. Well anyway, as you might imagine, you don't want to have carpets down here.
[03:22] So instead of shipping them down, just sell them or give them to your friends. Anyway, back to the fact that at the custom port, at the dock, there's tons of pallets and containers and boxes just sitting out in the sun and sometimes in the rain just taking a beating from the climate. Now someone, someday, is supposed to be processing that stuff, collecting the taxes on it and getting it off to its right for Loner. At least, that's the theory. And believe me, you don't want your stuff out there, even for a couple of days in those kind of harsh conditions. Because often when a ship comes in, and I've seen this, the guys that unload the ships and the fork trucks that come in will often just pile that stuff up alongside the dock on the pier, and it'll sit there for days because nobody's ever in a rush to process anything. And the squeaky wheel gets the grease, especially at the customs office.
[04:09] And one day when I was sitting around that dock for about 45 minutes, I happened to look at some birds crapping on some poor guy's stuff, and I watched one of those boxes cave in as the tail end of a fork truck skidded into it. And the fact is, they never have enough indoor storage space for the amount of goods and containers that actually make it into port. And that's why when you ship your stuff in from the first world, you should check the internet site of your shipping company every single day. Check the tracking number on your shipment or your container or containers so you'll know exactly when it lands at your destination. Then either you or your lawyer can call the Adwana and find out exactly how long it takes for your stuff to get processed, and if it seems like an unreasonable amount of time to you or your lawyer, you have to get on it right away. Because often the people at the Adwana will give you that same old excuse that they're
[04:56] backed up for two or three weeks, and they just can't get to your shipment until then. Well, that might just be their hint to you that they're expecting a little bit of a bribe to move you up to the front of the queue. Now the fact is, there might not be a long line at all. They might be able to process you that day, but you're never going to know that. But one thing you do know is that you don't want your stuff sitting on a dock for three or four days exposed to the weather. The thing is, you'll want to be out of there in a day or two, and your lawyer can handle that. That's what he's for. Now of course, if you're only shipping a car in and nothing else, it doesn't matter if it takes two days or three weeks, because basically a car is made to stay out in the weather. And generally it takes at least a week to get a car through customs anyway, because there's so much paperwork to process, and they'll have to get your license plates,
[05:43] your taxes, and your title in order. But when it comes to shipping personal items like household goods in a container, in the vast majority of cases, the Adwana people will contact you or your lawyer and ask you or your representative to come down and do an inspection when they first crack open your container. Now what I mean by doing an inspection at the Adwana is this. Most people, when they ship their car or their household goods down, they're shipped in one of those standard shipping containers that are identical to the trailers that you see pulled by long haul semi-trucks. And those shipping containers come in two sizes, 20 foot long and 40 foot long. And when your car or your property first got sealed into that container, up in Detroit or Cleveland or Minneapolis or whatever, the shipping company like Marisk or Chiquita
[06:30] Banana or Dole Pineapple will show up right at your doorstep. And don't laugh, I'm going to talk about Chiquita Banana and Dole Pineapple containers later. They actually ship cars and personal items too, believe it or not. Anyway, when your car or your personal items are first loaded, the shipping company puts a special tag and seal on the door of your container, and it's not to be opened until it reaches the Adwana in the country of the final destination. And generally, when that container lands, they'll notify you or your lawyer that you could come down and watch the container being opened. They'll want you to be there in person when the container is opened, right in front of the representative of the Adwana and representative from the shipping company. They give you that opportunity so you can see that there was no hanky-panky and everything of yours is intact just exactly as it was loaded and sealed up in Cleveland.
[07:18] Now some people say, you really don't have to do that. You don't have to go down and waste a day as the container is opened and the Adwana people pull all of your stuff out of that container and lay it out on the floor so they can check all the items that you've listed on your packing list against the boxes and items that they've pulled out of the container. And luckily, they always do that inside of a guarded building. And there are designated numbered spaces on the floor, each enclosed by a cyclone fence that can be locked every night. And each of those lockup areas is assigned to someone like you who ships something in that's got to be checked by the Adwana. Now like I said, I suggest that you and your lawyer be present when they open that container. And I suggest that you watch carefully as those Adwana people pull out all your items from that container and put them on the floor in your designated space.
[08:07] Not that any of your personal items are going to sprout legs and start walking, but this is the third world and it's been known to happen. A more likely problem is that some of your stuff will get damaged. Now I assure you, you'll never have to worry about your shipping company representative, the guy from Marisk or Chiquita or whatever, because he'll bend over backwards to keep you smiling and happy because he wants you as a continued customer. And you also paid insurance when you had that container shipped, that's mandatory. So his company is on the hook of anything's missing or damaged at that point. So he'll have an eagle eye too and he'll be in your corner. But what you do have to keep an eye out for is those Adwana guys. And if you happen to be there at a very busy time at the port, I guarantee it, there's going to be guys coming in and out walking past your stuff, checking out your fenced-in
[08:54] cage with all your goods in it, driving fork trucks and pushing hand carts, popping in and out, making little inside jokes in Spanish that you'll never understand. And really, it's kind of an unnerving experience. But luckily, those Adwana guys are pretty lazy. After all, they are government employees, don't you know? And they'll almost never check anything out as thoroughly as a custom official in the first world. In fact, one time I shipped about 130 boxes of household items, and of course those boxes were numbered 1 to 130, and on the packing list, each box had its own individual page where all the items inside were spelled out in detail and given approximate values. And that's normally how you're supposed to do it. One of the guys from the Adwana took a box, I think it was number 32, he opened it up,
[09:40] took about 6 items out, looked on the packing list, found them, saw that they matched what was printed on the list, he sealed the box back up with plastic tape, and that was it. That was the end of my inspection for the entire container. Now after an inspection like that, the Adwana office will have tabulated your import tax bill by the end of the day. Based of course on the packing list you've provided way ahead of time to the shipping company up in the first world who categorized your items as they went into the container. And normally after that inspection, and after they come up with your tax bill, and you pay it, they'll expect you out of there within another day, 24 hours. And there are always private individuals with trucks outside the Adwana lined up in the streets and in the parking lots, just waiting for you to walk by so they can all rush up
[10:28] and give you a price quote on what it'll cost to deliver your stuff to whatever town in that country you're headed for. And normally these delivery guys that hang out outside the Adwana, they're pretty reliable, and sometimes they even have halfway decent trucks, but don't hold your breath. But you shouldn't just make a deal with them, let them load up all your stuff, give them an address, and hope that they'll make it to the right destination within a few hours. Because remember, the customs office or Adwana that we're talking about is generally located at an ocean port. And it's probably quite a few hundred kilometers away from your final destination. And when you hook up with one of these private delivery guys, it's a good idea that you ride with them or at least follow in another vehicle from behind, just to make sure they get to the right place. Now, these guys aren't generally thieves, and it's their job every day to deliver things.
[11:15] But if you leave a guy like that alone for six hours with all your stuff, and you're not there, if that guy happens to stop for gas or beer at a truck stop, what's to stop him from taking a peek in the back of that truck and pulling out a few choice items for himself. But if you're close by, that's never going to happen. So be a little cautious and don't invite temptation. And another thing, as far as truck drivers being bonded down here, you know what bonded is, don't you? Being insured for accident or loss or damage to the goods that the trucker might be delivering? Well, down here, you can forget about it. 95% of the truckers down here don't even know what the word bonded means. Even if there was a Spanish translation for it. However, in every big city, if you look at the yellow pages, and they're called the Pajínes Amarios, by the way, you'll find a handful of big trucking companies, a lot
[12:04] of them transnationals. And if you contract one of those guys, you'll get your stuff delivered alright, and in good condition with well-maintained trucks. And they might even be bonded, and they'll even have GPS tracking, believe it or not. At least that's what it says on the sides of their trucks. Now whether that GPS is actually working or not, or they just have a GPS sticker on there to warn thieves off, or maybe just to look cool, well, nobody knows. But one thing's for sure, if you contract one of those big trucking companies like that, especially if it's transnational, you're going to pay twice of what it would have cost if you would have hooked up with one of the local boys who always have much more rickety and dented up trucks, and who of course probably don't have basic liability insurance, and are never bonded. And I did mention trucks with GPS, didn't I?
[12:50] And how did I find out that so many of those GPS stickers are false down here? Well it's easy, most of the GPS stickers don't just say GPS, they usually have some other wording on them. Like for example, GPS service provided by FNH Transport, or National Security GPS. Well most of the stickers like that that I see are in English, and some of them even have 800 numbers and area codes for regions in the United States. And of course, we're down in Latin America now. And 800 numbers don't connect down here, it's not the same as it is up in the first world. And if a phone number has an area code from Colorado, you know for sure that GPS security company is not working down here in Honduras. But the real giveaway is that the lettering is in English, not Spanish. So come on guys, if you're trying to fool somebody, at least get your GPS stickers printed
[13:39] up in Spanish. And by the way, speaking of the Atuana again, and getting your things out of there after you've paid your taxes, the thing is if you don't get your stuff out of there within a 24 hour period, they charge you a daily rental for the space, and though it's not much, maybe 20 to 50 bucks for a 10 by 20 space, for an expat it should be more about the insecurity of leaving it there past the allotted time. And even though your own personal little cage seems locked up and secure enough, on the top of all those little cages there's a common defect, and it's right at the top of the cyclone fence where it meets the roof. You could see that there could be a way for a sneaky little guy to wiggle his way through, if no one was around and he had the time and a ladder. And who knows what happens after 6 o'clock at night, when the Atuana is closed, but there's
[14:27] still a lot of night shift workers and maintenance guys hanging around. At least that was the Atuana setup that I saw down in one of the ports in Costa Rica. Now I promised I was going to tell you about Chiquita Banana and Dole Pineapple Trucks, and I'm sure you're wondering what does that have to do with shipping your goods or a car down here? Well you know worldwide Dole Pineapple and Chiquita Banana have some of the biggest fleets of semi-trucks and trailers and shipping containers in the world. And I'm sure up in the states you've seen Chiquita Banana trailers parked at all those big chain grocery stores, in fact you see them on almost every highway up in the states. And down here in Latin America they're all over the place. They load them up with fruit and send them up to the first world. And once it's unloaded at your local grocery store, what do you think happens to that empty container truck? It has to come back down here to Latin America and reload with fruit again.
[15:17] Well some years ago those fruit company bigwigs figured out they don't have to send empty containers back to Latin America anymore. They could charge a grand or so to people like you and me, people who were on their way down to Latin America and who wanted to rent some cheap space for shipping. So don't be surprised if a Chiquita Banana Semi-Trailer pulls up in front of your house when you expat wannabes decide to make that big move and come down here. And yes I'll grant you inside of those trailers it does stink a little bit like rancid fruit. But they're clean enough and all in all not a problem. Anyway all your stuff's gonna be in boxes and your furniture and soft items completely wrapped in plastic. At least that's what I hope you do because it'll save you a lot of grief. In that bit about wrapping furniture in plastic, I always recommend wrapping your soft items with that plastic completely.
[16:03] Don't leave any bare space of furniture exposed. And that kind of wide wrapping plastic comes in a roll, it's cheap and you just have to ask anybody at a furniture store or a moving company and they'll tell you where to get it. And again I highly recommend that because the people down here are not careful with your personal items or your furniture. They don't take care of their own things so what makes you think they're gonna take care of yours? You shouldn't be surprised when you see your moving company guy down here loading your stuff into a dirty, grimy truck using his grease stained fingers and no gloves banging your stuff against walls and door jams, not to mention against his truck's dirty metal panels. Well all I'm saying is you better have those white mattresses, white pillows and tan love seats all completely wrapped up in that hermetically sealed plastic I'm talking about.
[16:50] And it's a very good idea to get yourself some cardboard boxes and before you wrap your furniture, I recommend that you whip together some of your own cardboard triangular shaped corner protectors. Or you can use some of those styrofoam plastic corners that come with almost anything you buy nowadays that comes in a box. It doesn't matter what you end up using but you should protect all the corners on your furniture and then wrap that furniture completely with your plastic wrap. Believe me you won't be sorry for that extra half hour's work. Oh and just one final thing about bringing a car or a truck down here and paying those import taxes on it. Now in all countries in Latin America and across the world when you bring a car in you have to pay import duties. Even though you might have already paid an import duty when you first bought it if it
[17:35] wasn't made in your own country. For example if you bought a Mercedes or an Audi or a BMW. If you bought a car like that made in Europe whether you know it or not there's a pretty high import duty added right into the cost. Then later on after you've had it a while and you decide to ship that car down to Peru I'd say they're gonna hit you for an import tax duty on that too. But what most first world people don't realize is that most Latin American countries categorize those cars and trucks according to body style features and use and some of those vehicles end up paying a much higher import tax than others. For example in most countries in Latin America pickup trucks believe it or not pay the lowest rate of import tax. Commonly 5% of their blue book value when they come in. Of course that varies a lot from country to country but still pickup trucks pay a very
[18:24] low tax and the reason for that is Latin American economists figure that people who have pickup trucks are using them for business purposes and are therefore creating jobs and doing productive work and increasing the tax base of the economy. Because generally pickups are not what people buy for their main family vehicle. And actually it makes a lot of sense to do that but I'm a bit surprised that governments have actually done that considering it's eminently logical and governments generally consist of thieving morons. And politicians aren't driven by common sense or logic. Oops, sorry about the rant, let's get back to how they tax different types of cars and trucks down here. And oddly enough if you have a station wagon you pay less taxes too because somehow in a lot of Latin American countries they've been classified as agricultural vehicles.
[19:10] In other words, farm vehicles. But you see this once again shows how stupid governments are and the unintended consequences of bad legislation. Now get this, since everyone down here has figured out that taxes on station wagons are very low, a lot of wealthier folks have gone out and bought luxury high end cars that are considered station wagons simply because they look a little bit like one. Like for example a Toyota 4Runner, a Toyota 4Tuner, a Mitsubishi Nativa, a Nissan Pathfinder and practically anything big or small that happens to look a little bit like a station wagon. Which like I said have somehow been categorized as farm and agricultural vehicles down here. So if you buy one of these cars for 30 or 40 thousand dollars, instead of paying 10
[19:56] to 20 percent import tax, you pay about 5 percent which could easily save you a couple grand. And again this varies from country to country down here so you have to check on it if you have a car like that you want to bring down. Now on the other hand there are two classifications of vehicles where they hit you really hard on the import taxes. And one of those is a 4x4 which in Spanish they call cuatro por cuatro naturally. Now 4x4s and SUVs are in the highest import tax bracket and it doesn't matter that most SUVs are 4x4s and that most SUVs kind of look like souped up station wagons. So all in all the categorization of these cars can be pretty confusing because suppose you have a Subaru station wagon. Now a lot of people know that some Subaru station wagon models are 4x4s.
[20:43] So what import tax bracket do they go in? The very low agricultural or station wagon category or the very highly taxed 4x4 category? Who knows? It all depends on the country, the people in customs and maybe even who's reviewing your customs application. And sometimes it depends how good your lawyer is. So you can see how confusing that could be. And talk about confusion. What about all these cars on the market these days that say they have all wheel drive? Now isn't that technically a 4x4? Because 4x4s have all wheel drive right? And what about pickup trucks? Now they're almost always in the lowest import tax category. But we also know that a high percentage of pickup trucks come with 4x4 traction. So how do those pickup trucks get taxed? Low or high?
[21:29] Or in between? Who knows? Here's just another case that shows you how governments lose the threat of reality. I think if they have an import tax, which I think sucks anyway. Because like I said so many times before, the common man gets absolutely nothing for his tax dollar down here. Though it's not much different in the first world now is it? And since all governments do levy import taxes, why not make it a blanket one shot deal let's say 5%? That way if you do have a luxury car and it has a high blue book value, you're gonna pay more tax anyway. And if you bring in a Toyota Yaris or an Echo, you don't pay much tax at all. But that would be too logical wouldn't it? And another thing I have to mention is that tax laws down here are changing all the time. Which adds another layer to the confusion and that kind of uncertainty always makes it difficult to make long term plans.
[22:15] Especially when it comes to buying and selling big items like cars and houses and property. And most especially when it comes to cars. And in fact sometimes you'll be reading the paper in some little Latin American country and you'll notice a tiny little article somewhere that says that their congress has passed a special tax amnesty law or special tax waiver that only lasts let's say one month or two. Where you can bring a car in, any car, or a truck or whatever for a flat $500 or some ridiculously low figure to that effect. And so many times you'll hear about a law like that after it's expired. In fact that's happened to me more than once. I saw some big shot I knew at a Christmas party and he came up to me and said hey you wanna see my new Lexus? And I asked him why he needed another luxury car since he had two more sitting in the garage.
[23:03] And the guy told me it was because he learned of a short term tax break that he couldn't refuse. And of course I never heard about it, never read about it, nor did any of my own friends hear about it. But he was a friend of mine with government contracts and he had the inside track from his friends within the government when that special little tax exemption window came along. So you can see by that example just how government works down here. Not only are they terribly corrupt, narcissistic, moronic, and inefficient, they occasionally pass fleeting laws that nobody ever hears about so they themselves and their family and friends can gain. And the common man, well forget about the common man, who's he? I guess I better quit that subject while I'm ahead or I'll go on another rant and you don't want that.
[23:48] Now here's a bit of news that might come in handy for all you expats thinking of buying or selling a car. When you buy a car down here, whether from a private party or from a dealer, you have to pay the value added tax on it, which averages around 12%, which is a pretty big piece of change. So if you buy a car let's say for $10,000, you're going to end up paying the government $1,200 in value added tax, which is called EVA down here, remember? I-V-A, EVA. Now some countries, like for example Guatemala, have changed that law and if your car is over 5 years old, you pay just $100 transfer tax, which is much more reasonable. But that's the odd case and most countries charge that straight value added tax, no matter how many times that car is bought and sold. And that's why so many times when you buy a used car down here, you agree to an equitable
[24:36] price with the seller but the paperwork actually shows a much lower selling price so that the buyer pays much less value added tax and the buyer slips the remainder of the money under the table to the seller. Down here it's done like that all the time, anything to avoid taxes. Now again, I'm not advising anybody to do anything illegal, it's just my job to tell you how they do things down here, right or wrong. Now sticking on that same theme of selling and buying cars, there's another little tax saving trick that goes on all the time down here in Latin America, especially with the lower classes of people who can only afford to buy cars that are virtually junks and more than 10 years old. And I'm talking about cars in the $500 to $3,000 price range, which up in the first world your 16 year old kid would be embarrassed to drive.
[25:23] Now to avoid paying taxes and transfer fees on a junky cheap car like that, the people who buy and sell these kind of cars often don't register the sale at all with the transportation department or the tax people, they just hand over the license plates and the little circulation card I told you about in the title and the buyer pays the seller whatever price they agreed upon. Now even if the paperwork has never been registered the new owner's name, he has the title and the old registration in the other guy's name and with that it's completely legal for him to drive that car and even if he gets in an accident or gets pulled over for a moving violation or whatever, when the cops look at his documents and see that the car is not in his name but some other guys, the original seller of course, it doesn't matter because the paperwork still is in order and because people who drive those old junky cars around
[26:12] don't have a pot to pee in, they almost never get sued even if they're the cause of an accident that kills somebody because again, they haven't got a pot to pee in and there's no point taking a guy like that to civil court because he's got nothing that anybody wants. Now he might go to jail for a long time because he killed somebody but he won't go to civil court so down here in Latin America, hundreds of thousands if not millions are puttering around in unsafe pieces of junk and many of these cars have been bought and sold two, three even four times and none of the paperwork matches the guy who's driving it and that's just because at that level of society, the cost of the value-added tax and the title transfer fee even on a near worthless piece of crap like that, those fees though tiny to us are out of the buyer's budget and if he actually had to pay those taxes and fees,
[26:58] he probably couldn't swing the deal. However, people who have cars that are worth more than $3,000 almost never pull that scam because if they did, they wouldn't be able to get car insurance because before the insurance company gives you a policy, they make sure your title, taxes, and all your paperwork are in order and in your name and that's why folks, you don't want to get into an accident with one of those duct tape rust buckets because none of them have insurance and when you're in a country where nearly half the cars on the road fall into that category, you better learn how to keep your distance because they won't. You've been listening to The Expat Files, living in Latin America, and don't forget you can email me on anything at all about Latin America, theexpatfiles at gmail.com,
[27:47] that's theexpatfiles at gmail.com. See you next time, nos vemos!