How I can invest more profitably in property & shares

How Massive Tax Savings can be Made!

Investing in property, be it private or commercial, can often be made a significantly more lucrative endeavour if executed with the benefit of tax planning principles: Principles which are often not made readily available, or perhaps even known, by the vast majority of non-specialist lawyers and accountants.

Using the Separate Legal Identity of Limited Liability Companies

The most fundamental ‘tool’ of the tax planner is the use of limited liability companies since they are almost universally accepted as being totally separate legal persons/entities to their directors and beneficial owners. In fact, provided there is proper and suitable local management and control, it is often possible to extrapolate tax responsibilities from high to low (or even tax free) jurisdictions*

* SEE DOUBLE TAXATION TREATY INFORMATION BELOW

‘Passive’ or ‘Trading’ Investments

The obvious desire of any investor is to legally reduce taxes to as great an extent as possible. How far this can be achieved is controlled by a number of factors including whether the investment is ‘passive’ or ‘trading’ in nature. An example of a ‘passive’ investment would be when one wishes to acquire a property with the specific objective of avoiding capital gains tax on a future disposition – In many cases, particularly where one is non-domiciled in a country such as the UK, the use of a simple tax exempt International Business Corporation (IBC) based in countries such as the Bahamas or British Virgin Islands (BVI) can be used to realise virtually total tax savings provided any profits are kept outside of the United Kingdom. For those who are UK domiciled and who wish to invest in UK properties it may be necessary to employ a private interest foundation to afford the above-mentioned benefits. Where however the investment is not simply about a simple purchase and future resale but involves financing and/or the renting of a property it may be necessary to use domestic ‘loop-holes’ and/or certain tax treaty provisions – For example, it is possible to create ‘back-to-back’ loans on an investment property and locate the ‘lending’ company in a jurisdiction which has a treaty with the UK which results in no withholding taxes on interest re-payments

Commercial Property Investments

In many ways, these can be the most dynamic and interesting of tax planning structures since they can often allow even significant building construction to take place in one country, perhaps a high tax zone, but pay tax in another low tax jurisdiction. Obviously, the correct expertise must be in situe but literally hundreds of millions of Euro have been saved by using such structures with the greatest prerequisite being genuine external management and control - An area, which licensed trust and management firms such as Hibernian Trust e Management Company Lda are in a unique position to offer

Why it is Prudent to use a Company to Purchase Private Property Abroad

As can be seen in the other links within this Section, it is often possible to use selected offshore or tax planning companies to avoid future capital gains (CGT), inheritance (IT) or even re-sale stamp duties on property dispositions. However, it is also clear that certain jurisdictions are making the use, if one is only to consider the avoidance of CGT and IT, less financially prudent due to more and more sophisticated anti-avoidance provisions. Nevertheless, it is certain that wealthier clients can still benefit and indeed are inevitably advised to use either offshore and/or local companies to make their investments – Why? The reason is simple, in that apart from the UK and Republic of Ireland, most European countries tax all residents on their worldwide income and in many cases wealth!! For this reason, even if there are no CGT savings available by using a company, the use of such an entity can separate and reduce ones personal wealth both in the investment country and indeed worldwide. Certainly, anyone with significant assets in the UK or Ireland and who wishes to invest in countries such as Spain, France or Portugal should seek professional advice from a qualified tax planner who considers not only the myopic property investment but the overall tax situation of a client … Something SCF specialises in!!

The Importance of Double Taxation Treaties

The single most important weapon in the tax planners’ arsenal is the international tax treaty network that exists between virtually every non-tax haven country in the World. In most countries, tax treaties signed between countries are given primacy over domestic law and create many opportunities to go ‘treaty shopping’ in order to achieve the lowest tax exposure possible. Tax treaties generally cover taxes on income, dividends and royalties together with where an individual and/or company should pay such taxes. To mitigate overall taxation, tax planners often use a ‘treaty sandwich’ where new jurisdictions are introduced into an individuals and/or corporate structure where there might be tax saving advantages.