Mercatoria Services - Property Holding

By: Mercatoria  09-12-2011
Keywords: Real Estate, Tax, Offshore Company

Property Holding

The ownership of real estate in an offshore company, trust, foundation or partnership if properly structured can achieve substantial capital gains and inheritance tax savings. When selling land, the law governing the transaction will normally be the “lex situs” or law of the land. Hence, if the real estate is located in a high tax jurisdiction, a sale of the real estate and any increase in value (capital gains) on the sale will be subject to the local law and local high tax rates.

In contrast, if the real estate were held in an offshore company, a future sale of the asset would involve the sale or transfer of the shares of the offshore company and not a sale of the real estate itself. As there are no capital gains, income, inheritance or stamp duty taxes in offshore jurisdictions, the sale of the shares of the company would be free of tax.

It is important to have a good view of the political and economic landscape of the jurisdiction in which the real estate is located when advising on how best to suitably hold real estate. Future legislation may have negative consequences on tax efficient property holding structures that were valid at the time of creation. Examples of such changes in tax treatment can be cited in French, Spanish and Portuguese tax legislation in relation to the holding of real estate located in those countries.

Keywords: Offshore Company, Real Estate, Tax

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