Purchasing Property Using an Off-shore Company (Copyright ©2008)

Caribbean Property Magazine, December 2008

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So you’ve been vacationing in the Caribbean every year for the last six years and you’ve got your eyes set on this amazing ocean-front villa which is finally on the market. It’s perfect for your family. This is your dream home and it’s right at your fingertips- the only thing standing between you and this gorgeous villa is the excessive taxes and legal fees to be paid in addition to the actual cost of the property.

You may well be aware that purchasing a property overseas is a taxable action, and that there is an increased liability for taxes such as capital gains, inheritance and income tax, and often there are additional costs such as stamp duty and transfer taxes. Because of this, it is well worth your while researching your purchase options from a financial and legal perspective before committing to a purchase. How do you buy this property without paying all these additional taxes and Government stamp-duties?

Using an ‘offshore company’ is one of the best ways to go about this venture, as you can own foreign assets through that corporate structure and mitigate or even negate potential financial losses from taxation and fees.

What is an offshore company? In a general sense, an offshore company is one that is incorporated in a jurisdiction where the tax regime is advantageous to non-residents. The company is allowed to own property anywhere in the world, and is usually subject to a low or zero rate of tax on its income and gains.

Placing property into the ownership of an offshore company is beneficial for property developers as well as individuals purchasing a small vacation home or larger investment property, as the offshore company is not liable to pay inheritance tax and capital gains tax. This is because the property is owned by the offshore company, and the shareholders of the company indirectly own the property. Therefore, they can easily pass over the ownership of the property by transferring the shares. And so the ‘anonymously-owned’ company changes hands in the event of death or resale, not the actual property.

For instance, you set up an offshore company, XYZ Inc. specifically to purchase this ocean-front villa you’ve been looking at for several years. A few years later, you decide to sell this villa, but instead of selling the property, you simply sell the company XYZ Inc. to the buyer. As the ownership of the property remains in the name of XYZ Inc. at all times, there is no actual transfer of the property, and so, there are no stamp duty, transfer fees or closing fees to be paid. In some countries, stamp duty can be up to 10 percent. Therefore, the duty payable when purchasing a property valued at US$700 000 can be as much as US$70 000. By transferring the offshore company to a new owner, this huge bill can be legally avoided.

For high net worth or high profile individuals, there is an added bonus of purchasing property through an offshore company- anonymity of ownership. Their name can be kept away from public record as to who owns a given property.

Establishing an offshore account is a very quick, simple and straight-forward affair, however you will need to check the local laws of the country in which the property is located, to ensure that property ownership by an offshore company is allowed. Offshore company fees vary between jurisdictions, and disbursements for submission of annual returns, tax exemption fees, powers of attorney fees and any other expenses can increase this.

If you are planning to set up an offshore company, the advisors at Caribbean Land and Property will be happy to assess your individual circumstances, do the necessary annual paperwork, and manage the entire corporate structure on your behalf.

For anyone who wants to own property overseas, using an offshore company is one of the best decisions you can make, as it can make the entire ownership process very simple, secure the asset away from litigation, and offset potential financial losses. Now you can purchase that ocean-front villa and live the Caribbean dream with extra cash in your pocket!

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