LEGAL MOVES
appreciation over the long run)? Or is the intention
to trade the property in the short term to make capital
Taxation is, of course, a primary concern and
advice should be sought in the country in which
Fees are an important aspect to consider, whether
these are legal fees on acquisitions, or lending and
property management costs. The costs of a suitable
property holding structure eg a trust and/or a
company or similar vehicle are important. Funds
could result in layering of fees and it’s essential to ask
about all the fees from upfront to ongoing fees, any
performance fees and fees on exit.
The income could also be in the form of dividends
or other distributions and these may attract
withholding ta xes which means the holding
structure should, if possible, be in a jurisdiction
which has the relevant double taxation treaties to
reduce the withholding tax.
gains and possibly rental income? Alternatively,
is the investor looking to invest in a collective
investment scheme, some of these may be readily
tradeable and others can be in closed ended
structures ie the investment is locked in for a
number of years (for example five years).
A ll collective investment /pooling schemes
marketed to the general public should be regulated
and sold through promoters with appropriate
licensing.
Certain countries eg Australia blacklist particular
offshore jurisdictions. Effectively this means one
should not endeavor to hold property through a
company in this jurisdiction. In practice there will be
many options for holding vehicles and issues such as
cost, long-term estate planning, and asset protection
will play a role in choosing both a structure and a
jurisdiction.
There is a plethora of different structuring options
including, for example, trusts, limited liability
companies, limited partnerships, property unit
trusts, segregated portfolio companies to name
a few and a whole host of collective investment
schemes. Generally, one should stick with a tried
and trusted structure for the country in which the
property is situated.
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Offshore Handbook 2013
the property is situated. Each country (and certain
states within, for example, the USA) have different
treatment of taxation on property rentals. In some
countries there are advantages to being a nonresident holding property, eg in the UK one can
apply for Non-Resident Landlord status.
Disposing of the asset will most likely result
in capital gains tax (or income tax) and there may
be other duties payable locally. If one is trading in
property, income tax could be payable. The various
collective investment scheme options should advise
the taxation payable both on distributions and on
redeeming the assets. Generally if one holds foreign
shares for five years or more, capital gains rather than
income tax will be applicable.
Real Estate Investment Trust (“REITs”) are a
popular way to invest in property because they are
readily tradeable and standardised worldwide.
REITs have their own particular tax treatment.
Please note that when owning property in your
name in certain countries, you may be subject to
estate duty at the local rate. For example, in the
UK, when one owns UK situs assets in excess of a
certain amount, UK estate duty at 40% would be
payable (which is far in excess of SA estate duty
levied at 20%).
RESOURCES
Amicorp
www.reimag.co.za