Real estate companies
A popular way of achieving tax optimization is by establishing foreign real estate companies that basically act as owners and exploiters of land and real estate. And if the real estate investment company uses a trust or even a private foundation to own its shares, then this could lead to additional taxation perks in the client’s country of residence.
Offshore real estate ownership can indeed create many tax advantages –just like in the case of portfolio investment companies - that include avoidance of inheritance tax, of capital gains tax and ease of sale through transferring the shares in the foreign company. This means that the foreign real estate investment company will mainly be used for the tax-free collection and repatriation of rental income and gains upon the sale of the real estate. All this explains why real estate investments in an International (offshore) environment have proven so popular.
Real estate ownership advantages
It’s obvious that the real estate investment industry can be very lucrative, even though it can also be unpredictable. This is why real estate companies need to assimilate all the information they can get on current market trends and the legalities involved in real estate ownership, as well as be careful about time management, the transaction costs and the property’s liquidity potential.
The total returns produced from real estate investments are a mixture of capital growth and income and this is why the benefits of real estate ownership are numerous.
- The real estate companies are exempt from local transfer and capital gains taxes upon the resale of the property
- Exclusion of foreign exchange controls restrictions in case the beneficial owner takes up residence in the property
- Avoidance of local inheritance taxes in case of death of the beneficial owner
- Avoidance of the local succession laws that may stipulate the heir of the property
- Confidentiality regarding the ownership details of the investment company