Buying with an Offshore Company to Save Money
If you are buying a property abroad, you will understandably have some concerns on issues of tax and local charges for any mortgages you may have there. Some people consider purchasing their second home with an offshore company in order to save money on taxes or other expenses. As with any procedure related to buying houses, there are positive and negative aspects to using an offshore company. Let’s take a look at the few most common areas.
Things to Consider Before Buying with an Offshore CompanyThere are a few main issues to take into account before you commit to buying with an offshore company. First, you must consider the country you’re buying in. Each individual country has different laws and with these laws are different charges when it comes to buying property. Always speak with a professional in the country you’re consider buying in first. This is a fundamental part of any property purchase, but when considering buying offshore it becomes even more important. You must speak to as many people as possible, do not rely on one agent. Local tax agents may take advantage of the fact you’re not aware of the local laws and customs.
This means that they can provide you with the wrong advice that may eventually lead to you being over charged and taxed in the UK and abroad. Use a specialist company if you have to, as they will know exactly what is best for your situation. In Spain for example, there is a special 3% tax of the market value of the property every year. This is because the Spanish know people try to avoid taxation by buying through an offshore company and they have created a tax just for that occasion. There are some questions that you must ensure you get answers to before you enter into an agreement with an offshore company:
- If you profit from the sale of your home, will you be taxed?
- Is it easy to take your home out of the company should you wish to in the future?
- Will you be charged if you decide to take your home out of the company?
- Are there extra tax issues to consider if you sell your company owned home?
Advantages of Buying with an Offshore CompanyWhen you buy with an offshore company, one of the main advantages can ironically be when you go to sell again. The sale can usually be carried out much quicker and cheaper and in some cases it increases the asking price. However, this can also be a pitfall as many people who buy want to buy a property, not just shares of a company. There are also country dependent advantages, but generally you would expect to avoid transfer taxes, registry charges and notarial charges with an offshore company purchase. Often you can avoid local inheritance taxes on the property and in some cases avoid double taxation. You can buy and sell properties anonymously and can also benefit from company shares which can be used to help pay for the property.
Overall, when it comes to deciding whether or not to use an offshore company to purchase a home, it really comes down to the individual circumstances. For many, it is far easier to simply buy in your own name and pay what you have to. Using an offshore company can be confusing, time consuming and not overly beneficial. Seek out specialist advice, but unless you’re a serious investor and plan to make a series of purchases, it may not be worth your while.