NOVEMBER 2016 ROME
Investment in US real estate: tax efficient strategies for the non-US investor
[ MATTHEW LEDVINA ]
INVESTORS WHO ARE NOT US CITIZENS or Green Card
holders have significant exposure to estate tax on shares and real estate in the US. There is no 100% perfect investment plan. Property may be owned directly or through a (tax-transparent) LLC. This is good for tax on income and capital gains but the property remains fully liable to estate tax – a liability which may be reduced by debt. Owning property through an offshore
company involves no exposure to estate tax, but a higher level of tax on income and capital gains. The partnership structure, though expensive, improves the position as regards tax on rental income and sale profits – using a two-tier partnership reduces the estate tax risk. The trust structure has the optimal results, but requires greater care in maintenance. The insurance wrapper offers protection from all these taxes.
Tax planning after Brexit [ RICHARD HAY ]
THE EU-UK RELATIONSHIP HAS EXISTED SINCE 1973. The vote to leave was unexpected. Immigration
was the key issue, but exaggerated claims about saving money were influential. The vote cannot be undone. The Prime Minister says, “Brexit means Brexit”. The Supreme Court will sit on 7 December (2016) to consider the extent of the Prime Minister’s powers. The PM may be forced into a general election (subsequently called on 8 June 2017), which could be advantageous to her. EU leaders do not want to encourage people in other member states to oppose free migration. The UK Government is anxious to protect the business of the City. This business will not migrate elsewhere. Passporting is the main issue. Equivalence is a possible option, but would still require a UK contribution to the EU budget, and would take considerable time to agree. There are, however, opportunities for new agreements, though the UK has a severe shortage of negotiators. The UK could attract with less regulation – for example, in relation to beneficial ownership disclosure.
Undeclared assets and the Common Reporting Standard: the new urgency
[ TESSA LORIMER ]
OFFSHORE STRUCTURES ARE REGARDED WITH SUSPICION. Tax authorities are going to receive huge amounts of information. They are actively investigating structures
holding concealed assets. The CRS has now come into effect and the results are being seen. Historically, HMRC had very limited power to investigate foreign bank accounts. This is changing. Once HMRC suspects tax evasion, it can issue ‘letters of request’ to foreign governments and invoke Conventions of Mutual Assistance. Extensive information on bank accounts can be obtained. An allegation of money laundering can often persuade reluctant tax authorities to cooperate. Information ceases to be privileged when it comes into the hands of a third party. A foreign tax authority can be asked to put a suspect under surveillance. Intercepted material is not admissible in the UK, but this is not so everywhere. A request may be made for premises to be raided, for suspects to be interviewed, for their number plates to be tracked, or for them to be extradited.
A foreign tax authority can be asked to put a suspect under surveillance
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THE ITPA GREEN BOOK 2018
www.itpa.org
EU leaders do not want to encourage people in other member states to oppose free migration
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