I’m often asked can I transfer ownership of my home or investment property/s to my tax free Offshore Company (“IBC”)?
It can be done legally but you need to assume the worst case scenario (ie that that the local tax authorities or a litigation lawyer will investigate and possibly try and overturn the sale or transfer) and plan accordingly.
The key is commercial reality. The sale or transfer must be, and appear to be, “above board”.
1. The inquisitor might ask Where did the buyer come from? How did you meet the buyer? So the smart thing to do would be to (ie assuming you wish to sell the property to your Offshore Company or Foundation – see below) is list the property for sale with an agent that has international reach (ie one which regularly attracts non local real estate investors) and have the Tax Haven Company (or Private Foundation – see below) make a bid for it after a few others have made an offer.
2. The sale will need to be seen to be at fair market value – you can’t just sell a house to a nil tax IBC for one Dollar (unless it is gifted – see below). Similarly the contract of sale will need to be seen to be on normal or reasonable commercial terms. That said the sale contract could be an instalment or vendor finance contract ie where a deposit is paid and ownership is transferred but the seller retains a mortgage until such time as all the instalments have been paid.
3. Depending on where you live you may be able to “gift” the property to a tax free Offshore Company (or tax free Offshore Private Foundation). It might be difficult to explain why you’re gifting a piece of property to a zero tax IBC hence the smarter thing to do might be to set up (and transfer ownership of the property to) a tax free PIF ie Private Interest Foundation (eg one characterized as a Charitable Purpose Foundation). This one might survive the “sniff test”. Why? Because all day, every day, well intentioned wealthy persons gift money or assets to Charitable causes.
4. You will not want to be seen to be doing or managing anything for the IBC/PIF. Hence the communications will need to be seen to be coming from the IBC Director (or Private Foundation Councillor as applicable)
5. Check local tax laws first. Often when a piece of real estate is sold the seller has to pay capital gains tax. Likewise if/when property is gifted a gift tax may apply.
6. Check local investment laws next. There may be prohibitions or restrictions on the ability of non-local persons or companies to buy and/or hold real estate in the country where the property is located.
7. If you intend to keep living in the property – and you want to fly under the radar – it might not be wise to pay rent to the Offshore IBC (or Offshore Foundation as the case may be) directly; It would probably be more prudent to have a property manager appointed by the Offshore Company (or Foundation) to collect the rent and manage the residential tenancy.
Local conditions can have an impact. Hence before committing to transfer property to an Offshore entity you should seek local legal/tax/financial advice.