Wednesday, August 1, 2007

Offshore stamp duty

Several great questions appeared on my last seminar in London.

One of them was...
Is it really true that an offshore identity will pay less stamp duty?

After studying this topic I can tell you the following.

For land in the UK, it is charged at:

0% if the price does not exceed £150,000 (£125,000 for residential properties)
1% if the price exceeds £150,000 but does not exceed £250,000
3% if the price exceeds £250,000 but does not exceed £500,000
4% if the price exceeds £500,000

So the question remains, how can we "bypass" the stamp duty in full?

The first key information is this....

If you where to buy your properties by using a UK Limited company you can sell the SHARES in the UK Limited company to the new buyer of your property, instead of selling the actually property you would sell the shares of the company that owns the property. Of course the purchaser then owns the shares and indirectly the property...

Do you get it?

If you use ONE UK Ltd per property you buy and only sell/transfer the shares to the new owner the stamp duty is 0,5%

Please note that the shares must be more than three years old... so you can not use this strategy in "flipping".

And how do we pay zero?

The rules in the UK clearly states that IF you where to sell the shares of a NON-UK company instead of a UK Ltd the stamp duty is 0%

Conclusion: It is really up to you to make your own calculations. Is it worth to have one Cyprus or one UK Ltd company per property to escape the Stamp Duty? Measure the yearly cost of maintaining the Ltd towards the Stamp Duty you must pay when selling and you have the answer.

If you have a property worth over 150K the stamp duty would be 4K
Your investment with establishing a Cyprus company is approximate 2K
(imagine having a property worth up to 500K and paying 3% = 15K!!!!)

In other words... If you wish to sell the property within one or two years you will SAVE money having the Cyprus company owning the property and selling the shares of a Cyprus company as the Stamp Duty and Capital Gains will be ZERO!

This strategy would apply for most countries within the EU and also USA and Asia.

P.S The above is for general information purposes only. It is not intended to be comprehensive or to provide any specific tax advice. For spesific advice on your case please contact me for full clarification

Best wishes Jarl Moe "The NO Tax Man"

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