Thursday, October 13, 2011

How to Take Title to Your Property in Belize - Using IBC's

The best way for you to take ownership of any property on Ambergris Caye do is to form 2 IBC's (International Business Companies). One as a holding company and one to take title to the property. The benefits of doing this are huge!

Let me explain a bit about IBC's. These are international companies that have at least one Director, and at least one shareholder. Two of the top jurisdictions for IBC's in terms of legal protection and being low-cost, are Belize and Anguilla, both British Commonwealth Caribbean nations. An IBC is instrumental in operating an offshore account, so it allows you to have a US$ account with any of the international banks in Belize. Your IBC can hold title to property, be used to trade stocks, bonds and securities and to transact business. IBC's are typically tax-free jurisdictions.

For owning property in Belize, a foreign (non-Belize) IBC is required. This is because a Belize IBC is an international company and cannot conduct business domestically, so it can't hold property in Belize. So a Belize IBC can hold property anywhere else in the world but Belize. To hold property in Belize, I recommend the formation of an Anguilla IBC. If you are buying multiple properties as many investors are I would suggest one IBC per property. The reason for this is that when you eventually sell your property or properties, you will in fact be selling your Anguilla Corp.'s with all their holdings.

This can and will offer a significant tax savings to the next buyers and will in turn allow you to command a higher selling price for your property. The reason being is that stamp duty (transfer tax) is payable on the transfer of property in Belize at the time of sale. There is no stamp duty due on the sale of a foreign (non-Belize) company.

Likewise, an IBC offers protection from personal liability. It also allows legitimate tax avoidance (not tax evasion) through deferral of taxes on capital gains. US citizens are liable for capital gains taxes on their worldwide income.

This accomplishes several things. For one, it means that when you sell a property (by selling the Anguilla IBC) the net gains are still held in your Belize IBC holding company. Let's say you bought Property "X" for $500,000 US and in 3 years you sell it for $650,000. If you hold title in your personal name, you owe capital gains tax on $150,000. If you do as I suggest, then completely legally, you have a $150,000 gain for your Belize IBC. There are no taxes due so long as you haven't withdrawn that money personally as dividends. You can turn around and purchase $150,000 property in Belize, the U.S. or anywhere else, and there is no tax basis on the gain. You can keep rolling the money and reinvesting and at all times, you only pay taxes on the amount that you pull out of the IBC for personal use.

So you can effectively defer taxes for many years, and can also pass on property to any family members or children down the road without inheritance taxes, by including them as shareholders and adding them to your companies.

You keep hold of your Belize IBC at all times, but you can buy and sell as many properties as you want, always holding each one in a separate Anguilla IBC (You could do BVI, or Nevis, or Cayman Island IBC's but they just cost more and don't offer any benefits. In fact, Anguilla and Belize have some very specific benefits that those others don't.)

What is the catch to this great tax saving strategy? Well, the cost to incorporate an IBC with Capital Corporate Services is $950 US per IBC. There is also an annual filing fee of $400. That's it.

Another benefit of the dual IBC ownership structure is that it offers additional asset protection and anonymity. There is no annual financial reporting required of IBC's and while Anguilla has a tax treaty with the US, Belize does not. All in all, holding title to your property in an IBC offers advantages that will benefit you now, and when you have sizable capital gains, as well as when you go to sell and can command a higher selling price.


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