Latin America targets UK

Thursday, 25 June 2009 08:34

Latin America targets UK property

The UK property market has been ‘on pause’ for some time but there are signs of recovery. For inbound investors at least the UK is looking attractive due to depressed land values and the weakness of sterling. A group of Latin American investors from Brazil, Argentina and Mexico are currently engaged on an inbound UK development and infrastructure project. Most Latin American countries have adopted strict anti-tax haven provisions commonly referred to as ‘blacklists’ that essentially preclude the use of traditional offshore centres such as the Cayman Islands, the Channel Islands and so on.

For UK property investment it is common to employ some form of basic offshore arrangement as a non-resident is not liable to UK tax on real estate gains - a highly unusual feature of the UK tax code. However, where a trade is undertaken - such as property dealing or development - it is necessary to use a treaty jurisdiction to override domestic taxing provisions.

One option combines non-blacklisted personal holding structures for each investor feeding into a Barbados holding company owning a Dutch property dealing company. Barbados is a very useful ‘linking’ jurisdiction in this type of situation as it has treaties with Mexico and Brazil as well as the Netherlands, allowing tax efficient repatriation through to the beneficial owners. The group from Latin America chose the Netherlands because of its wide treaty network and treatment of income from foreign real estate.

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