Newbie Question: Asset protection Holding Vs Trust

[TheGlobetrotter]

Hello,

I am quite new here but have been reading the forum for some time now. Still, I have not found a complete answer to my question.

I am working in a liberal - professional own company in a high liability risk industry and would like to put my further investitions in a safe place, away from the reach of someone in the unlikely situation of a law suit (the more discrete , the better)

Tax residence at the moment (not changable in the near future): Europe
The business I own now can NOT be integrated in the new structure.
Areas where the investments are planned to be made: Out of Europe (South America, Africa or eventually Asia)
Size of the investments: 7-8 figures
Type of investment: mainly Real Estate to rent, eventually to resell
Highest possible anonymity would be a big plus


Questions:
1. What form of corporation would you choose (Trust vs Holding vs ?? ) ?
2. Would you do the investments on the main company or create a 2/3 level structure (with multiple subsidiaries companies in every country of investment) ?
3. What jurisdiction would you choose ?

I do really appreciate the effort of anyone who takes the time to educate me.

Thanks

 

[Martin Everson]

1. What form of corporation would you choose (Trust vs Holding vs ?? ) ?

The holding structure is highly dependent on the jurisdiction the property is based in. Some countries do not even recognize trusts so you need to check this beforehand.

2. Would you do the investments on the main company or create a 2/3 level structure (with multiple subsidiaries companies in every country of investment) ?

If the properties you own shall be producing income then a corporate structure for each jurisdiction wholly owned by the trust is the way to go.

3. What jurisdiction would you choose ?

You firstly need to determine where you are buying property. Is it in a civil law or common law country? This makes a difference. As civil law and common law countries can interpret ownership rights in different ways.

The actual whole issue is complex and is not as simple as just setting up a Caribbean or Channel Isle trust and sticking your property or shares of local company holding property in it. If a trust is not recognized by the jurisdiction where the property is based then you have no protection whatsoever the minute a challenge is made and no one will tell you beforehand its a duff structure.


P.S The setup of any structure if you use a EU agent to perform it will also likely be reportable to your local tax authority since DAC6. So your EU agent has a legal obligation to provide your home country with entire structure created for you. In which case your naked and tax man will decide if structure is just a privacy structure or determined to gain a tax advatage. You will likely get an audit and go through pain to show setup has nothing to do with tax evasion etc.

EU DAC6 - Tax structures Disclosure & Reporting comes into effect 1 July 2020

https://www.pwc.ch/en/services/tax-advice/corporate-taxes-tax-structures/dac6.html What’s DAC6 all about? The EU is introducing an additional level of transparency in order to detect potentially aggressive tax arrangements. The amendment to Directive 2011/16/EU on mandatory automatic exchange...

www.offshorecorptalk.com

 

[TheGlobetrotter]

The holding structure is highly dependent on the jurisdiction the property is based in. Some countries do not even recognize trusts so you need to check this beforehand.

I am confused, what’s the connection between owning a holding company and using a trust (not recognised in some jurisdictions) ?

If the properties you own shall be producing income then a corporate structure for each jurisdiction wholly owned by the trust is the way to go.

If we go with the holding company, is it possible that some country does not allow creating a local company with the holding as sole owner ?

You firstly need to determine where you are buying property. Is it in a civil law or common law country? This makes a difference. As civil law and common law countries can interpret ownership rights in different ways.

First options would be Argentina, Panama, Colombia, Peru, Chile , Brasil.

The actual whole issue is complex and is not as simple as just setting up a Caribbean or Channel Isle trust and sticking your property or shares of local company holding property in it. If a trust is not recognized by the jurisdiction where the property is based then you have no protection whatsoever the minute a challenge is made and no one will tell you beforehand its a duff structure.


P.S The setup of any structure if you use a EU agent to perform it will also likely be reportable to your local tax authority since DAC6. So your EU agent has a legal obligation to provide your home country with entire structure created for you. In which case your naked and tax man will decide if structure is just a privacy structure or determined to gain a tax advatage. You will likely get an audit and go through pain to show setup has nothing to do with tax evasion etc.

I agree it is very complex. I am still very baffled that I can not seem to find any lawyer / financial advisor who can safely offer WRITTEN advice in a matter like this. Most of the times it seems like my google research offers me better answers than them. And if I decide to use a non-eu agent, than I can not count on them being impartil because they, well, want to sell me their product. So I am back tu square one…

 

[Martin Everson]

I am confused, what’s the connection between owning a holding company and using a trust (not recognised in some jurisdictions) ?

The legal form of a trust may not be recognized there but a holding will be. Your topic header is "Holding vs Trust". There is no connection other than the topic header you made.

Hague Trust Convention - Wikipedia

en.wikipedia.org

If we go with the holding company, is it possible that some country does not allow creating a local company with the holding as sole owner ?

Some countries may hold blacklist of tax havens and if holding company is based there then could be issues.

 

[TheGlobetrotter]

The legal form of a trust may not be recognized there but a holding will be. Your topic header is "Holding vs Trust". There is no connection other than the topic header you made.

Hague Trust Convention - Wikipedia

en.wikipedia.org

Some countries may hold blacklist of tax havens and if holding company is based there then could be issues.

Thanks for the answer.

So if you would be in my shoes and want to form a holding, what would be the jurisdiction you would choose ? thanks

 

[Martin Everson]

So if you would be in my shoes and want to form a holding, what would be the jurisdiction you would choose ? thanks

As per my answer below taken from above. There is no one size fits all solution.

You firstly need to determine where you are buying property. Is it in a civil law or common law country? This makes a difference. As civil law and common law countries can interpret ownership rights in different ways.

The actual whole issue is complex and is not as simple as just setting up a Caribbean or Channel Isle trust and sticking your property or shares of local company holding property in it. If a trust is not recognized by the jurisdiction where the property is based then you have no protection whatsoever the minute a challenge is made and no one will tell you beforehand its a duff structure.

 

[bubbledouble]

Thanks for the answer.

So if you would be in my shoes and want to form a holding, what would be the jurisdiction you would choose ? thanks

What exactly are your plans, what will the holding company "hold" or do ?

Where are you located and what is your budget to setup a proper structure?

 

[TheGlobetrotter]

What exactly are your plans, what will the holding company "hold" or do ?

Where are you located and what is your budget to setup a proper structure?

The holding is going to hold properties in Latin america ( Argentina , Colombia and/or Brasil) directly or through another company (that was as well part of the question). The properties are going to be rented or eventually sold.
Budget: 7-8 figures ranges .

what would be the best jurisdiction for the holding and what would be the best jurisdiction for the operative subsidiary ?

 

[TheGlobetrotter]

The holding is going to hold properties in Latin america ( Argentina , Colombia and/or Brasil) directly or through another company (that was as well part of the question). The properties are going to be rented or eventually sold.
Budget: 7-8 figures ranges .

what would be the best jurisdiction for the holding and what would be the best jurisdiction for the operative subsidiary ?

Anyone any idea of the best jurisdiction ? thanks

 

[clemens]

Consult a Panama tax expert and get setup in Panama, that is what I would do. The Holding can form a trading / investment firm anywhere that would fit to your plans. Shouldn't be difficult. You don't need a trust to set this up.

 

[TheGlobetrotter]

Consult a Panama tax expert and get setup in Panama, that is what I would do. The Holding can form a trading / investment firm anywhere that would fit to your plans. Shouldn't be difficult. You don't need a trust to set this up.

thanks for the idea. How about the compliance ? isn t it be a problem to open an account for a company owned by a panama holding ?

 

[clemens]

Depends on the bank you approach for the account opening and the banking network of the agent that you want to help you with the setup.

 

[DomOCT]

First options would be Argentina, Panama, Colombia, Peru, Chile , Brasil.

My advice would be to buy it through a foreign company located in a jurisdiction that has an investment protection treaty with the country the property is located in.

Whether you should own this company directly or through another entity will depend on your personal residence.

 

[wellington]

My view having read countless indictments is asset protection via any means doesn’t work unless the following occurs.

You renounce citizenship
Your kids don’t have Western citizenship

Your kids have medium range citizenship and passports

All transactions are routed from cash then transmitted via non western financial rails

You own none of these assets directly or indirectly

The entities at the end have owner ship or use ties to those said kids via multiple layers of non Western language contracts and physical paper not digital ties

You if you use said assets have leases / rent contracts

You are willing to go to prison and die in prison to safeguard those assets into your kids ownership.

Anything else is a pipe dream until a western state puts you into a legal vice and turn the screws.

If however it is non Western states there’s protections with basic holding companies etc

Basically - own nothing and be happy

 

[TheGlobetrotter]

My advice would be to buy it through a foreign company located in a jurisdiction that has an investment protection treaty with the country the property is located in.

Whether you should own this company directly or through another entity will depend on your personal residence.

Where could I read more about investment protection treaties between countries?