Seeking Efficient Structure for EU Citizen's Overseas Property Investment

[gatrader]

Hello OffshoreCorpTalk community,

I'm inquiring on behalf of a relative, an EU citizen living outside the EU in a tax-free jurisdiction, who's planning to buy an investment property in their home country (Europe). The aim isn't to minimize taxes—since all local taxes will be duly paid—but to find a suitable legal structure (LTD/LLC, trust, or foundation) that offers protection and efficiency against potential inquiries from tax authorities.

What would be the most effective and prudent structure for this purpose? Additionally, are there specific jurisdictions that are particularly favorable for Europeans setting up such structures from abroad, which balance legal protection with cost-effectiveness?

Appreciate your insights and suggestions!

 

[Sols]

The aim isn't to minimize taxes—since all local taxes will be duly paid—but to find a suitable legal structure (LTD/LLC, trust, or foundation) that offers protection and efficiency against potential inquiries from tax authorities.

Why would an inquiry from the tax authority be a problem if everything is above board anyway?

What would be the most effective and prudent structure for this purpose? Additionally, are there specific jurisdictions that are particularly favorable for Europeans setting up such structures from abroad, which balance legal protection with cost-effectiveness?

Europe has dozens of jurisdictions. It's impossible to answer broadly.

Check local laws where you want to buy the property. Sometimes there are limits on property ownership by foreign residents, foreign companies, or even local companies.

Speak with a couple of major law firms in the country of the property, and see what setups they are used to seeing. I wouldn't necessarily recommend using the same law firm for actually setting things up. If they say you can easily put the ownership in the name of a local company whose shares are held by a foreign trust, you can set up the company with them but consider finding your own trustee and trust jurisdiction.

 

[gatrader]

Why would an inquiry from the tax authority be a problem if everything is above board anyway?


Europe has dozens of jurisdictions. It's impossible to answer broadly.

Check local laws where you want to buy the property. Sometimes there are limits on property ownership by foreign residents, foreign companies, or even local companies.

Speak with a couple of major law firms in the country of the property, and see what setups they are used to seeing. I wouldn't necessarily recommend using the same law firm for actually setting things up. If they say you can easily put the ownership in the name of a local company whose shares are held by a foreign trust, you can set up the company with them but consider finding your own trustee and trust jurisdiction.

Every tax enquiry would be a headache anyway, even if someone has nothing to hide .

How about a similar structure:

1. The property will be owned by the LTD, not directly by the individual.
2. The LTD is responsible for paying the applicable taxes in the European country on any rental income received from the property.
3. The LTD will also file a tax return in the UK.
4. After the property purchase is finalized (post-deed signing with the notary), the shares of the LTD will be transferred to an LLC.
5. The LTD will distribute dividends to the LLC, where the funds will be kept.

My only doubt in this case would be, who should own the LLC to ensure the structure remains secure?

 

[Sols]

How about a similar structure:

1. The property will be owned by the LTD, not directly by the individual.
2. The LTD is responsible for paying the applicable taxes in the European country on any rental income received from the property.
3. The LTD will also file a tax return in the UK.
4. After the property purchase is finalized (post-deed signing with the notary), the shares of the LTD will be transferred to an LLC.
5. The LTD will distribute dividends to the LLC, where the funds will be kept.

Literally impossible to answer meaningfully without knowing where you live, where the company is, and where the property is. And even then, chances are only a lawyer can answer accurately. In some places, the whole structure is illegal as a foreign (or non-EU) person/company can't own property at all. Or maybe it can own but it can't rent out. Or maybe it can rent out but only under certain conditions in certain areas.

Any half-baked informat you get risks backfiring spectacularly. This is a situation where there's no shortcut around seeking legal advice.

My only doubt in this case would be, who should own the LLC to ensure the structure remains secure?

Secure from what? Alien invasions? Forfeiture? Creditors? Lawsuits? Tax debts?

If you think adding a triple layered multinational structure is going to make the the tax man less interested in you, I have bad news for you. Tax authorities often follow the duck test: if it looks like a duck, and quacks like a duck... You have to at least consider that it's tax evasion.