Archive for December, 2016

How tax optimisation can maximise the returns on your investment property

By: IS | Date posted: 12.20.2016 (5:00 am)

This article has been writen by George Kachmazov, managing partner of


If you’re not careful, taxes can eat away at the bulk of the income you should be earning on your foreign investment properties.

This fact alone sends chills down the spines of property investors everywhere. A recent survey conducted by revealed that 18% of property investors believe structuring purchases for maximum tax optimisation is the single most difficult part of acquiring real estate abroad.

To further complicate matters, more than 100 countries have committed to the Common Reporting Standard (CRS), an initiative developed by the Organization for Economic Co-operation and Development (OECD).

In accordance with the CRS, between 2017 and 2018 countries around the globe will launch the automatic exchange of financial account information, dispelling the opacity that previously enabled wealthy citizens to squirrel their money away into foreign bank accounts in order to dodge tax obligations in their home countries.

In light of the shifting realities of tax optimisation, I want to offer you some advice on how to acquire foreign properties with tax optimisation in mind. Please note that this is general advice. I strongly encourage you to consult a tax advisor who is familiar with the nuances of your situation before you purchase any property.


Pros and cons of purchasing a property as an individual vs. via a legal entity


If tax optimisation is a key priority, you would do well to begin by determining whether it would be wisest to purchase your property as an individual or via a legal entity.

Because tax rates and terms differ considerably between these two categories, your choice in this matter will have a key impact on your total tax obligations in connection with the property.

The table below outlines some of the basic differences:


  Individual Legal entity
Advantages — No need to pay the costs associated with maintaining a company;

— Capital gains taxes can be lower for individuals than for legal entities (some countries provide capital gains tax exemptions after a few years of property ownership)

— If the property generates significant profits, tax rates may be lower for legal entities than for individuals;

—  The possibility of exemption from capital gains and dividend taxation if the rules of strategic participation apply;

—  In some countries, i.e. Germany and France, no inheritance tax applies to property acquisitions by a company;

—  Increased flexibility with respect to selling shares or the property itself;

—  Greater protection against the disclosure of information.

Disadvantages — Income tax can be higher for individuals than for legal entities;

— No flexibility with respect to withdrawing from the sale

— It is impossible to conceal the identity of the beneficiary.

— There are costs associated with running a company;

—  In some countries, i.e. the United Kingdom and France, specific property taxes apply to legal entities.



* Please note that the information contained in the table above is subject to variation depending on which country you’re purchasing property in and a wide range of other factors. It’s always important to consider your unique circumstances and consult with relevant professionals before making any purchase.

When our clients are considering purchasing a property valued at about EUR 1.25 million or less, we generally recommend that they make the purchase in their individual capacities. It is typically cheaper and easier to do so due to the additional expenses associated with opening and maintaining a company.

However, this isn’t universally true; in some countries, individuals are subject to higher income tax rates than legal entities, which can offset any advantage of purchasing as an individual. This tends to hold truer the higher the individual’s income.

If the property is worth upwards of about EUR 1.25 million, it is typically advantageous to make the purchase via a legal entity. In this case, lower income tax rates and greater opportunities for tax optimisation tend to offset the company-related costs.

This is largely attributable to the fact that a relatively expensive property would usher in relatively high income, which in many countries would expose an individual owner to higher tax rates than it would a legal entity.

Consider, for example, a property in Germany that generates rental income of more than EUR 50,000 per year. An individual owner would pay some 40% in taxes, while a company would pay a comparatively meager 15%.

Generally, such savings would fully offset the cost of launching and maintaining a company. However, this holds primarily true in cases where the company and its owner are both tax residents of the same country. Otherwise, dividend taxes would negate any tax benefits derived from purchasing a company as a legal entity.

What taxes do legal entities usually need to pay for properties?


If a legal entity owns income-generating real estate overseas, it will typically be subject to the following types of taxes:

  • Taxes on any income generated by the property (rental income, capital gains from the sale of the property or the sale of a portion of the legal entity or its shares)
  • Property tax (usually compensated by tenants)
  • Land tax
  • Inheritance tax, if applicable (exemptions often apply)
  • Tax on dividends (exemptions typically apply if the investor refrains from distributing dividends and instead reinvests the funds in the same country, for example into another property).


Tax rates for individuals and legal entities in the United Kingdom, Germany and France

Data: Tranio

  Income tax/profit Capital gains tax Estate tax Property tax
United Kingdom Individuals 20-45%


20-28% (not applicable to the sale of a primary place of residence) 40% (this does not apply between spouses) Not applicable*
Legal entities 20 % 20 % Not applicable From GBP 3,500 for properties valued at more than GBP 500,000*
Germany Individuals 14-47.47 % 14–47,47 % (not applicable after 10 years of ownership ) Up to 50 % Not applicable *
Legal entities 15.825 % 15,825% (not applicable if the owner invests in another German property within four years of the sale)


Not applicable under certain circumstances** Not applicable *
France Individuals 20-45% 20-45 % (Not applicable after 22 years of ownership) 5-60 % (this does not apply between spouses) Not applicable *
Legal entities 33.33% 33.33 % (not applicable after 22 years of ownership) Not applicable upon registration with a Société Civile Immobilière


3 %*

* There are property taxes, but it’s the tenants responsibility to pay them.

** The business must operate for a minimum period of seven years after the acquisition of the property, and total salary expenditures must exceed the original salary expenditures by more than eight times, or the number of employees must exceed 20.


Taxes on rental income


 Rental income tax is included in the corporate tax rate and is payable in the tax jurisdiction where the property is located. As a general rule, if a company is liable for taxes in a foreign jurisdiction, and a double taxation treaty applies between the company’s home jurisdiction and their foreign jurisdiction, the amount of taxes paid overseas is to be subtracted from the amount of taxes that is supposed to be paid home. The difference should be paid in the home jurisdiction. If the tax overseas is bigger, then there will be no taxes home.

In order to reduce your income tax base, you will need to scour the tax regulations for deductible expenses that apply to your purchase, ownership and maintenance of the property. Such deductions may include:


  • The cost of acquiring a founder loan;
  • The cost of acquiring a bank loan;
  • Building depreciation;
  • Leasehold improvements;
  • Transaction execution expenses;
  • Property tax;
  • Property management and maintenance expenses;
  • Other expenses during the ownership period.

Taken together, the aforementioned deductions can significantly reduce a property owner’s income tax base during the first decade of ownership. The table below outlines a typical German example.

Sample calculations for legal entities in Germany, Euro

Data: Tranio


  Standard tax scheme         Effective tax scheme
Tax base calculation
Property price 500,000
Annual rental income 30,000
Building depreciation deduction (2 %) 10,000 10,000
Deduction of mortgage interest
(LTV 50%, 2% per annum)
Deduction of founder loan interest (LTV 50%, 4%
per annum)*
Tax base 20,000 5,000
Tax calculation
Corporate tax (15 %) 3,000 750
Solidarity surcharge (0.825 %) 165 082.50
Total tax sum 3,165 832.50
Annual income after taxes 26,835 32,417.50
Percentage of annual rental income that taxes account for under both schemes 10.55 2.5

* The interest rate on the founder’s loan can be increased, thus reducing the effective income tax rate to zero


A founder loan could enable you to save part of your income from dividend taxes.

Founder loan interest is subject to the investor’s personal tax obligations in the country of his or her tax residency. But the investor must also be ready to pay founder loan taxes in the country where that interest was generated.


Capital gains and asset transfer tax


Whether you will be obligated to pay capital gains tax or asset transfer tax depends on the ownership structure at the moment of the sale. This can occur either when you sell the property itself (asset deal), or when you sell the company that you purchased the company through (share deal).

In the case of an asset deal, capital gains tax is typically calculated as the difference between the sale price and the carrying amount of the property. The carrying amount is the cost of the property, less accumulated depreciation. While depreciation decreases the carrying amount, it increases the capital gains tax base.

Let’s say, for example, you purchased a property for EUR 1 million and sold it for EUR 1.1 million. You owned the property for three years, during which you had a 2% depreciation allowance, amounting to EUR 60,000 over the course of your ownership. Your carrying amount is thus EUR 940,000. Your capital gains tax base will amount to EUR 160,000 – the difference between the sale price and the carrying amount.

In the case of a share deal, the property’s carrying value is of no importance for tax purposes. In this case, profits from the sale of shares are taken into account to calculate asset transfer taxes.

Say, for example, you purchased a company in order to purchase a EUR 1 million property. You then sold the company for EUR 1.1 million. Thus the tax base for asset transfer tax is calculated by deleting the purchase price from the sale price, so in this case your tax base would be EUR 100,000.

In the context of the above examples, it would make more sense financially to purchase the property through a company; doing so would save you EUR 60,000. Investors who already have an exit strategy in mind when purchasing a property – such as those who plan to purchase a property, flip it, and sell it at a profit five years down the road – typically favor this model.

While it’s possible to structure real estate purchases in such a way as to ensure you’ll be exempt from capital gains tax, it’s not easy. Doing so requires extensive research of and familiarity with local legislation in the country that you’re planning to purchase in. It will also likely require corporate ownership and elaborate deal structuring, which is best left to seasoned professionals.


Double taxation laws


Another key issue that can have a considerable impact on capital gains tax is the existence of double taxation laws or relevant treaties between the county where the real estate is located and the country where you registered your company. Double taxation regulations can protect taxpayers from paying the same tax twice.

For some practical examples of this, we spoke to Dmitry Zapol, an international tax advisor at London-based tax practice IFS Consultants. Mr. Zapol explained that UK residents are required to pay income tax on foreign source rental income at their marginal rate. In other words, foreign rental income is added to the UK resident’s other types of income, and the total amount received during the tax year determines the applicable income tax rate.

However, UK law protects taxpayers from double taxation even in the absence of a double tax treaty.

“If foreign rental income suffers withholding tax [in the source country], it is credited towards UK tax liability in order to avoid double taxation. In order to calculate the tax credit, the taxpayer calculates the actual amount of tax paid abroad and sets it off against UK tax liability,” said Mr. Zapol. “In the end, this results either in having to pay the difference between the two amounts (if UK tax is higher) or brings no further tax liability (if UK tax is smaller), although in the latter case the difference will not be refunded. In calculating the tax liability, it is necessary to take into account the difference between UK and foreign tax years, which usually do not run concurrently.”

He added: “Normally, the relief is offered under a double taxation agreement concluded by the UK. However, unlike in some countries like Russia, the relief is also available in the absence of the agreement… Normally, the UK resident must submit proof that tax was withheld outside the UK to be able to credit it against his UK tax liability.”

Generally, the ways in which you can benefit from double taxation laws or agreements hinge on whether you purchased the property via a company or as an individual. In order to determine which taxes you’ll be on the hook for in your home country, you will need to familiarise yourself with the ins and outs of the relevant policies.

Mr. Zapol noted that the relevant UK laws are complex. “Broadly, if a UK tax payer buys a foreign company that receives foreign rental income, he must declare its income as if it were his own and pay tax on it or alternatively declare dividends and also suffer tax liability. Interestingly though, if he receives the same company as a true gift from someone else, there is no tax liability until a distribution is made. Also, if the person is domiciled outside the UK, he can claim the remittance basis and stay outside the scope of the transfer of assets abroad rules,” said Mr. Zapol.

Prior to any purchase, I recommend that you consult a tax specialist.  Should you have any questions, Tranio will always be happy to help. We can provide you with a comprehensive overview of the tax and legal issues that will apply to your purchase of any overseas property, and help you achieve the optimal transaction structure.


George Kachmazov, managing partner

Closing Trades

By: ispeculatornew | Date posted: 12.15.2016 (6:31 am)

Wow, you would not tell from my long & short tech stocks but this has actually been a very good year in terms of investing performance for me. That is because most of my income is invested in fairly passive ETF’s. That being said, today is another day where I’m closing some long & short tech trades that unfortunately didn’t turn out very well.

This morning I will be closing 4 of the remaining 5 live trades which are all at -20 or worse:

Long Expedia (EXPE) & Short Microsoft (MSFT)
Long Paypal (PYPL) & Short IAC Interactive (IAC)
Long Salesforce (CRM) & Short Zillow (Z)
Long Tripadvisor (TRIP) & Short Twitter (TWTR)

As is always the case, you can see all the long and short trades from 2017 (and previous years) here:

Over the next few weeks I will be writing a bit about what I think went wrong this year and hopefully on the long & short stock picks, I can turn things around in 2017!

The Ultimate Museum Adventure in San Francisco with Museum Hack

By: IS | Date posted: 12.13.2016 (3:44 pm)

Choosing just one fun, energetic and exciting adventure in San Francisco can be a tricky task. With so many unique experiences to choose from, how do you find the perfect one? Well, if you crave adventure and love juicy gossip and interesting stories, a Museum Hack tour is the perfect fit.

Museum Hack leads museum adventures in some of most amazing museums on Earth. Their tours are designed to be high energy and fun, perfect for helping people see museums in a totally new light. Complete with selfies with the art, games and juicy historical gossip, this is the most fun you’ll ever have in a museum.

Museum Hack hosts their renegades tours at the de Young in San Francisco, as well as in New York City, Chicago and Washington D.C. The de Young is home to some seriously eccentric collections (thanks to its namesake Michael de Young’s personal collection) but also includes everything from American Art to Textile arts.

Take a Museum Hack Tour of the de Young

Un-Highlights Tour: The de Young is the ideal location for a tour intent on finding the secrets and juicy gossips behind art and artists. The Un-Highlights Tour focuses on the kind of stuff you may not normally see on a museum tour.  It’s super high energy with a 100% satisfaction guarantee, and all the sass and wit of the Museum Hack brand.

Badass Bitches Tour: Female artists are criminally underrepresented in museums, so Museum Hack created a tour to celebrate female artists and female subjects. This fast-paced museum experience focuses on badass women in history. This tour will leave you ready to take on the world. It’s perfect for people of all genders!

Beta Tours: The“beta test” of the museum adventure world. Beta Tours are created to mint new guides and test out brand new tour ideas.  The most recent Beta Tour at the de Young was murder mystery themed, where guests had to solve clues and find the killer before they had the chance to strike again.

VIP Tour: The ultimate museum experience. Perfect for dates of all kinds, the VIP Tour includes wine! This premiere de Young experience will have you learning the secrets of all the hidden nooks and crannies of one of the greatest museums on earth.

Highlights of a Museum Hack Tour in San Francisco

  • Juicy stories about artists and art that aren’t often highlighted on traditional museum tours
  • Your tour guides will be passionate and energetic. They LOVE museums!
  • Never a dull moment
  • Selfies (with the art!)

Museum Hack has also figured out how to transform their museum adventures into seriously awesome company team building experiences.  These custom team building tours are designed to help get staff motivated and excited, and to boost morale.  This is the kind of activity your staff will LOVE so much they’ll forget they are team building!  And you know what the coolest part is? Team building tours can be customized to fit your company values, goals, and history.

If you don’t love art or museums, don’t worry. The Museum Hack design keeps the  non-museum-lover in mind, so they are a good fit for anyone. Whether you are a visitor to San Francisco looking for a fun and unique experience or a local seeking something new, Museum Hack is the perfect place to start.



Updating The Stocks I Follow

By: ispeculatornew | Date posted: 12.01.2016 (7:01 am)

twilio_logo_01Today I’m (finally!) updating the list of stocks that I follow. There have been a few different changes so today I’ll discuss stocks that I’m removing, adding and ones that will be added in the near future if all goes well.

Youku Tudou Inc (YOKU) was taken over by Alibaba (BABA) earlier this year which in a way was not a big issue because I’ve mostly stayed away from trading Chinese tech stocks but I did like the idea of being able to eventually trade a pure video play.

Monster Worldwide (MWW) was acquired by Randstad Holding. MWW was a stock I had consistently shorted as I see it mostly as a company that failed to adapt to a changing internet and will continue to struggle with the likes of LinkedIn and even

Rackspace Hosting (RAX) was acquired by a group led by Apollo Global Management LLC and Searchlight Capital Partners UK LLP. It was a stock that I had shorted despite being a very interesting company but remained overvalued in my opinion.

Demand Media (DMD) was acquired by Leaf Group Ltd, it was a stock I had mostly stayed away from because of the challenge in trying to value it. DMD owns a lot of different sites such as which probably are seeing a slow steady traffic decline and I doubt that will change. It was a bit of an IAC Interactive (IAC) style of company but with less growth and not as much in terms of interesting divisions.

Stocks That I’m Adding:

Twilio Inc (TWLO): Twilio is a company that went public this summer and that I would not be trading right now because I want to better understand its business. the company develops and publishes internet infrastructure solutions that allow web developers to integrate phone calls, IP calls, text messages and more. Its customers include Uber, Airbnb, Netflix (NFLX), Coca-Cola (KO), Salesforce (CRM) and more. Not a bad list right? The other reason why I’m waiting is that I try to wait a few quarters of earnings, calls, etc to better judge a company. That is probably even more important when discussing a company that has fast-growing revenues but is losing money. If you look at these charts of revenues and EPS you will see exactly what I mean:



Trivago (TRVO): Trivago will be a newly listed company, that is being “spun out” of Expedia that will be added to the stocks I follow as soon as it launches.

Snapchat Inc (SNAP): Snapchat will be the most fascinating tech IPO (it filed a confidential IPO) in a long time and I’m very much looking forward to the stock listing. Why? So many reasons:

-A Pure “Social” play that can be compared with Facebook, Twitter, etc

-I’d love to see revenues and EPS be “disappointing”. increasing opportunities for profit

-The company has been executing tremendously well on a longer term strategy