The Importance of Tax in Deal Structures
At First Celtic International TAX is our main watchword knowing that how you buy or sell an asset is far more important than the price you pay or receive for that asset
Don’t get me wrong the price you pay for an asset is important but the tax treatment of that asset both at acquisition and on-going income related to that asset and finally disposal of the asset will be much more important to you in essence everything we do at First Celtic has tax at the heart of it.
Let’s have a look at real estate and the First Celtic groups companies is Gray Stuart which specializes in helping people buy real estate assets overseas and in most cases in a country where that client has never bought an asset before. The business is mainly focused on the UK, Spain, Portugal, and Thailand.
So, a good example of this would be the contrast between an international client buying a buy to let property in the UK against a Lifestyle property in Spain. When looking at the Tax implications in the UK you would almost always buy through a UK private limited company and in Portugal nearly always buy in your personal names. Once you get above six million Euro villas you may want to consider some estate planning that might change that approach. This advice is based on the fact that you have no intention to become resident of the country where you are buying those assets as this would involve a completely different calculation.
For those who might be retiring or relocating to another country then you have to be aware of the tax rules of the country you’re moving to and cross border taxation liabilities. However, when you get to make a lifestyle choice Taxation can somewhat go out the window. Let’s say you’re looking at Spain and Portugal to relocate the taxation situation in Portugal with their Non-Habitual Tax Regime (NHR) is vastly superior to that in Spain. However, if your dream is to live in Marbella you just must pay the tax requirements and get on with it. Here though there is an option knows as Beckham’s Law after the footballer’s time at Real Madrid which means you don’t have to pay tax on your Worldwide income.
Now let’s have a look at buying and selling businesses which is the major focus of First Celtic right now. How you structure your purchases and exits of these businesses is much more important than the price you pay for them. A good example is you could sell your business for 1.2 million with the wrong deal structure compared to a Million with the right deal structure and the NET proceeds you would receive would be considerably more from the right deal structure.
If we take the UK for example when you own a business, you have four potential taxes. These are BADR, Capital Gains Tax, Corporation Tax. These attract different rates of Tax ranging from 10% to 46% so as you can appreciate you don not wanting to structuring a deal where you pay 46% tax.
Finally, if you personally own a large amount of Crypto and Bitcoin the tax treatment on disposal of those assets will vary quite considerably under which Jurisdiction they are taxed. You therefore may decide to change tax jurisdiction in the year you wish to dispose of such assets. For example, Portugal currently charges no tax on personal crypto assets that are held for over 12 months. Please bear in mind the UK for example have a 5-year time period that you would have to pay Capital Gains Tax if you became a UK tax resident again.
So, I should end by pointing out that First Celtic is not a Licensed or qualified accountant or tax advisor, but we use the very best cross-border tax advisors in the world to confirm our extensive knowledge on every transaction. We can also make this network available to those who become clients of First Celtic International.
Please feel free to reach out to me if you would like any further clarification on the content raised in this Blog.