1. Home
  2. UK Finance Discussions
  3. UK Limited Company to Own a Foreign Property Trading Company

UK Limited Company to Own a Foreign Property Trading Company

Can i pick some brains please.

Looking at the booming property market in Eastern Europe, I am contemplating to buy some properties in Prague.

However, to do this, i will need a local company in Prague which i can setup without much problems.

However, my questions are:-

  1. Can my UK Ltd Company own that Prague Ltd company. I do not intend to use those properties for holiday purpoases.
  2. If (1) is possible, will UK Ltd company provide a loan to Prague Ltd Company? Or will this arrangement be as simple as investing in say "overseas stocks"?
3.Is the double taxation treaty applicable for corporation tax as well?

I understand that using Ltd company route i can not use my allowances for CGT. But this will be a long term investment and can act as my pension.

Do i need any further special considerations?

Reply to
A Passi
Loading thread data ...

Yes. This is done all the time to avoid civil law inheritance rules, among other things. An EU/EEA company can own the shares of a Czech one.

Perhaps a combination of the two. Get competent tax advice. One problem is that losses in the Czech Republic cannot pass through to offset gains and profits in the UK. You need to structure your business to preserve the losses that are bound to occur in the beginning to offset future profits.

Of course. You can get info from the International Bureau of Fiscal Documentation. Their stuff is in most tax libraries.

formatting link

Reply to
Biwah

Yes

UK rules allow you to do it either way. You would need to check the Czech position elsewhere.

Yes

You need to register the business for tax purposes with the Inland Revenue in the UK as well as comply with any Czech tax rules.

I don't know what the audit requirements for czech companies are. You may need to appoint an auditor over there.

Reply to
Jonathan Bryce

EU law prohibits discrimination. However, EU bankruptcy and tax law are imperfect, and one should consult with local lawyers and accountants to see (1) whether you won't lose some tax benefits one way or the other and (2) whether you will be subject to more favourable insolvency rules if you retain a UK corporate "seat".

UK, and for all I know Czech, tax law does not allow you to offset foreign losses against domestic profits even from the same line of endeavour (real estate investing, for example). The USA, for example, does allow this.

Careless choice of entity can mean you lose the benefit of double taxation relief. This is not a DIY project.

Reply to
Biwah

EU law allows proportionate responses to counter legitimate concerns.

Whilst it is true that the EU does not allow countries to forbid legitimate trading companies the opportunity to trade in a foreign county, I can see every reason why a law that banned foreign shell companies from investing in a foreign country's real estate would be permisable. This looks purely like a tax dodge (whether it is or not will depend upon the respective country's tax rate for each type of holding) and a law to closed this dodge would, I think, be allowed.

tim

Reply to
tim

BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.