Writing for Tax Journal’s Ask an Expert column, BKL tax partner David Whiscombe discusses tax options for a UK property developer who has a project financed by an offshore investor.
Q. Our client company is a privately-owned UK property
developer that develops residential property for sale. It has
identified a potential project which is much larger and more
speculative than it would usually commit to or finance but
which promises to be extremely profitable if successful. It has been
introduced to an offshore investor who has provisionally agreed to
provide the bulk of the funding on a profit-sharing basis. What are the
main options and pitfalls for the client and for the investor in structuring
the joint venture as far as tax is concerned?
A. First, a warning: the UK tax liabilities
cannot be considered in isolation. It will
also be necessary to consider the
jurisdiction(s) in which the ffshore
investor operates and the vehicle through which
the investment will be made. Nor should the
importance of reviewing the detailed terms of any
double taxation agreement which may be relevant
be overlooked. Although most treaties are based
on the OECD model, it is dangerous to make
assumptions.
is is especially true when it comes to the
permanent establishment provisions. Most
but not all treaties provide that a building site
or construction project will be regarded as a
permanent establishment only if it lasts for more
than a specified period of time, but the period
varies from treaty to treaty – it is oen either six or
12 months, but always check…
The full article is available via the Tax Journal website.