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Don’t Let Tax Sour Your Caribbean Dream
March 3, 2009Article by Ray Withers
Before buying that dream Caribbean property , you need to think about two main issues – why you are buying and an exit strategy.
If you are buying for investment, then resort properties are well worth considering as the Caribbean undergoes a boom in tourism. Capital gains tax is the big issue if you are buying off-plan and intending to ‘flip’ for profit. ‘Flipping’ is buying an off-plan property in a market with rising house prices and selling before on construction completion. The problem as a UK resident is you pay capital gains tax at 18% on your net capital gain on properties you sell anywhere in the world. If you have substantial property holdings and want to maximise your exit strategy by selling your portfolio, the only realistic option is considering becoming a non-UK resident.
Providing you meet the ‘five year’ rule, you can sell your property holdings and pay no UK capital gains tax. You need to make sure that you don’t shoot yourself in the foot by moving to another country with capital gains tax laws or you return to the UK in the five-year period of absence. So if you are going to the Caribbean, which countries offer a good standard of living, reasonable capital growth for property prices and nil capital gains for residents?
Three of the most popular that offer resort and residential properties are:
- Trinidad and Tobago
- St Kitts
One international property consultancy offering properties in all these destinations is Property Frontiers. Their portfolio of Caribbean property investment developments includes:
- Indigo Bay, Trinidad and Tobago, is a resort development of studio, single and two-bed apartments from £122,800. Tobago is a top ‘eco-tourism’ destination and the annualised return on Indigo Bay investment is forecast to be 55%
- Renaissance, Trinidad and Tobago, Caribbean are large apartments and penthouses ranging in price from £1 – 2 million. The Renaissance will have a the highest standards of design, facilities and services that will surpass any development currently in Trinidad and should therefore be in strong demand by the executives working for the ever expanding oil and gas companies arriving in the area.
- Bacolet Bay, Grenada, Caribbean, is another resort with a range of studios, apartments and villas costing from £310,000. As a five-star resort set in 41 acres of tropical gardens, Bacelot Bay comes with all the state-of-the-art facilities you would expect.
- Villas and apartments in Frigate Bay, Saint Kitts, bordering the Royal St Kitts Golf Course, priced from £188,000 to £448,000 Yields expected to achieve between 8 -11%, while economic citizenship is available on certain properties
Depending on your property strategy, the resort and residential properties both offer investment alternatives that can cut your tax, providing you follow the UK rules. Don’t forget not to sell any UK property other than your main residence before leaving to join an ex-pat community; otherwise you will still be liable for capital gains tax.