Buyers who are not first-time homebuyers or who already own residential property are now paying an ad valorem stamp duty of 15% on the purchase of a residential property. Since the stamp duty involved in buying and selling a property in the name of a limited company is only 0.26%, which is much lower than the resale of a residential property by a natural person, and the procedures are simple and quick, buyers will consider buying the property by transferring the shares of the limited company holding the property.
Another advantage of buying a property by share transfer is that the rental income of the property can be exempted from the 15% property tax, and the profits tax can be paid in the name of a limited company. Since a limited company can claim deductions for all related expenses (including repairs and maintenance, management fees, mortgage interest, salaries, telephone Internet access fees, stationery, cleaning, accounting audits, etc.) that generate rental income, the assessable profits can be greatly reduced. Profits under 2 million (without other related entities nominated for taxation at the two-tiered tax rate) are also subject to only 8.25% profits tax.
However, there are also many disadvantages to buying and selling properties in the name of a limited company. First, the buyer needs to spend time managing the operation of the company. Every year, they must hire an auditor to prepare audit reports and tax returns. All accounting documents and documents must be kept for at least 7 years. It is necessary to file an annual return every year or notify the Companies Registry of any changes in the company or directors within the time limit.
In terms of bank mortgages, banks will only lend to buyers who purchase properties as natural persons but will not lend to buyers to purchase shares in property companies. In other words, a buyer who buys a property in the name of a company must first pay the full amount to complete the share transfer and then can apply for a mortgage from the bank. Therefore, the buyer may first apply for a high-interest loan from the financial company to purchase the company’s shares.
Another buyer to be aware of is that it will be difficult to find new buyers in the future. Since the new buyer cannot apply for a mortgage to buy shares in the company, he needs to have a certain number of financial resources to complete the transfer of the shares in advance. These wealthy and wealthy new buyers are not easy customers to find in the market.
Buyers should also be aware that buying a property in the name of a limited company may indirectly take over some hidden problems of the company, so it is necessary to find out whether the limited company has hidden debts, unpaid taxes, or potential lawsuits before the transaction. Wait…
The above information is for reference only. If in doubt, we welcome your tax inquiry