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Capital Gains Tax for Individuals and Companies

How to reduce your Capital Gains Tax through the use of Offshore Companies and Tax Havens

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What is Capital Gains Tax?

Capital Gains Tax (CGT) is a tax on the profit realized from the sale of an asset that was purchased at a cost amount that was lower than the amount received on sale. The most common capital gains are realized from the sale of stocks, bonds, precious metals, real estate, and property. CGT is typically calculated on the difference between the purchase price (or acquisition cost) and the selling price (or disposal proceeds).

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Typically, a Capital Gains Tax is not due until you sell or convert the asset.

What is the Capital Gains Taxable Event?

The Capital Gains Tax taxable event is when there is a Realized Capital Gain. A Realized Capital Gains is when you either sell an asset with a profit margin.

 

Typically, a Capital Gains Tax is not due until you sell or convert the asset.

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There are other cases when a capital gains is deemed as Realized Capital gains, this can be when:

  • Covert the asset. 

  • Perform an exit tax procedure.​

What is a Realized Capital Gains?

The mere increase in value of an asset is not a Realized Capital Gain. It becomes a Realized Capital gain either when you sell or transfer and asset with a profit margin.

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There are also cases where a Capital Gain is deemed as realized even if you haven't sold the asset, which is when you perform an exit tax procedure.​

Not selling your assets in order to avoid incurring into a Realized Capital Gains event.

Unlike income tax which can be deemed as distributed by Controlled Foreign Companies Rules, Capital Gains is not taxed until the asset it sold at a gain, as the sale of the assets and the profits is considered a taxable event. If you don’t sell or transfer these assets there is no taxable event.

Capital Gains Tax Exemption

There is a common practice by jurisdictions, especially by tax havens, to not levy Capital Gains Tax on the sale of these type of assets. This can be by pure tax havens, or partial tax havens, where the jurisdiction exempts from Capital Gains Tax the profit from the sale or transfer of assets.

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For example, Singapore has a 19% income tax rate on Singapore Sourced income, but it has a 0% income tax rate (tax exemption) on Capital Gains.

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(Singapore is one of the tax havens with the most complex tax system, which allows them to be a tax haven while being white-listed and highly prestigious among foreign jurisdictions)

Trust to avoid capital gains tax or inheritance tax

When holding your assets under a Trust, the assets are managed under the benefit of the beneficiary, nonetheless, the beneficiary is not directly the owner of such assets, the owner is the Trust or a company or entity owned by the Trust. So when the settlor (the person who put the assets into the trust) dies, there is no change in the assets’ ownership, hence the capital gains tax is not triggered as there is no change in the asset’s ownership title by way of inheritance.

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