Question from an IM Member:
Q: “What are the limitations of owning a company abroad (can it be a real estate investing or stock holding company)?”
A (by Ed Marsh): Ownership restrictions depend on the market, and in many cases, the type of business. Some countries restrict ownership in certain industries according to government priorities and protectionist policies. Natural resources are a common example of this.
In general, a foreign corporation will have more latitude in ownership than foreign individuals will. Many countries are actively courting foreign direct investment (FDI) and foreign companies are therefore often free to invest locally in a subsidiary. But while governments encourage the flow of capital, they often simultaneously impose restrictions on its use (so companies may find, for example, that they can own real estate provided that the property is directly related to creating jobs in the region).
A couple of quick examples – In India, under the Reserve Bank of India’s regulations, non-resident Indians (NRIs) and Persons of Indian Origin (PIOs) may own real estate (“immovable property”) – although not agricultural land – while a foreigner, even if a resident in India, may not. A foreign company may only own real estate if ownership is necessary or incidental to the business activity. A liaison office, for instance, doesn’t qualify.
In contrast, in Colombia (my experience here is only anecdotal) any foreigner may buy and own property as an individual. And further, by buying property he simultaneously acquires resident status and receives full “exchange rights” to freely take the investment and profits out of the country, tax-free!
Ed Marsh has in-depth experience on a number of continents, in various capacities and industries. He founded and managed a start-up in India; successfully built channels throughout Latin America; leveraged his German birth and marriage to a German national in his extensive work in Western Europe and has deep cultural experience with Vietnam. Ed’s B2B and B2G pan-global experience has involved a variety of products and services including capital equipment, industrial automation, distribution services and homeland security and defense technology. He is a Founder and Principle at Consilium Global Business Advisors.
Caveat – these are complicated legal issues, which have a variety of potentially serious legal implications. Decisions shouldn’t be made without consulting capable and internationally experienced counsel. These are just practical replies.
PLEASE NOTE: The information contained within this article is based on the best research we could find as of the date of publication. However, the world changes fast and information can become out of date relatively quickly. So, two points… First, before undertaking any action described in this material, please conduct your own due diligence and verify all facts. Second, if you happen to spot an out of date fact or figure (or even suspect something is out of date or false), simply get in touch with us and we’ll look into it. International Man is a network made up of some very smart people – tax specialists, accountants, lawyers, analysts and many other talented individuals. As a group, we can create and maintain a very accurate and highly actionable resource for internationalization.
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