Purchasing land in Chile using Self-Directed (Roth)IRA LLC?

Buying, Selling, Building, Tax issues, anything regarding real estate or properties in Chile.
Forum rules
NO DISCUSSION OF SPECIFIC REAL ESTATE AGENTS BY NAME, LINK, OR RECOMMENDATION ANYWHERE ON THE CHILE FORUM.
User avatar
JHyre
Rank: Chile Forum Citizen
Posts: 1991
Joined: Tue Jan 08, 2008 12:08 am
Location: Columbus, Ohio

Re: Purchasing land in Chile using Self-Directed (Roth)IRA L

Post by JHyre » Fri May 25, 2012 7:35 am

if you pay them from your regular non-IRA funds, then they will be treated by IRS as your IRA contributions subject to annual limit, currently for RothIRA - US$5,000 if you are less than 50 years old and US$6,000 if you are 50 or over.
Maybe, maybe not. We may be litigating a case where the tax court shall decide whether what you just described is a mere "over-contribution" or a "loan", which would be a prohibited transaction, in which case IRA goes bye-bye. Still at the audit level for now, getting ready to file in court. In short: Make sure that CBLLC is adequately funded with a conservative reserve, and contemplate its ability of it to borrow or otherwise acquire funds from a friendly, but arms-length, third party.

John Hyre

User avatar
admin
Site Admin
Posts: 18182
Joined: Sat Aug 26, 2006 11:02 pm
Location: Frutillar, Chile
Contact:

Re: Purchasing land in Chile using Self-Directed (Roth)IRA L

Post by admin » Fri May 25, 2012 9:55 am

xpat wrote:
admin wrote:One little catch to that you might want to take in to consideration. If you buy and own real estate in Chile for at least one year as a private citizen, there is no income tax on the profits. If you buy through a company, you open the tax can of worms here, there, and everywhere. You also need to deal with legal recognition of the company in Chile. That can take a bit of legal paperwork, that not many attorneys in Chile are equipped to handle (e.g. foreign powers of attorney, legalization of articles of incorporation, and so on). It will drive your acquisition costs up, but it is possible.

Chiloe is fine to buy in. You just need an attorney that knows the local legal quirks. Especially watch out for people that have not been fully granted a title by the government, but still want to try and sell a property they have rights to. A common one is that they will try to sell the property, but are under a 5 year embargo on selling after the title is granted to them. Inheritance messes that have not been fixed are also common. Other things.

Other than that, personally I kind of lost interest in Chiloe. I use to think it was really cool. Kind of Ireland of South America. Then I realized there is nothing to do there, once you have seen the 100th rainbow. If you are looking to get away from it all, then its great.
Thanks, Charles. What would be a ballpark estimate for all the fees related to legalization of LLC setup in Chile and costs related to land purchase (of course excluding the purchase price itself)? I just need to know if the total goes into hundreds, or thousands or (hopefully not) over 10,000 USD.
I am not going to post our prices on the forum, but you are looking at likely a few thousand dollars more over the costs of a regular property purchase. Once setup in Chile however, you can acquire other properties without a lot of added expense.

Again, that is a guess. It depends on what kind of structure you have in the States. For instance, dealing with a U.S. trust and Chile is a hassle, because Chile does not recognize common law trusts (they are working on something similar). So, you want it to be a plain jain no frills easy to understand LLC, that is not going to freak out the crusty old property registery (and Chiloe has some really crusty ones) with a bunch of obscure language that was thrown in for the consumption of the U.S. IRS. Your also going to want to watch the money law compliance paperwork at the banks. Does not matter if it is legal, if the moron at the bank gets spooked and refuses a wire.

Best way, if you insist on doing it, is likely forming an LLC in Chile with the U.S. LLC as the owner of the Chilean LLC. Either way, you will need an accountant to make your monthly declarations in Chile, even if the company has not income in that month.

I would highly recommend however carefully looking at the tax consequences in detail, on both sides of the equator to make sure you really are saving money.
Spencer Global Chile: Legal, relocation, and Investment assistance in Chile.
For more information visit: https://www.spencerglobal.com

From USA and outside Chile dial 1-917-727-5985 (U.S.), in Chile dial 65 2 42 1024 or by cell 747 97974.

Post Reply