Real Estate Investment In Honduras -


Hi David,
You do not know me, but I seen your postings on the Internet. I was wondering if you could answer a question for me.
I'm a Canadian interested in purchasing some real estate in Honduras. When I go to sell the property if at a higher price, do have to pay tax in both countries, and file tax returns in both countries?
Thank you,

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david ingram replies:


You are the first to ask me about Honduras in over 20,000 questions.

I admit that I did not have a instant answer.  Have not been there and do not remember ever doing a tax return where someone owned Honduran rentals. I do know of one person with a rental place on the Island of Roatan. He doesn't do any tax returns anywhere and spends his life wandering.   The only other  Honduras ownership I remember was a client who was building his dream vacation home there and it was wiped out by a hurricane just as it was finished.  He used to have the contractor sending him pictures of the job by cell phone as it progressed.

There is no Honduran Income Tax treaty to work with either.

However, an analysis shows that the tax they do have is a general VAT of 12% with the exception of medicine which is zero and  Liquor and Tobacco which is 15%.  . 

There is no mention of an income tax in half a dozen manuals, books and web sites I looked at.  I will then go on record as saying no Honduran Tax but you would owe Capital gains tax to Canada on any income if you bought something as a long term investment. 

OR, if Canada decided you were buying and selling as a business, they would tax you at full taxes as a trader.

How does the Canada Revenue Agency Find out?

Your old girl friend, your ex wife wants her half in a divorce action or somebody just turns you in 'because'.  The CRA gets some of its best information from court documents filed in divorce actions.

Another place they get it is from the Internet.  You post a blog about the place you have in Belize or Honduras or Ecuador and the CRA looks at your return for source and application of funds.  Or you advertise it for rent with a Canadian phone number or email address which is easily identifiable as a Canadian address as your present address is.

Good luck. 
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SUGGESTED PRICE GUIDELINES - May 17, 2008

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David Ingram gives expert income tax service & immigration help to non-resident Americans & Canadians from New York to California to Mexico  family, estate, income trust trusts Cross border, dual citizen - out of country investments are all handled with competence & authority.
 
Phone consultations are $450 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or is to be returned to Canada or a phone consultation is in Canada. ($472.50 with GST for in person or if you are on the telephone in Canada) expert  US Canada Canadian American  Mexican Income Tax  service and help.
This is not intended to be definitive but in general I am quoting $900 to $3,000 for a dual country tax return.

$900 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only (but were filing both countries) - no self employment or rentals or capital gains - you did not move into or out of the country in this year.
 
$1,200 would be the same with one rental
 
$1,300 would be the same with one business no rental
 
$1,300 would be the minimum with a move in or out of the country. These are complicated because of the back and forth foreign tax credits. - The IRS says a foreign tax credit takes 1 hour and 53 minutes.
 
$1,600 would be the minimum with a rental or two in the country you do not live in or a rental and a business and foreign tax credits  no move in or out

$1,700 would be for two people with income from two countries

$3,000 would be all of the above and you moved in and out of the country.
 
This is just a guideline for US / Canadian returns
 
We will still prepare Canadian only (lives in Canada, no US connection period) with two or three slips and no capital gains, etc. for $200.00 up. However, if you have a stack of 1099, or T3 or T4A or T5 or K1 reporting forms, expect to pay an average of $10.00 each with up to $50.00 for a K1 or T5013 or T5008 or T101 --- Income trusts with amounts in box 42 are an even larger problem and will be more expensive. - i.e. 20 information slips will be at least $350.00
 
With a Rental for $400, two or three rentals for $550 to $700 (i.e. $150 per rental) First year Rental - plus $250.
 
A Business for $400 - Rental and business likely $550 to $700
 
And an American only (lives in the US with no Canadian income or filing period) with about the same things in the same range with a little bit more if there is a state return.
 
Moving in or out of the country or part year earnings in the US will ALWAYS be $900 and up.
 
TDF 90-22.1 forms are $50 for the first and $25.00 each after that when part of a tax return.
 
8891 forms are generally $50.00 to $100.00 each.
 
18 RRSPs would be $900.00 - (maybe amalgamate a couple)
 
Capital gains *sales)  are likely $50.00 for the first and $20.00 each after that.

Catch - up returns for the US where we use the Canadian return as a guide for seven years at a time will be from $150 to $600.00 per year depending upon numbers of bank accounts, RRSP's, existence of rental houses, self employment, etc. Note that these returns tend to be informational rather than taxable.  In fact, if there are children involved, we usually get refunds of $1,000 per child per year for 3 years.  We have done several catch-ups where the client has received as much as $6,000 back for an $1,800 bill and one recently with 6 children is resulting in over $12,000 refund. 

Email and Faxed information is convenient for the sender but very time consuming and hard to keep track of when they come in multiple files.  As of May 1, 2008, we will charge or be charging a surcharge for information that comes in more than two files.  It can take us a valuable hour or more  to try and put together the file when someone sends 10 emails or 15 attachments, etc. We had one return with over 50 faxes and emails for instance. 

This is a guideline not etched in stone.  If you do your own TDF-90 forms, it is to your advantage. However, if we put them in the first year, the computer carries them forward beautifully.
 







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