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THE SOVEREIGN SOCIETY OFFSHORE A-LETTER
Your Link to Freedom, Privacy & Prosperity in the Offshore World
Wednesday, October 29, 2003 - Vol. 5 No. 128
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In This Issue:
* COMMENT: Austrian Real Estate
* OFFSHORE: Bermuda Big News; HSBC, OECD, Blacklist, Shorts. Hong Kong Future in Perspective. Swiss Federal Council Election.
* WEALTH: Tax Shelter Class Action. Gold Is Money! US Anti-Money Laundering Strategy. Tax Reform & Loopholes. BoA Fleet Merger.
* PRIVACY & RIGHTS: Return to Sender. Attack of the Librarians. Spyware in Your Computer?
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Our Guest Commentator is Dr. Manfred STRASSER-KLEEBER, an attorney with more 20 years experience purchasing and renovating real estate in Austria and eastern Europe.
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COMMENT: Austrian & Eastern European Real Estate
Dear A-Letter Reader:
Why should someone buy real estate in this small, beautiful and highly developed country in the heart of Europe? After reading this article, you will know the answer!
Austria is a center of economic and social stability. It is also one of the richest and safest countries in the world, and Vienna has been voted as having the world's second highest quality of life. (Zürich is #1, but much more expensive to invest in or live in than Vienna.)
These factors have led to a robust real estate market. While there is no real estate "bubble" as in the US, real estate prices are slowly rising, year by year. However, due in part to the long legacy of rent controls, prices for real estate are lower in Austria than in other EU countries. It's possible to safely obtain a 7-15% annual yield with Austrian real estate investments, depending on the type of investment you make.
The lowest risk strategy involves purchasing apartments or buildings and renting them out. This generally provides a 7%-10 % annual return, after all expenses, assuming you don't overpay for the real estate.
You can make greater returns, up to 15% annually, and sometimes more, by purchasing and renovating townhouses built in the early 20th century. These are mostly converted to apartments, often sold in quite a run down condition, yet they can be modernized for a relatively small outlay.
This kind of investment is promising as many of the old houses are architectural marvels with high ceilings, decorative doors and many other construction details not offered in modern buildings. Moreover, they are located mostly in the urban centers of Austria's cities (the preferred and more expensive location in Europe), rather than in more distant suburban areas, reachable only by car.
If you are fluent in German and know the local market, and particularly if you purchase properties at court auctions for cash, for less than appraised value, these investments are very safe. This is how our firm generally purchases real estate on behalf of the investors we represent. However, if you don't have this background, it can difficult to find good properties at undervalued price.
Unlike many other countries, there are no restrictions on foreigners owning real estate in Austria. Generally, this is done through a participation in an Austrian company that buys real estate. If you want to purchase real estate directly, you will need to obtain a permit, but approval is usually fast and easy.
Real estate investments are taxable in Austria with tax imposed both on rents and capital gains. However, all costs of renovation are deductible, and generally any taxes you pay in Austria can be written off against your income in your home country. Austria has double tax avoidance treaties with all developed countries in the world.
You can achieve even higher returns if you venture out of Austria into Hungary, the Czech Republic, Poland or Slovakia. For these countries the yields are generally 2% higher, but you must also deal with less transparent markets, foreign exchange risks, more bureaucracy and less legal security. Generally we recommend avoiding direct investment in these markets (unless on a large scale) and instead target Austrian Real Estate Funds, which also cover eastern Europe.
That's how it looks from my office in beautiful Vienna, Austria!
Dr. Manfred Strasser-Kleeber
E-mail: austria@ich-corp.com
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Comment LINKS:
* The World Fact Book: Austria.
LINK: http://www.odci.gov/cia/publications/factbook/geos/au.html
* Worldwide quality of life survey. LINK:
http://www.mercerhr.com/pressrelease/details.jhtml/dynamic/idContent/1084615
* Austria financial data.
LINK: http://www.geoinvestor.com/countries/austria/main.htm
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* OFFSHORE *
BIG NEWS FROM BERMUDA
* HSBC to buy Bank of Bermuda for $1.3 billion. LINKS:
http://www.theroyalgazette.com/apps/pbcs.dll/article?AID=/20031028/BUSINESS/110280070
http://www.reuters.co.uk/newsPackageArticle.jhtml?type=businessNews&storyID=395445§ion=finance
* Opposition demands OECD clarification from government.
LINK: http://www.tax-news.com/asp/story/story.asp?storyname=13837
* Bermuda denies blacklisting by US Treasury.
LINK: http://www.tax-news.com/asp/story/story.asp?storyname=13847
* What's happening to Bermuda shorts? LINK:
http://www.theroyalgazette.com/apps/pbcs.dll/article?AID=/20031028/NEWS/110280033
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HONG KONG'S FUTURE IN PERSPECTIVE
This island city is a major world financial center; what lies
ahead for the 5th largest offshore haven? Read this. LINK:
http://www.heritage.org/Research/AsiaandthePacific/HL803.cfm
* Hong Kong needs broader tax base.
LINK: http://www.tax-news.com/asp/story/story.asp?storyname=13845
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SWISS FEDERAL COUNCIL ELECTION
New executive government to be elected Dec. 10th. LINK:
http://www.swisspolitics.org/en/news/index.php?page=dossiers_inhalt&dossier_id=139
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Full report at:
LINK: http://www.agora-inc.com/reports/TRW/WTRWDA60/
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* WEALTH *
CLASS ACTION LAWSUITS OVER TAX SHELTER ADVICE
Inevitable; class action lawsuits against tax shelter lawyers. LINK:
http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=SVBIZINK4.story&STORY=/www/story/10-27-2003/0002044837&EDATE=MON+Oct+27+2003,+10:08+AM
* Law firm fires partner involved in IRS tax shelter probe.
LINK: http://www.nbc5.com/money/2586896/detail.html
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GOLD IS MONEY - DEAL WITH IT!
A thoughtful analysis of where gold stands today. LINK:
http://www.goldensextant.com/LandisAMA.html#anchor537636
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U.S. GOVERNMENT ANTI-MONEY LAUNDERING STRATEGY
Combating Money Laundering: Improving a National Strategy.
LINKS: http://www.gao.gov/cgi-bin/getrpt?GAO-03-813
http://www.gao.gov/highlights/d03813high.pdf
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BUSINESS WANTS 'TAX REFORM' BUT ENJOYS ITS LOOPHOLES
Cries for a simple tax code but: "Tax that other guy, not me!" LINK:
http://www.industryweek.com/Columns/Asp/columns.asp?ColumnId=972
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BANK OF AMERICA MERGER
$47 billion for Fleet Boston makes BoA #2 in the USA. LINK:
http://www.economist.com/agenda/displayStory.cfm?story_id=2171054
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* PRIVACY & RIGHTS *
BIG BROTHER TO WATCH YOUR U.S. MAIL
"Return to sender" takes on new meaning. LINK:
http://www.washtimes.com/national/20031026-124606-8419r.htm
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LIBRARIANS ATTACK PATRIOT ACT
Fears of terrorism clash with privacy. LINK (subscribers only):
http://online.wsj.com/article/0,,SB106729549398054200,00.html
* Liberal Hypocrisy on the Unpatriotic PATRIOT Act. LINK:
http://www.hawaiireporter.com/story.aspx?6bcc4376-ccf1-4b7c-b604-01b783071869
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SECRET SPYWARE ON YOUR COMPUTER
You probably have it and don't know it. LINK:
http://www.redandblack.com/vnews/display.v/ART/2003/10/24/3f98a1e12e4fa
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* THE SOVEREIGN SOCIETY OFFSHORE A-LETTER. *
Bob Bauman, Editor * Daniel Aponte, Jr. Research Asst.
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