A flexible, tax efficient international art fund
London Based Art Dealer
Our client wanted to establish an international art trading fund that would provide off-market trading, hedging, portfolio management and custodial services.
While the advisory services for the fund would be based in London, investors would be international.
Additionally, our client wanted to sell fine art to US galleries but was put off by facing US withholding tax exposure of 35%, due to their location in a low tax jurisdiction that did not have a double tax treaty with the US.
- We established a Guernsey fund with a UK limited company to act as the investment manager. We could also have used a UK LLP but our client wanted the ability to pool profits in the UK company.
- We recommended an independent third-party take possession of the art to shelter the fund from any potential foreign tax exposure.
- The fund felt confident to proceed with its US business activities without risking exposure to US taxation.
- Working in partnership with this client, we were able to mitigate the tax exposure by 50% ensuring capital gains tax treatment for the executives.
- The client gained the ability to repatriate profits from the underlying subsidiaries and fund vehicle with minimum tax leakage.
- We built in sufficient flexibility to create tax enhancements for the individual investors on any eventual exit.