THE proposed halving of tax on capital gains will make United States property a more attractive haven for local investors, a tax director of KPMG Peat Marwick, Sandy Weiss, says.
Mr Weiss said the tax reforms, which were expected this year, would remove one of the main obstacles to increased buying in the US housing market.
'This reduction in tax on profits from real property, combined with a strengthening US dollar, could lead to significant real estate investment by Hong Kong investors in 1995.' Foreigners now face a top rate tax on capital gains of 28 per cent and companies about 35 per cent when disposing of US property.
'The Inland Revenue Service is strict in collecting the tax. When a US non-resident sells a property, the purchaser has to withhold 10 per cent of the purchase price as an advance security on the tax,' he said.
The reform is being proposed as part of a tax package by the new Republican-dominated Congress and is not expected to be vetoed by President Bill Clinton.
'Despite rumbling in the US Congress that a tax crackdown on foreign investors is needed, it is conceivable that Hong Kong property dollars could wind up in the US in the near future.' Mr Weiss said it was already possible for Hong Kong investors to avoid death duties on US real estate by using a company in a tax haven.
