Asian investors set to benefit from Trump’s tax plan, say experts

Asian investors could benefit from “considerable tax savings” should President Donald Trump’s signature tax plan be enacted – with those holding US real estate set to gain the most, according to experts.

“Among the key changes discussed, the possible repeal of the 40 per cent US federal estate tax is definitely a development that Asian investors should watch closely,” said George McCormick, a lawyer with international firm Withers in Hong Kong, noting the US property market saw significant investment from Asia – with US$31.7 billion coming from Chinese investment in residential real estate alone.

“The enactment of the estate tax repeal would mean a significant amount of tax savings for Asian investors and wealthy American tax residents living outside the country,” McCormick added.

President Trump announced a series of measures on September 27, which both he and Republican lawmakers claim will be a boon for the middle class and make American companies more competitive.

Among the few details announced are a reduction in the corporate tax rate to 20 per cent from its current level of 35 per cent and an almost doubling of the standard deductions used by most Americans.

But the move expected to benefit wealthy Asian investors most is the repeal of the federal estate tax.

Also known as the inheritance tax, it is paid by those with multimillion-dollar inheritances and currently sits at 40 per cent.

Experts say its removal could mean significant tax savings for wealthy Americans and foreign investors who hold US assets, including real estate.

“A repeal of the estate tax would benefit many wealthy Asian investors who currently must engage in sophisticated tax planning to circumvent this tax,” added Chris Kotarba, a registered foreign lawyer at DLA Piper in Hong Kong.

“Unfortunately though, the tax plan doesn’t explicitly propose a repeal or limitation on the FIRPTA tax for Asian investors holding u.s. real estate.”

Kotarba added the proposed plan would also provide “significant benefits” to Asian investors who do business in the US.

“While the US tax system for many years has been a deterrent to Asian businesses, the proposed tax plan is likely to encourage more Asian businesses to expand to the US than ever before.”

Steven Sieker, the Asia Pacific Head of Baker McKenzie’s Tax Practice, said if implemented, a 20 per cent corporate tax rate would be one of the lowest of any the OECD [The Organisation for Economic Co-operation and Development] country, and would reduce much of the tax rate advantage offered by jurisdictions throughout Asia.

“This lowered rate is clearly intended to make the US a more attractive target for foreign investment as well as to encourage American businesses to increase their investments in America.”