 Tax Benefits
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U.S. IRS Tax Advantages
Note: the following general guidelines are provided as a service for potential real estate and reforestation investors, and are correct to the best of our knowledge. However, because we are not tax experts, we ask that you consult your own tax advisor as to any specific questions you may have.
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Personal income tax deductions
The business of hardwood reforestation is inherently long-term in nature. For income tax purposes, this means that your real estate and reforestation investment will be operating at a loss during the early years. Accordingly, those of you who itemize your deductions may have the option of writing these losses off from your taxable incomes.
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Tax-deferred status of your profits
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Reforestation as a typical investment
As your trees grow and mature into harvestable lumber, their net worth will also appreciate. But of course, you won't be subject to US capital gains taxes until you actually start to receive returns on your investment. And since the majority of your profits won't be realized until years 17-25, the appreciated value of your both your real estate and reforestation investment will enjoy tax-deferred status until then.
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Reforestation under an Individual Retirement Account (IRA)
You may be able to place your real estate and reforestation investment in your IRA account, and enjoy the corresponding tax deferred status over the 25 year life of the project. You can even pay for your trees from the sale of assets already in your IRA, without incurring any tax liability. Please contact us for details.
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Tax deductions of your trip expenses to Costa Rica
Those of you who itemize your tax deductions may write off all or a portion of your out of pocket costs incurred in visiting Costa Rica. This assumes of course that you are a bona fide prospective or actual investor in our reforestation venture, and that you structure your trip here around an inspection of real estate and reforestation.
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Costa Rica or Panama Tax shelter
Some of you may be interested in setting up an offshore account, trust, or foundation, for either present purposes or for future reforestation profits. We would be happy to work with you to explore these possibilities.
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Costa Rican tax advantages
Under Reforestation Incentives Law No. 7575, your project will enjoy total tax free status on all sales of plantation lumber. This amounts to a very significant benefit. For example, the local corporate profit tax rate ranges from between 10-30 percent, and self-employed individuals from between 10-25 percent. But by exonerating certified reforestation farms from any and all tax burdens, the government has signaled that its avowed intention to support ecological projects is, in fact, for real.
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Costa Rican investor residency status
By law, the National Immigration Department of Costa Rica is required to grant permanent resident investor status to foreigners who invest a minimum of $100,000 in a certified reforestation project (note: several other routine steps must also be met, such as providing police records, taking basic medical tests, etc.). This amount includes the cost of the Costa Rica real estate and the reforestation together. In contrast, to gain this residency status any other way, you would have to invest $200,000 in a local account or business. Again, this law demonstrates the government's keen interest in reforestation ventures such as ours.
Please email or otherwise contact us for more information on any of the preceding.
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