October 18th, 2011 Signature Grand. Sponsor:

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1 October 18th, 2011 Signature Grand Sponsor:

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3 Ernesto Vega Realty World

4 DOING BUSINESS WITH VENEZUELA

5 Foreign Buyers Boost Miami Housing Market Voice of America- Published: Oct. 5, 2011

6 CURRENT STATE OF THE SOUTH FLORIDA REAL ESTATE MARKET "The Miami real estate market continues to outperform the nation," Miami Association of Realtors. For the 12 months ending in March 2011, 31% of Florida s home sales were to foreign buyers Venezuelans rule Miami's residential real estate market as foreign buyers.

7 VENEZUELANS: NUMBER & PERCENTAGE OF SOUTH FLORIDA BUYERS According to census data, the Venezuelan community in the United States has grown more than a record 94% in the last decade and is on track to break that record. According to a survey of South Florida realtors in 2010, 28% of clients hail from Venezuela. Many Venezuelan for years have vacationed here, buying second and third homes seeking secure and safe investments.

8 WHY ARE THEY BUYING The upper class Venezuelan investors have diversified their portfolio of investments over the years. The more recent, emerging and migrating middle class investors are looking for new routes to create a new world for their children. This is a more cautious and less affluent population with different goals and resources. EB5 investor visas are the real factor driving immigrant purchases of real estate and businesses in the U.S. Foreign nationals want more than a "foot" in this country, they want to be able to stay here permanently if their wealth is threatened back home.

9 WHY SOUTH FLORIDA? WHY SOUTH FLORIDA? The political climate of Venezuela keeps making South Florida a safe and much preferable bet for real estate: Investment Residence South Florida: an amazing investment opportunity for Venezuelans The continuing devaluation of the Bolivar. The current price correction that of the South Florida real estate market Venezuelans have always been attracted to South Florida the beaches, the weather, shopping, education and cultural life.

10 Where are they buying Doral This municipality has gotten the nickname Doralzuela because 21% of Doral s 45,704 residents are Venezuelans that have migrated there. They have come to create small businesses and a new place to live and work. Weston The Venezuelan population in this westernmost Broward suburb is about 15% of the city s population. Venezuelans seek this destination because of the security. Its gated neighborhoods, country clubs, and great schools have made Weston a family destination. Brickell Venezuelans are buying in Brickell due to the new appealing price lows, location, and lifestyle. Most are long term investors are looking to the vision of what this metropolis will be in the future. Sunny Isles & Aventura These cities draw more of the vacationing Venezuelan buyers taking advantage of the amenities offered in these beachside communities.

11 INVESTOR Current PROPERTY VALUES and a WEAK DOLLAR have contributed to ascenario attractive to an investor buying a vacation or income producing property.

12 VACATION Venezuelans have always been attracted to Miami: the beaches, the weather, shopping, universities and cultural/recreational events such as art, festivals, boat shows, Nasdaq tennis, etc.

13 STABILITY STABILITY Venezuelan like the freedom and security they have in South Florida. Many are used to having to look over their shoulders at home because of socioeconomic turmoil and crime. They enjoy the fruits of their labor with their families and friends while in South Florida, and appreciate the freedom that our provides.

14 SECURITY Venezuelans like the sense of freedom and security they have in Miami. Many are used to having armored cars and bodyguards at home. They like to be able to drive a luxury car and be safe here.

15 INVESTORS X END USERS CONDOS & HOTELS Good return on rentals Rental demand Lowest prices/ sq. ft. Lowest maintenance fees Attractive amenities Offices and airport proximity Brickell, Downtown Miami, Miami Beach Gated communities Larger interior space CONDOS & HOUSES Exclusive services, such as concierge, full spa, etc Shopping proximity Beach access or proximity Miami Beach, Bal Harbor, Sunny Isles, Aventura, Hollywood, Ft. Lauderdale

16 THE PERFECT AGENT It all starts with a friendship. Be reliable and gain the trust of the client. Explain and showcase the neighborhoods & their lifestyles. Use photography, video, bilingual copy, convert measurement to square meters. Prepare lists of comparable and market prices in different neighborhoods.

17 INVESTMENT OPPORTUNITY INVESTMENT OPPORTUNITY What makes the South Florida market so attractive for investors shopping for an income producing property? Current affordably factor of properties Higher than average rents have contributed to a scenario attractive to an investor buying a income producing property.

18 FIRST STEPS Identify the best 5 to 10 properties of buyer s criteria (size, price, location) Introduce an attorney for structures Introduce a bank for financing rates and requirements Introduce an interior designer Introduce an accountant Introduce a home insurance agent

19 FOLLOW UP AND CHECK LIST Follow up constantly with attorneys and banks for a smooth closing Have every contact information handy Check list file should have all important dates and comments, such as: contract date and amount Deposits, Escrow Letter, Inspections Commitment Letter GFE Walk Through Closing Date and Location Preliminary HUD Funds to Close Associations Approval and Orientation.

20 NETWORKING AND LEADS Affiliates in Venezuela Social networking accounts, such as Linked in, Facebook, Twitter Telephone easy accessibility such as Skype, Vonage, Nextel Events and presentations Partnerships and promotions Local advertisement Leads and follow up program

21 Hector Catano Westvest Associates

22 PRESENTATION PREPARED BY Hector Cataño, P.A. Senior Vice President

23 MY MEMORIES OF VENEZUELA

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33 Industrial Miami-Dade County s Vacancy Decreases to 8.4%

34 Venezuelan Immigration Impact Divided by Industrial Sectors Office Industrial Retail

35 Office Miami-Dade County s Vacancy Increases to 14.6%

36 Retail Miami-dade County s vacancy decreases to 4.3%

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38 Investment Cash is King Joint Ventures Assuming Non Recourse Debt

39 Case Study

40 Conclusion Strong Industrial Market Development Opportunities in the Retail Sector Cash Acquisition of Distressed Assets and Stability for Future Leverage

41 Ileana Arias Arias Tovar& Associates

42 Doing Business With Venezuela Visas and Licensing Requirements International Council Miami Association of Realtors October 18, 2011 Broward, Florida

43 STARTING POINT Your Attorneys and other Advisors The US Company - Corporate Structure The Business Plan

44 NON-IMMIGRANT VISAS B-2 Tourists B-1 Business Visitors B-1 Domestic Workers E-1 Treaty Trader Requires a U.S. Company owned or controlled by a citizen of a treaty The company must engage in trade between the United States and country country the treaty trader s The trade can be in goods or services The trade must be substantial

45 E-2 Treaty Investor The company must be owned or controlled by a citizen of a treaty country The individual investor must invest a substantial amount of capital in the company The investment must not be marginal in nature E-2 Treaty Managers Same Treaty Country Specialty Ocupation

46 F-1 Students I Media Correspondents J-1 Exchange Students/ Interns J-1 Au Pairs K Fiance and other qualifying relatives H-1B Professional Workers Specialty Occupation Bachelor s or higher degree or its equivalent is normally the minimum entry requirement for the position

47 L-1A Intracompany Transferees. Executives and Managers Executive or Manager overseas (at least one year with the foreign company) Transfer to the United States affiliate or subsidiary Joint Ventures Executive/Managerial Position Functional Managers L-1B Intracompany Transferees. Specialized Knowledge Workers Professional employee with specialized or proprietary knowledge relating to the organization s interests

48 M Vocational Students O-1 Extraordinary Habilites Aliens O-2: Support Personnel of Extraordinary Abilities Aliens (O-1) P-1 Artists, Atheletes, etc R-1 Religious Workers TN-1 U Special Treaty (NAFTA) Mexico and Canada Extraordinary Circuinstances Others

49 VISA vs STATUS Form I-194 Extension and Changes of Status Consular Process

50 PERMANENT RESIDENCE ( Green Card ) Family Petitions Immediate Relatives Employment Based Labor Certifications Intracompany Transferees Extraordinary Abilities Asilum Lottery Other

51 EB-5 PROGRAMS EB-5 Investors Regional Centers EB-5 INVESTORS USCIS administers the Immigrant Investor Program, also known as EB-5, created by Congress in 1990 to stimulate the U.S. economy through job creation and capital investment by foreign investors. All EB-5 investors must invest in a new commercial enterprise, by: 1. Purchasing an existing business, restructuring or reorganizing a business in such a way that a new commercial enterprise results, or 2. Expanding through the investment so that a 40-percent increase in the net worth or number of employees occurs.

52 The Enterprise must create or preserve at least 10 full-time jobs for qualifying U.S. workers within two years The minimum qualifying investment in the United States is $1 million. Targeted Employment Area (High Unemployment or Rural Area). The minimum qualifying investment either within a high-unemployment area or rural area in the United States is $500,000. EB-5 REGIONAL CENTERS: The Immigrant Investor Pilot Program ( Pilot Program ) provides for investments that are affiliated with an economic unit known as a Regional Center. A Regional Center is defined as any economic entity, public or private, which is involved with the promotion of economic growth, improved regional productivity, job creation and increased domestic capital investment. The organizers of a regional center seeking the Regional Center designation from USCIS must submit a proposal, supported by economically or statistically valid forecasting tools. To locate a Regional Center by State see: USCIS.ImmigrantInvestorProgram@dhs.gov.

53 Ronald Monahan Monahan, Mijares

54 Doing Business with Venezuela Understanding International Taxation and FIRPTA

55 Topics 1.- Misconceptions 2.- Definitions,FIRPTA and other taxes 3.- Investment in a U.S. Business 4.- Investment in Real Estate 5.- Tax Treaty 55

56 Misconceptions Buy Sell Transfer by Gift or Death 56

57 Definitions, FIRPTA and Other taxes 1. Permanent Resident Alien o Green Card Holder- Person lawfully admitted to the U.S. to permanently reside and work 2. Tax Resident - Term used by the IRS- includes a U.S. citizen, Green Card Holder, and any person who remained in the U.S. more time than lawfully permited. ( substantial presence test) 3. Non Resident Alien -( NRA) foreigner with non immigrant visa ( B1/B2, H1-B,L-1, etc.), who does not remain in the U.S. more time than lawfully permitted. 57

58 FIRPTA The disposition of a U.S. real property interest by a foreign person (the transferor) is subject to the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) income tax withholding. FIRPTA authorized the United States to tax foreign persons on dispositions of U.S. real property interests. A disposition includes but is not limited to a sale or exchange, liquidation, redemption, gift, transfers, etc. A U.S. real property interest includes sales of interests in parcels of real property as well as sales of shares in certain U.S. corporations that are considered U.S. real property holding corporations. 58

59 FIRPTA The transferee must deduct and withhold a tax equal to 10% (or other amount) of the total amount realized by the foreign person on the disposition. The amount realized is the sum of (1) The cash paid, or to be paid (principal only), (2) the fair market value of other property transferred, or to be transferred, and (3) the amount of any liability assumed by the transferee or to which the property is subject immediately before and after the transfer. The amount realized is generally the amount paid for the property. If the property transferred was owned jointly by U.S. and foreign persons, the amount realized is allocated between the transferors based on the capital contribution of each transferor. 59

60 FIRPTA A foreign corporation that distributes a U.S. real property interest must withhold a tax equal to 35% of the gain it recognizes on the distribution to its shareholders. A domestic corporation must withhold a tax equal to 10% of the fair market value of the property distributed to a foreign shareholder if (1) the shareholder's interest in the corporation is a U.S. real property interest, and (2) the property distributed is either in redemption of stock or in liquidation of the corporation. 60

61 Substancial Presence Test U.S. Tax Resident Definition Formula A person is a tax resident if he( she) remains more thant 182 days in the U.S. in a calendar year, or if he meets the Substantial Presence Test rules. Number of days in current year + 1 / 3 No. of days in prior year + 1/ 6 No. of days in subsequent prior year - TOTAL NUMBER OF DAYS 61

62 Substancial Presence Test Calculation Year No. Days Ratio Númber of Days Total Days Days of entry and departure count as full days Residents of a treaty country can remain up to 182 days each year. Need to file form 8840 ( Closer connection test). In meet SPT, then subject to U.S. tax on worldwide income 62

63 Investment in a U.S. Business Election of Entity Type and it s tax implications 63

64 Entity Election Sole Proprietor Firma Personal Limited Liability Company LLC. Cia.Hybrido Type of U.S. Entity C-Corporation Compañía Anónima Limited Partnership Sociedad en Comandita S-Corporation Partnership Sociedad Civil Sociedad de Responsabilidad Limitada 64

65 Default Rule One Member Limited Liability Company LLC Tax Classifications Disregarded Entity 2 or more members Partnership Check the Box Rules (8832) One or more members One or more members- must be (Green Card or US Citizen) C- Corporation S- Corporation 65

66 Limited Liability Company LLC Default- partnership Legal Aspects 3rd party liability Minimum Number of Members 2 Continuity of company upon death Estate tax proteccion 66

67 Limited Liability Company LLC Tax Aspects Default- partnership Who pays tax? Tax rate table Members Individuals Tax on Dividends? Self-Employment tax on profits? Salary to Members? No Simplicity? Complex 67

68 Sole Owner Structure-Individual Foreigner Owner (Individual ) Advantages 1. Sale of share tax free- unless USRPI, then FIRPTA USA C- Corp Disadvantages 1. Subject to U.S. Estate Tax 2. Dividends -30% w/holding unless reduced treaty rate ( Vnzla is 15%) 3. IRS information returns-5472 (foreign persons) 4. Subject to Federal and State tax Business- $ 68

69 Sole Owner Structure- entity Foreign Owner (foreign entity) Advantages 1. No U.S. Estate Tax USA C- Corp Disadvantages 1. Dividends subject to 30% w/h-unless reduced treaty rate ( Vnzla 5% w/h is > 10% equity 2. IRS information returns-5472 (foreign persons) 3. Federal and State income tax Negocio $ 69

70 Partnership Structure Foreign Member (individual or entity) Advantages 1. No U.S. Estate Tax 2. No State of Florida Tax, if individual member LLC Partnership USA. Disadvantages 1. Profits subject to 30% withhoding tax,even if not distributed. 2. IRS Information Return-8865 Business- $ 70

71 Export Structure Shareholder(s) Offshore Holding Foreign Suppliers Purchases LLC Single Member Diregarded Foreign Clients 100% Sales - Structure consists of Single Member LLC with Offshore entity as sole Member - LLC is (disregarded entity) - IRS views offshore Holding as exporter - Avoid creating a Permanent Establishment in the U.S. ( No payroll, no sales in U.S.) Purchases U.S> Suppliers 71

72 Investment in Real Estate Structures for NRA s The Classic The LLC The C-Corp. ( a.k.a.-inc.) The Offshore The (Double Tier Partnership)- Have your cake and eat it to 72

73 The Classic Foreigner Individual Advantages 1. (Capital Gain Tax) 15% 2. No State of Florida Income Tax USA Disadvantages 1. Subject to U.S. Estate Tax 73

74 The LLC- Partnership EE.UU. Individuals (2 or more) LLC Partnership Advantages 1. (Capital Gain Tax) 15% 2. No State of Florida Income Tax Disadvantages 1. Subject to U.S. Estate Tax 2. 35% income tax withholding 3. IRS information return (8865) 74

75 The C-Corporation Offshore Individual Or Entity Advantages 1. No U.S. Estate tax Disadvantages USA C- Corp 1. Sale of USRPI is ordinary income. No capital gains tax benefit of15% 2. Subject to Federal and State of Florida income tax 3. IRS inoformation return on foreign shareholders (5472) 75

76 The Offshore Entity Offshore Cia Offshore Advantages 1. No U.S. Estate taxes Disadvantages USA 1. Sale of USRPI is ordinary income. No capital gains tax benefit of15% 2. Subject to Federal and State of Florida income tax- and Branch Profits Tax 3. IRS inoformation return on foreign shareholders (5472) 76

77 Double-Tier Partnership Offshore Check the box foreign partnership Member 1% Members Offshore Entity 99% Double Tier Partnership Advantages 1. Captial Gains tax of 15% on disposition of USRPI 2. No U.S. Estate Tax 3. No State of Florida Income Tax USA LLC Partnership Disadvantages 1. IRS information Return-(8865) 2. Multiple annual tax return filings 77

78 Income Tax Treaty Competitive Advantages 78

79 Myths Tax treaties allow the exchange of information on bank accounts held by treaty country residents. Tax treaties only apply to large companies, such as CITGO ( to obtain reduced tax w/h rates) Tax treaties avoid having to pay income taxes in the other treaty country Treaties impose and reduce income taxes. 79

80 Realities U.S. is signatory to 56 income tax treaties Venezuela has approx. 20 income tax treaties. El 1st U.S. tratado fue con Francia en 1934 while Venezuela 1st treaty was with the U.S. in 2000 There are only 2 tax treaties in latin America (Venezuela y México). 80

81 Reality OBJECTIVE- To promote the free flow of commerce and investments between the United States and Venezuela through the reduction of tax withholdings on international transactions between the countries. 81

82 Our offices are located in: Caracas Venezuela Torre la Previsora. Av. Las Acacias, Piso 10. Sabana Grande,Caracas Teléfono:+58 (212) Miami EEUU 2519 Galiano Street, Suite 703, Coral Gables, Florida Phone: + (305)

83 Peter Zalewski CondoVultures

84 Thank You!!! Gracias!!!! Muito Obrigada!!!