When you are looking to expand your business, whether as an established corporation looking overseas to a new territory or a local looking to start a small business, Guam can be an excellent choice. Guam is a gateway to many commercial markets, and as such has drawn attention across the Pacific Rim from investors looking to settle there and expand.
As a growing commercial hub, Guam has taken steps in recent years to increase opportunities for investors looking to build a presence on the island with tax incentives and designated opportunity zones to help boost economic growth and fuel development.
Opportunity Zones for business growth
Since 2018, Guam has established 25 Qualified Opportunity Zones that offer tax incentives for businesses that are created and based in those areas. These come in two varieties, Low Income Communities (LIC) and Non-LIC Contiguous tract areas.
The tax benefits offered by these areas are designed to serve as a deferment of part or all of a company’s estimated federal capital gains taxes that they might otherwise incur on their investment. Guam has established a separate agency, known as the Guam Economic Development Authority, which is charged with encouraging and managing investment opportunities on the island.
For an investor looking to join in these opportunity zones, the easiest way to do so is through a Qualified Opportunity Fund. These operate as a vehicle for investment in the area that is structured as either a partnership or a corporation. These businesses are then able to invest in a property within the Opportunity Zones and gain benefits from them.
How Opportunity Zones benefit investors
The way that these Opportunity Zones function is that they allow the investor to defer taxes on all prior gains on their investment within the Opportunity Zones so long as those funds are reinvested in the Qualified Opportunity Fund. These tax deferments last until the end of 2026.
The other means by which an investor can take advantage of these Opportunity Zones is through a step up in basis for their investments. If an investor holds an asset in their Opportunity Fund for at least ten years, then they will be eligible to apply for a stepped-up basis in the value of the asset equal to its current market value at the sale date, without the additional capital gains.