|
Thanks to a series of tax concessions, the purchase of property overseas as a second home or investment is increasingly popular, and no longer the prerogative of the rich. Before deciding to make a purchase overseas there are many issues to take into consideration. While the tax implications may not be at the forefront of the decision-making process, failure to give a few important issues some consideration could cast a gloomy shadow over the pleasures of owning a place in the sun.
Thanks to a series of tax concessions, the purchase of property overseas as a second home or investment is increasingly popular, and no longer the prerogative of the rich. Many UK buyers have been attracted by relatively low prices (and the more attractive climate!) on the continent and while many still look to buy with the intenton of generating incoming from letting, in many cases it is to provide a semi-permanent base in the other country with a view to retirement or permanent relocation later. Before deciding to make a purchase overseas there are many issues to take into consideration. While the tax implications may not be at the forefront of the decision-making process, failure to give a few important issues some consideration could cast a gloomy shadow over the pleasures of owning a place in the sun.
One of the key tax issues to be considered is the impact an overseas purchase and subsequent living arrangements may have on residence for tax purposes both in the UK and in the country where the property is located. Generally, if the purchase is intended to be a second home and your permanent home remains in the UK, you are unlikely to alter your basic position of being resident (and ordinarily resident) here. The majority of UK investors buying property overseas are likely, at least initially, to remain resident in the UK for tax purposes. This means you will be liable in the UK on any letting income or capital gains you make on your overseas property. You will be able to deduct any foreign tax paid from the UK liability, but if the overseas taxes are lower than their British equivalent you will have to make up the difference. In addition, retaining your home in the UK will mean that any overseas property will be part of your estate for IHT purposes.A prospective buyer should also consider how they may be affected by local inheritance, wealth and other taxes. For example, within the UK, the individual may state in their Will how their estate should be distributed on death, but this is not the case in many other countries, including France and Spain - two of the most popular choices for property investment. This is an important area on which to seek advice before a purchase is made, otherwise property may not pass on in the desired way. As well as inheritance taxes, you will also need to look at local wealth taxes, income taxes, and property taxes.
The importance of of obtaining good, local, independent professional advice cannot be stressed enough. Remember: no two countries in the world have identical legal systems, nor are the rules and regulations that govern the purchase of property the same! Just as with the purchase of property in the UK, there will be many legal and tax issues to consider of which the outsider, even with a reasonable working knowledge of the systems, will be unaware. Use qualified professionals to protect your interests and deal with the endless stream of rules and regulations on your behalf - a few hundred euros spent on that advice could save many euros and many tears later! Useful sites that give further information:
Legal Aspects Of Buying Property Abroad
Buying a property abroad
Guardian Cash clinic: buying property abroad
|
Home 
News 
