Essential Guides & Advice Buying A Second House Overseas

Date Published:

02/06/2008

'There are four categories of taxes that impact on property,' says Jonty Crossick, director for agents www.Ready2invest.co.uk. 'They are transaction taxes, profit taxes, operating taxes and VAT. Most transaction taxes come into play when you buy property; profit taxes are levied on the profit you make when you sell property. Operating taxes are the taxes a local authority levies on a particular apartment or house. VAT is VAT.'

In many EU countries the rate at which one pays CGT on the gain of the sale of a property is set at 18% for both nationals and non-residents for tax purposes. In Spain, however, the figure has until recently been set at 15% for residents and 35% for non-residents - an iniquitous position said the European Commission. Spain capitulated and as of 1 January 2007, CGT is levied at a flat rate of 18% with allowances.

CGT only becomes an issue when one sells a property, unlike a local form of the UK Council Tax. Almost every country you'd care to name has some kind of local tax to pay for refuse collection, street lighting and so on. In most countries the amount paid is considerably less that it is in the UK - often amounting to not more than the equivalent of a few hundred pounds annually.

Be aware though that because you are a foreigner or do not live in your property year-round you still have to pay. In France, for example, two local property taxes are applicable: taxe foncire and taxe d'habitation and regardless of whether an owner is a resident or not, or whether the property is a permanent or holiday home, the taxes are applicable.

Inevitably, there is no one tax level or system adopted worldwide; every country sets tax levels at different thresholds and makes tax allowances or punitive charges as it sees fit. An exception is in the EU where member countries are 'encouraged' but not legally bound to adopt similar levels of taxes. A case in point is Capital Gains Tax (CGT).

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