Tax on overseas property and registering homes abroad
Buying overseas property almost certainly means incurring taxes and other fees. The latter charges may relate to registering homes abroad with the appropriate government department. Registering the home and paying any taxes relating to the purchase are generally the final stages of the process of buying foreign property.
Overseas property tax
The taxes you incur, and how much they set you back, depends upon which country you are buying foreign property in. The main taxes on homes abroad which you must look out for include:
- Transfer taxes - payable on all overseas property purchases.
- Income tax - charged on rental income generated from homes abroad.
- Capital gains tax - payable on profits made from the sale of overseas property.
- Inheritance tax - heirs are liable for inheritance tax on foreign property they might inherit.
The UK has a double taxation treaty with a number of other countries, which means you will not be charged income tax or capital gains tax twice. Before moving abroad you must fill in form P85 and return it to the Inland Revenue to advise them of your intentions.
Your liability to tax can usually be reduced by professional advice from tax specialists with a full understanding of the tax situation in the country you buy homes abroad in.
Overseas property registration
The taxes you must incur when you buy foreign property are usually payable when the final deed of sale is being signed. These are typically 2-5% of the property price. In most cases this is done in front of a notary and once the taxes on overseas property have been settled, the process of registering homes abroad begins.
Registering foreign property usually requires the deeds to be lodged with the local equivalent of a land registry. They then record the change of ownership of overseas property.
Any registration fees related to buying homes abroad will also be due at this point. The lodging of deeds with the land registry may have to be completed by yourself but it is more likely that either the notary or your solicitor will do this.
The process of registering homes abroad can take several months. Taxes associated with buying overseas property can add significantly to the purchase price. An additional 10-15% in taxes and other fees (eg legal and notary fees) will usually be incurred on top of the cost of foreign property.
