The tax implications of buying abroad

Buying abroad can be a really attractive investment option – not only can you potentially buy a really cheap property and have a secondary income through the rent, but you also hopefully have something which will greatly appreciate in value over the next few years or somewhere warm and sunny where you can retire and live like a king or queen.

However, you must take care when purchasing abroad lest you end up with a tax muddle. Many people who buy abroad are unaware that not only will they have to pay all the local taxes, they also have to pay tax in their resident country too.

Inheritance tax laws may also come into play – not just in your own country but also in the country where your property is situated. Most of Europe is covered by a Napoleonic law which means that your children and spouse are entitled to a portion of your estate when you die. This can create inheritance tax problems in the UK as well as abroad. It is important that you make a will that will cover the local tax laws in both countries to minimise tax issues if you die.

Depending on the country you are planning to buy in, it may be more cost effective to create a company and buy the property via the company. Although some financials such as utilities will be more expensive through a company, you may find that the benefits in the long run are far greater than owning the property as an individual. If you are planning to sell the property at a later date, ensure that you check all the tax liabilities for a company.

Before buying a property, we strongly advise seeing a tax advisor in not only your home country but also in the country abroad to ensure that go into your house purchase with your eyes wide open. Don’t let the above points put you off you dream home in the sun as it can be immensely rewarding experience, but it is important to understand the full picture rather than jumping in at the deep end!

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