This continues from the hijacked thread "Property Hotspots in 2008" where Capital Gains Tax and income tax issues were discussed. I was hoping for some more advice/discussion so thought I'd start a new thread.

This seems to be an area which is not highlighted in all those glossy brochures we pour over. I've seen so many that advertise a place with the advantage that there is no Tax to pay . . . This doesnt matter as we are all governed by our home country's tax laws.

wherever we invest CGT, Income Tax, Inheritence Tax, in some countries a Wealth Tax will be due. We have to fill in the overseas country's tax forms, in some cases even if we have had no income from the property. Note although Uks tax year is from 6th April, this is not standard.

Some countries have double tax agreements (I'll copy Mickthe propertygurus list below). This still means we pay the overseas country's tax. But it then allows us to deduct this from our own country's tax bill.

Problems I forsee (apart from doing the maths!) are language of the overseas tax form, when investing in several countries the multiple overseas country's tax forms and the possibility and cost of having to hire local accountants.

I thought this could be simplified by employing a UK accountant to do all the returns. Does anyone know of one?

What do other people do re tax abroad?

Originally Posted by mickthepropertyguru View Post

Apparently there are more than 1,300 double taxation treaties world-wide and the UK has the largest network of treaties, covering over 100 countries.

Antigua and Barbuda, Argentina, Argentina, Austria, Azerbaijan, Bangladesh , Barbados, Belarus, Belgium, Belize, Bolivia, Bosnia-Herzegovina, Botswana, Brunei, Bulgaria, Canada, Chile, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Falkland Islands, Faroes, Fiji, Finland, France, Gambia, Georgia, Germany, Ghana, Greece, Grenada, Guernsey, Guyana, Hungary, Iceland, India, Indonesia, Ireland (Republic of ), Isle of Man, Israel, Italy, Ivory Coast (Côte d'Ivoire), Jamaica, Japan, Jersey, Jordan, Kazakhstan, Kenya, Kiribati, Korea (Republic of), Kuwait, Latvia, Lesotho, Lithuania, Luxembourg, Macedonia, Malawi, Malaysia, Malta, Mauritius, Mexico, Mongolia, Montenegro, Montserrat, Morocco, Myanmar (Burma), Namibia, Netherlands, New Zealand, Nigeria, Norway, Oman, Pakistan, Papua New Guinea , Philippines, Poland, Portugal, Romania, Russian Federation, St Kitts and Nevis, Serbia, Sierra Leone, Singapore, Slovak Republic (Slovakia), Slovenia , Solomon Islands, South Africa, Spain, Sri Lanka, Sudan, Swaziland, Sweden, Switzerland, Taiwan, Tajikistan
, Thailand , Trinidad and Tobago, Tunisia, Turkey, Turkmenistan , Tuvalu, Uganda, Ukraine, United States of America, Uzbekistan, Venezuela, Vietnam , Yugoslavia (Federal Republic), Zambia, Zimbabwe.

Ireland has double taxation treaties withe the following:
Australia, Austria, Belgium, Bulgaria, Canada, Chile, China, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, India, Israel, Italy, Japan, Korea, Latvia, Lithuania, Luxembourg, Malaysia, Mexico, Netherlands, New Zealand, Norway, Pakistan, Poland, Portugal, Portugal, Romania, Russia, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland, United Kingdom ,United Kingdom Protocol, United States, United States Protocol, United States Competent Authority Agreement, Zambia

All the details for individual countries can be found on official government revenue site.

SS, I suspect the CGT calculations are more complex still. I haven't sold a foreign property, but I'm expecting exchange rate fluctuations to come into play with relation to CGT. Think its fair to assume that the Government in the country you have bought will not care about exchange rate fluctuations which affect your return. They will look at price you sell your property for (in their currency) and deduct purchase price and all allowable expenses you provide documentation for (again in their currency) to determine amount that CGT can be applied to.

So, lets say you pay £300k Euros now for a property at todays exchange rate of 1.3 Euros to the £1. (Costs you £231k to buy property.)

To keep the sums simple lets say there were no other costs associated with buying your property and that you won't incurr any when you come to sell.

When you come to sell the exchange rate has returned to 1.5 Euros to the £1. CGT is 10% in country you have property.

You sell property for 350k Euros, leaving 50k Euros being taxable abroad. After CGT you transfer the remaining 345k Euros for £230k (1.5 Euros to the £1.) That's £1k less back than you paid yet you still had to pay CGT in the other country.

SoupDragon,
Interesting! the more I think about these issues, the more I realise that tax has huge implications which just arent addressed when one purchases the property. Or perhaps I have been naiive. I have considered stability of the econmy and hence currency as part of due diligence, but not in that CGT scenario. And some of the more 'stable' countries USA/Europe have seen high currency changes.

Its generally harder to sell properties abroad, takes more time, more cost so most of my foreign purchases are long term (10yrs+). If the exchange rate has fallen since purchase either you'd have to wait longer to sell, or keep the funds in the local currency and hope for a currency rise.

Rental income and hence local income tax in US and Turkey are my immediate concerns. Then later Morocco and Brazil. Think I need to budget heavily for accountants or give up work so I can spend my time filling in foreign tax returns!

A useful property tax site:

International Property Tax Q&A