Securing an overseas property investment is one of the most popular ways to create diversification in an asset portfolio. Often, overseas property investments can be picked up at bargain prices and can provide you with a secondary income, should you choose to enter into the foreign Buy to Let market. Then there’s always the prospect of selling your current home, retiring and purchasing a property in a country that boasts year-round warm temperatures, stunning scenery and a better quality of life.
But, like any investment, buying international investment property requires careful consideration and due diligence, otherwise you could end up in a sticky situation, particularly when it comes to tax, which can be something of a minefield. For example, those who choose to buy a second overseas investment property are often unaware that they need to pay tax in their resident country as well as all the local taxis in the foreign country.
It may also be the same for inheritance tax and annual wealth tax, which is based on the value of the assets you have in the country you wish to buy in. Always carry out a sufficient amount of research on these factors before handing over your funds. Employ the help of a tax advisor, both in the foreign country and your home country for maximum peace of mind.
Double taxation can also be a problem for many would-be buyers abroad. To make sure you are not taxed twice, find out whether the overseas country and your home country have a double taxation treaty, like the UK and France do. This is to ensure that no income, gains or any other taxes are levied twice on the same portion of your income. It also ensures you will not pay income tax that is greater that what you would pay in your home country.
In some circumstances, it may be more cost effective to set up a shell company and purchase your property investment overseas via the company; however this will depend on the country you are planning to buy in. Some financial aspects such as utilities may be more expensive when buying overseas investment property through a company, however long term benefits could be much greater than owning a property as an individual. But it is important that you find out what the tax liabilities are before setting up your company.
There are a number of questions you must find the answers to before proceeding with any transactions if you wish to achieve the very best overseas investment properties experience, with minimal hassle. Seek overseas property investment advice and find out what all the tax implications of buying overseas are before you sign any legally binding agreement on a property.
*This page is provided for information purposes only and should not be construed as offering advice. IPIN is not licensed to give financial advice and all information provided by IPIN regarding real estate should never be treated as specific advice or regulations. This is standard practice with property investment companies as the purchase of property as an investment is not regulated by the UK or other Financial Services Authorities.