- Research or obtain tax advice on all aspects of your investments – tax on purchase, tax when renting/holding the property and tax on ultimate sale or transfer (gift/inheritance tax). Click on the country specific tax details for each at www.dgitax.com which summarises tax rates by country for transfer tax (stamp duty), VAT, income tax, corporate tax (if applicable), local property tax (rates), wealth tax, capital gains tax and gift/inheritance tax.
- Consider the optimal legal/tax structure for you eg. own in personal name(s), in a company etc. In many cases it is often more tax efficient to hold residential property in your own name(s) to avoid double taxation when extracting net rents or gains from a company. However in some countries foreigners cannot own property in their own name and must purchase it through a local company. The tax implications will vary depending on the structure so specific tax advice should be sought before finalising your investment.
- Always declare the full value of the purchase price on the Notary Deeds. Some advise that you can reduce your transfer tax on purchase if you declare a lower price than what you actually paid for the property. Transfer tax rates vary per country but (excl. Ireland) average about 2%. If you reduce the price on the Notary Deeds you will end up paying higher capital gains tax, at a much higher rate eg 25% in Ireland, when you ultimately sell or transfer the property as the lower cost base will be used to determine your taxable gain.
Foreign Property Tax Returns made easy at DG International Tax.