(5) IBI, PROPERTY TAX : shopping around the world
4 September, 2011 No Comments
Real estate tax, impôt foncier, Grundsteuer, stondbeleisting, owners fiscale, Tax on properties, EMLAK vergisi ………. Taxes are paid one way or the other in the majority of countries
Taxes are inevitable. There are different property taxes:
1 – Taxes from the purchase of a property; they are in force in most countries and can be referred to as stamp duty, TRANSFER TAX, TAX PURCHASE, but in the end is the same tax that the respective governments collect. Even though the amount may vary from country to country, some countries only charge a fee on the resale and not on new construction properties. Usually VAT is applied on new construction buildings.
2 – Taxes regarding the ownership of a property: In Spain we refer to as the IBI, based on the assessed value of the property. Every property owner must pay it no matter what his/her status is. Since we are talking about a municipal tax the amount usually varies depending on the size of the property and its location. This tax is paid annually and the amount is automatically charged into the owner’s bank account. In the UK would be similar to Council Tax.
3 -. Taxes levied on the profits from the sale of the property: In many countries this tax is applied to the gain obtained from the property’s purchase price and its sale price (note; some countries allow the deduction of expenses such as maintenance, repairs or improvements made to the property (which must be justified with receipts and vouchers). Also referred to as Capital Gains Tax (CGT), is applied at the time of sale. In some countries the amount due is paid gradually ie. Turkey. In other countries such as France, this tax is paid off in fifteen years. Outside the US, there are different ways to view this tax, considering if they are residents or nonresidents in the country. Many investors are mistaken because they beleive that if the tax is not imposed in the country where the property is being sold, they do not have to pay anything …….Wrong! You are exempt only if you are tax resident in the country. In the case of being resident, for example in the UK, a tax will be charged on any profit earned around the world. In general, the seller of any property will pay CGT or any similar tax to the country where the property is located because a tax applies for any sale.
Regarding double taxation: be careful not to pay taxes twice (the country where the property is located and the country that you belong). Countries often sign double taxation treaties to avoid its citizens to pay taxes twice for the sale of a single good. In these cases, the amount paid in the foreign country should not be re-paid in the country of residence.
It is almost “mandatory” to seek advice from a tax lawyer or a specialist in the country where the good is bought, so that he helps, within the framework of the law, to minimize the amount to pay in each case.
