The tax implications of buying property abroad


The number of British people buying homes abroad is rising year on year. A strong pound and low interest rates are making the luxury of a second home more affordable than ever - and with over five million British people living abroad, the property market for expats and second-homers is more buoyant than ever.

There are many things to consider when buying abroad, but the implications for your tax situation is one of the most fundamental financial ones. We’ve put together this general advice - but engage the services of a recommended financial advisor to help you with your specific situation.

Buying The Property

You won’t normally have to pay any UK tax on the purchase of a foreign property. VAT is another issue however, and you might be liable for “reverse charge” on some services. This might also be applicable if you are using money gifted to you to make the purchase. Make sure you keep all receipts, as you will need them when working out the tax if you sell the property in the future.

At this point, consider making a will in the language of the property’s country as this can solve some financial complications in the event of death. This is also the time to check that the owner has no local outstanding tax demands related to the property.

Owning The Property And Local Taxes

If you are buying property as a rental investment, then you will probably be liable for tax in the UK and the country the property is in. There are deductions available however, which a reputable financial adviser will be able to help you with. You'll also need to take into account if the tax year starts in a different month. Take expert advice to make sure you are fully aware of what is owed in council or municipal tax.

You should also look into the annual property tax, and income tax for non-residents. Some countries, such as Spain, have a tax on “deemed rental income” for second homes, whether or not the property is actually let. Obviously this will be another added expense if the property is actually sitting empty.

Selling The Property

Selling the property has major tax implications, especially if it is being sold due to the death of the owner. Capital Gains tax and Inheritance Tax can benefit from double tax relief however, to lighten the financial burden. This is the point when your will in the local language will save a lot of time and stress for those dealing with the property disposal. You will be transferring large sums between countries when dealing with property tax issues on a home abroad.

Make an account with Transferwise in order to move your money securely - and save on UK high street bank charges. If you are retiring abroad, take a look at our guide to the tax implications of that situation or if you want to buy abroad on a budget, we’ve taken a look at some of the thriftiest destinations to live the second home dream.

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This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.

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