How is real property situated in the jurisdiction taxed, in particular where it is owned by an individual who has no connection with the jurisdiction other than ownership of property there?
Private Client (2nd edition)
The purchase of Israeli real estate (directly or indirectly through a company) is generally subject to purchase tax (at the rate of 6% for commercial Israeli real estate, and at the rate of 8% or 10% for residential assets). The sale is subject to capital gains tax (generally at a rate of 25%) or a corporate tax rate in case of a sale of real estate by a company (at a rate of 23%). For this purpose, the term real estate may include interests in entities holding real estate.
Betterment tax ("hetel hashbach") of 50% of the increase in value of the property created by re-zoning (for example, additional building rights were granted or other benefits affecting the value of the apartment by the planning authorities) may apply by the local zoning municipal authority at the sale of real property.
Irish source income, for example rental income from an Irish situate property, will be subject to income tax in Ireland on an arising basis, regardless of the tax profile of the tax payer. Non-resident individuals will be subject to withholding tax where they do not appoint an Irish resident agent to collect the rent and pay the tax due.
Capital gains arising on the disposal of ‘specified assets’, which are defined in Section 29 TCA 1997 as including land and buildings in Ireland, will be subject to CGT on an arising basis.
CAT will be imposed on a gift / inheritance of Irish situate property held by the donor personally. However, where Irish situate property is held by a non-Irish resident company, and the shares in such company are the subject of a gift / inheritance, the charge to CAT should not arise where the disponer of the shares is not domiciled in Ireland.
Stamp duty is charged on instruments, specified in the First Schedule to the Stamp Duty Consolidation Act 1999, which (a) are executed in Ireland or, (b) relate to any property situate in Ireland or to any matter or thing done or to be done in Ireland (irrespective of where they are executed). The rate of stamp duty applicable to the sale or transfer of residential property is 1% for the first €1,000,000 and 2% for any value over €1,000,000. The rate of stamp duty applicable to the sale or transfer of non-residential property is 6%.
Local property tax (“LPT”) is an annual self-assessed tax on residential properties, payable to the Revenue Commissioners. LPT is calculated based on the market value of the property at the valuation date. Taxpayers are required to self-assess for LPT.
Real property is subject to an annual tax which is calculated on its deemed income (‘cadastral income’). If the real property is not rented out or if the annual rental income does not exceed EUR 2.500, then no other taxes are due and no tax return has to be filed by the non-resident owner. If the annual rental income exceeds EUR 2.500, a non-resident income tax return must be filed and the income will be taxed at progressive rates of 25% up to 50%.
In case of a taxable capital gain realised by a non-resident on the sale of his real property, the tax will be withheld from the purchase price by the notary.
Real property taxes are not imposed at the federal level. In the US, taxes on real property are imposed at the state or local level and the tax rates of the states and local jurisdictions vary significantly. State and local governments levy taxes on real property situated within their jurisdictions, regardless of the citizenship of the owner. Property tax is generally determined by the property tax rate and the tax base. The tax base is determined by the assessed value of the property and assessment ratio. The methods for assessing property tax rates vary from jurisdiction to jurisdiction.
A property owner who has no connection with the jurisdiction other than ownership of property there should be mindful of the Foreign Investment in Real Property Tax Act (FIRPTA), which authorizes the US to tax nonresidents on dispositions of US real property interests. A disposition includes, but is not limited to, a sale or exchange, liquidation, redemption, gift or transfer. Persons purchasing US property interests from nonresidents are required to withhold 15% of the amount realized on the disposition. If the purchaser fails to withhold, the purchaser may be liable for the tax.
There is no immovable property tax in Cyprus, and no special taxation of property owned by an individual who has no connection with the jurisdiction other than ownership of property there.
Rental income from Austrian located property earned by an individual having neither its domicile nor its habitual abode in Austria will generally be subject to Austrian limited income tax liability. The same applies with respect to capital gains realised upon the sale of Austrian real estate. In addition, buying and selling Austrian real estate triggers a 3.5% Austrian real estate transfer tax.
Real estate properties (rights in rem inclusive) in Bulgaria are subject to two main taxes:
Tax on onerous acquisition of property. The person liable to pay the tax is the transferee, unless otherwise agreed by the parties to the contract. The transferor is liable to pay the tax where the transferee is abroad. The tax base is the higher of either the transfer price or the taxable value of the property determined by the municipality.
The tax rate is from 0.1% to 3%.
The tax is payable upon the transfer of the property.
Property tax is payable yearly for real estate properties in Bulgaria irrespective of the owner’s nationality and the use of the property. Tax is paid by:
- owners of taxable real estate properties;
- owners of buildings constructed on state or municipal land;
- persons holding an in rem right to use;
- persons who have been allocated the management of state or municipal real estate properties.
Where ownership is held jointly by several persons, each person is liable to tax in proportion to their respective share.
The tax base is a tax assessment determined by the municipal authorities on the basis of the information provided by the owner of the property in a tax return which must be submitted within 2 months of acquisition (6 months if the property has been acquired through inheritance).
The rate of the tax is from 0.1 to 4.5 per mille.
Tax credits are available as follows:
- properties used as a main residence qualify for a 50% tax credit;
- properties used as a main residence by a person with a 50 to 100 % working incapacity qualify for a 75% tax credit.
The tax is payable from 1 March of the year for which it is due in two equal instalments – until 30 June and until 30 October. Individuals that pay the full amount by 30 April benefit from a 5% tax credit.
Real estate properties in Bulgaria are also subject to a waste management fee, which is a municipal fee for the maintenance and cleaning of the public areas and for the collecting, removal and processing of waste.
Individuals owning a real property in Argentina shall pay the following taxes:
- Real Property Tax (Impuesto Inmobiliario) at Provincial Level, must be paid annually, in one or several instalments that expire in the months of February, April, June, August and October. The tax is composed of a fixed amount (from ARS 150 to ARS 85,975, for the fiscal year 2018) and a tax rate to be applied on the surplus of the established minimum of the scale which goes from 0,02% to 1,25% and varies according to the type of property and the fiscal valuation carried out by the Land Registry and Territorial Information Service (being the minimum and maximum, ARS 179,851 and ARS 10,000,000, respectively). In the year 2018 Buenos Aires Province Revenue Agency (ARBA for its acronym in Spanish) has made a sharp increase in the revaluation of real property situated in the Province.
- Sweeping and Cleaning, Maintenance Fee (Tasa por Alumbrado, Barrido y Limpieza) at Municipal Level, must be paid annually, in one or several instalments, with rates which are usually between 0.30% and 0.40% applicable on the fiscal valuation carried out by the Land Registry and Territorial Information Service.
- Personal Asset Tax (Impuesto sobre los Bienes Personales) at a Federal Level. As mentioned in Question 4 above, through the Substitute Taxpayer.
- Real Property Transfer Tax (Impuesto a la Transferencia de Inmuebles) at a Federal Level), in the event the individual sales its real property provided this was acquired before January 2018. Tax rate 1,5% that the notary will withhold and pay to AFIP.
- Income Tax (Impuesto a las ganancias persona física): (i) if the individual rents its real property, the tenant should withhold 21% (which is the effective tax rate in this case, tax rate of 35% applicable to the net income which the ITL presumes is 60%) and pay to AFIP. (ii) If the individual sales its real property and this was acquired on or after January 2018, the notary will withhold income tax at the rate of 15% (incorporated by Law 27.430).
Monaco does not levy any wealth tax or local taxes on properties. There is no property occupancy tax.
Stamp duties are levied upon transfer of ownership of real property.
There is an annual reporting obligation for foreign companies, trusts and other entities holding real estate in Monaco to appoint a local fiscal agent whose duty is to file an annual declaration regarding the change or the absence of change of beneficial ownership. Subject to certain exemptions, if there has been a change of beneficial ownership, a transfer duty of 4.5 or 7.5 per cent of the market value of the property is due. The applicable tax rates vary depending on whether the transaction is carried out for the benefit of persons that meet the transparency criteria set out by the legislation enacted in 2011.
Such real property is subject to wealth tax on Italian real estate, which is levied at the general rate of 0.76% on the deemed value of the property resulting from the Land Registry. If the property is rented out, then the rental income is subject income tax. Upon certain conditions, the rental income from an Italian real property can be subject to an optional flat tax at the 21% rate on the gross rent, rather than progressive tax rates on the rental income. The real property is also exposed to inheritance and gift tax (if the reported value is at least equal to the aforementioned deemed value, then the reported value cannot be challenged by the tax authorities). Capital gains from the sale of the real property are not taxable provided that either the property was inherited or it has been owned for at least 5 years.
If an individual owns property in Bermuda an annual land tax applies, regardless of whether the individual is resident in Bermuda or not.
This is assessed semi-annually and is linked to the notional rental value of the property (which is set by the Accountant General). The rates are stepped and range from 0.8% for a notional annual rental value of under BM$11,000 to 47% for the portion of notional rental value above BM$120,000.