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?
As noted above, India follows residence-based and source-based rules of taxation. Therefore, going by the source-rule, if the real property is situated in India, then any income arising from the real property (whether in the nature of rental income or capital gains on transfer of the real property,) will be subject to tax in India. In case the transfer of real property is not undertaken at fair value, which means if the consideration is less than Government prescribed stamp duty value, then the stamp duty value of such real property is deemed as the consideration. Accordingly, such stamp duty value will be factored in to determine the capital gains tax implications. Furthermore, there would be implications under Section 56 of the IT Act as well, if the real property is received by any person at a price which is less than the Government prescribed stamp duty value.
India has signed a number of double taxation avoidance agreements with several countries. In a situation, if an individual is resident of a country with which India has signed a double taxation avoidance agreement, then the provisions of double taxation avoidance agreement would apply to the extent it is more beneficial to the individual for the purposes of taxation of income (arising from real property) in India.
Subject to taxation are the buildings and plots located within the territory of Bulgaria, situated within the development limits of the build-up areas, and outside them, in certain cases. The tax is levied regardless of whether the property is in exploitation. Certain properties are exempted from taxation.
Tax liable individuals are the owners of the property, which is subject to taxation regardless of their nationality.
Tax base and tax rate: each municipality determines the amount of the tax due on their territory within the range of 0,1 to 4,5 per mile (thousand) of the tax base, determined as follows:
- For individuals: the tax base equals the tax value of the property, which is determined by the municipality;
- For companies: the tax base is the higher of the tax value determined by the municipality and the book value of the property/ its revaluated amount in case of revaluations.
- Immovable property used as a main residence, the tax is levied at 50%.
The tax liable person notifies the municipality, at which the property is located, for the newly built and acquired immovable property with filing a tax return in 2 months.
The tax is determined based on the tax value of the immovable property as of 01 Jan of the year in which the tax is due.
Along with tax on immovable property, owners of immovable property located in Bulgaria are required (with certain exceptions) to pay garbage collection fees.
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, and 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 are executed in Ireland or, wheresoever executed, relate to any property situate in Ireland or to any matter or thing done or to be done in Ireland. 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 commercial property is 6% following the enactment of Finance Act 2017.
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 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.
Several French taxes may be due by a non-resident individual owning a real estate property located in France, upon its acquisition (§ 8.1.), during its ownership period (§ 8.2.) upon its sale (8.3.) upon its transfer by gift or by death (8.4).
8.1. French taxes due upon the acquisition of a French real estate property by a non-resident individual
Transfer duties at the rate of approximately 6.20% (computed on the purchase price of the real estate property) as well as French notary’s fees should be paid by the purchaser regardless it is an individual or a company resident or non-resident of France.
The purchase of the shares of a company (French or foreign) owning a French real estate property which qualify as “société à prépondérance immobilière” is also subject to 5% transfer duties computed on the purchase price of the shares.
As already explained, the definition of “société à prépondérance immobilière” for transfer duties purposes is different from those applying to ISF, gifts and inheritance taxes and to capital gains taxation.
8.2. French taxes due during the ownership period of a French real estate property by a non-resident individual
- Income tax is due on rental income received as explained in § 2.2.
- ISF was due up until January 1st 2017 as explained in § 4.1
The concept of “société à prépondérance immobilière” (real estate company) and of real estate properties indirectly held by companies controlled (more than 50%) by the same family members allowed France to tax non-resident individuals regardless the ownership structure used to hold the French real estate properties.
- IFI is due as from January 1st 2018 as explained in § 4.2
The scope of IFI is broad enough to include real estate properties indirectly owned by a non-resident individual through a trust, intermediate entities or companies (French or foreign) regardless their activities.
- Taxe foncière is a local tax which is annually due by the owners of French real properties regardless their quality (individuals or companies) and their country of residence.
- Taxe d’habitation is another local tax which is annually due by the users of French real properties regardless their quality (individuals or companies) and their country of residence.
8.3. French taxes due upon the sale of a French real estate property owned by a non-resident individual
The sale of a French real estate property by non-resident individuals is subject to French income tax on capital gains realised as explained in § 2.2.
Capital gains realised on the sale by non-resident individuals of shares of companies (French or foreign) qualifying as “sociétés à prépondérance immobilière” is also subject to income tax.
8.4. Transfers by gift or by death of a French real estate owned by a non-resident individual
They are subject either to gift tax or to inheritance tax as explained in § 5.
The concept of “société à prépondérance immobilière” (real estate holding company) and of real estate properties indirectly held by companies controlled by the same family members allowed France to levy gift and inheritance tax on non-resident individuals regardless the ownership structure used to hold the French real estate.
However the definition of “société à prépondérance immobilière” given by the French tax code is different for ISF, gift and inheritance tax purposes for transfer duties purposes and for capital gains taxation purposes (see our comments in § 2.2.).
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.
Capital gains arising on the sale of real property in Israel are taxable under the Land Appreciation Tax Law, unless income tax is payable on the sale as business income.
A foreign resident who does not have a residential property in his country of residency (supported by a specific approval from the tax authorities) may be entitled to a complete exemption from tax on the sale of residential property, where the value is not more than ILS4.443 million (for 2017).
In case a non-Israeli resident is not entitled to the tax exemption, the sale will generally be taxed at 25% plus 3% surtax (different rates will apply to assets that were purchased prior to January 1, 2012).
There is no annual tax on the value of real estate. However, municipalities levy local taxes (arnona) on dwellings or business premises in accordance with certain criteria and based on the size of the surface area.
Foreign individuals without any connection to Greece other than owning property are subject to:
- The uniform tax on real estate property [EN.F.I.A.], as mentioned above [question nr. 4], which amounts generally from 0,1%-1% annually on the property’s automatically assessed value [“objective value”].
- Tax on income from real property leases [subject to the potential application of any double tax avoidance treaties].
- A low municipal property duty [TAP], amounting to app. 0,030% on the property’s automatically assessed [“objective”] value is also paid to the local authorities.
- Immovable property in Greece owned by legal entities, trusts and other legal structures residing in non cooperative or in preferential treatment regimes [for tax purposes], are subject to an annual special tax of 15% on the property’s automatically assessed objective value, unless such entities are, inter alia, listed or substantially operational or carry out shipping, charitable, educational, religious or cultural activities.
Generally, a sale of German real property held by a non-resident as a private asset will only be taxable if the holding period does not exceed 10 years. Rental income from the property will be taxable in Germany as well. Also German inheritance or gift tax may apply with respect to the property (see No. 5 above). Furthermore, an annual property tax may be due (on the basis of an assessed uniform value of the property) at the discretion of the relevant local authority. A transfer of German real estate or a transfer of shares (at least 95%) in a company holding German real estate may trigger real estate transfer tax at 3,5 – 6,5%.
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.
British Virgin Islands
There is a transfer tax (stamp duty) of 12% on transfers for persons individuals and entities who are non-Belongers. Tax exemptions are available in the following cases:
(a) in the case of property registered in the name of an individual, where the transfer is -
(i) to the legal spouse, children or grandchildren of the individual exclusively;
(ii) to a trustee of a trust the beneficiaries (a) of which at the time of transfer are any of the persons referred to in subparagraph (i);
(iii) from the trustee to any other trustee of a trust referred to in subparagraph (a) (ii); or
(iv) from the trustee of a trust referred to in subparagraph (a) (ii) to any beneficiary of the trust being one of the persons referred to in subparagraph (a) (i); and
(b) in the case of the property registered in the name of a company, where the transfer is -
(i) to the legal spouse, children or grandchildren of the beneficial owner of the company exclusively,
(ii) to a trustee of a trust the beneficiaries (a) of which at the time of transfer are any of the persons referred to in subparagraph (i), or
(iii) from the trustee to any other trustee of a trust referred to in subparagraph (a) (ii), or
(iv) from the trustee of a trust referred to in subparagraph (ii) to any beneficiary of the trust being one of the persons referred to in (a) subparagraph (i).
Where a company transfers property (including shares in the company) to another company which has the same beneficial ownership as that company and the property is held pursuant to a licence issued under the Non-Belongers Land Holding Regulation Act that other company may apply in writing to the Governor to be exempted from payment of stamp duty.
As mentioned, there is no CGT in New Zealand, however if a business activity is established through the sale and purchase of property, any gains may be deemed taxable as a business or trading activity.
A residential land withholding tax applies to an entity controlled by non-resident person and/or entity who buys a residential property located in New Zealand and sells it within two years (or within four years in the case of a trust with a beneficiary who is an offshore person). The seller’s main home exemption will not usually apply because the property is unlikely to be an offshore person’s main home if they do not live in New Zealand.
Home owners including landlords pay rates (council tax), but tenants do not. Rates are a ‘tax’ charged by local authority (or council) to help pay for the services they provide the community.
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.
Various taxes are levied on real estate located in Switzerland, irrespective of the owner's residency.
Real property tax: More than half of the cantons levy real property tax at the place of location of the real estate. Real property tax is assessed based on the full market value of the property (no deduction of debts).
Wealth tax: Real estate properties in Switzerland owned by foreign individuals create a limited tax liability on the value of the properties for wealth tax purposes. Market value is determinant for the taxable basis. Debts are deductible. However, when allocating the debts, one has to take into consideration all taxpayer's debts (not only the debt related to the Swiss property) and allocate a percentage of them corresponding to the following ratio: value of assets located in Switzerland / value of worldwide assets. Worldwide tax rate applies. In some cantons, pragmatic approaches apply.
Taxation of current income from immovable property: Real estate properties in Switzerland owned by foreign individuals create a limited tax liability on the property income for income tax purposes. Taxable income includes the effective rental or, if the real estate property is not rented, a notional rental value which is determined periodically by the local tax authorities on the basis of fair market values. Generally all maintenance costs as well as financing costs (limited amount) can be deducted for income tax purposes. Deductible interests are allocated according to the same ratio applicable to deductible debts.
Special real estate gains taxes: Capital gains realized upon the disposition of real estate are subject to a special (cantonal/municipal) real estate capital gains tax (see above question 1).
Real property transfer taxes: Transfers inter vivos of real estate are subject to cantonal/municipal transfer taxes, calculated on the transfer price and due by the buyer.
8.1 The value of real property situated in the UK (and of non-UK property representing the value of UK residential property) is included in the estate (§5.3) of the owner for the purposes of inheritance tax (§5) even where the owner is neither domiciled (§1.9) nor deemed domiciled for inheritance tax purposes (§5.9) in the UK, although debt (such as a mortgage loan from a bank used to purchase the property) may generally be deducted from that value.
8.2 Rent derived by an individual (whether or not UK-resident (§1.5-1.7)) from real property situated in the UK is subject to income tax (§2.1; §3.2).
8.3 An individual (whether or not UK-resident (§1.5-1.7)) who realises a chargeable gain (§2.7) on the disposal (§2.8) of UK residential property is charged to capital gains tax (§2.6), subject to an exemption which is available (on conditions) where the property has been his main or only residence throughout his period of ownership.
8.4 An annual tax known as the annual tax on enveloped dwellings ("ATED") is charged, subject to reliefs, on companies which own UK residential property with a value of £500,000 or more.
8.5 Individuals (whether or not UK-resident (§1.5-1.7)) purchasing UK real property must normally pay stamp duty land tax on the purchase price. This tax is charged at progressive rates, with the highest rate for an individual applying to the excess of the price over £1,500,000, and generally being 13% (or 15% if the individual already has at least one residential property anywhere in the world and the new property is not to replace his main home).
8.6 Local authorities impose council tax on UK residential property, with the rate of tax depending principally on an assumed capital value of the property (based on 1991 prices for England and Scotland and 2003 prices for Wales).
8.7 Business rates are charged on most UK non-domestic properties, such as shops, offices, public houses, warehouses, factories, holiday rental homes and guest houses. Business rates are based on the open market rental value of the property on 1 April 2015, which is estimated by the Valuation Office Agency.
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.