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?
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.