Owning a property overseas is no longer a prerogative of the rich. Low prices on the continent are attracting many UK investors. Sometimes the purchase is simply to generate an income from letting but in many cases it is to provide a semi-permanent base in the other country. That may become permanent if people choose to retire there or decide that the opportunities for business or employment are better (and the climate is a considerable improvement on the UK).
There are many issues to take into consideration in deciding to make such a purchase and most of those will be nothing to do with tax. Indeed it is arguable that the decision to make a purchase like this is not one that should be driven in any way by tax. However, there are some important tax issues which do need to be taken into account and a failure to give them some consideration could cause a shadow to fall over the pleasures of owning a place in the sun.
The key tax issues which need to be considered are:
- the impact the purchase and subsequent living arrangements may have on residence for tax purposes both in the UK and in the country where the property is located
- the impact of local tax issues
- the impact on UK tax liability.
This bulletin provides an outline of those issues and focuses briefly on two countries - France and Spain - which are the most popular choices for property investment. Similar considerations will be needed for any other country as well.