Holding and selling abroad: tax questions to take to an adviser

Owning property in another country is not only a matter of contracts, keys and maintenance. From the day you buy until the day you sell or pass the property on, tax questions can arise — and they can arise in more than one place at once. The answers depend on the law of each country involved and on your own circumstances, and only qualified tax advisers can give them.

What you can do is arrive at those conversations organised. This article is a question list, grouped by stage of ownership, to take to tax advisers in the country where the property is and in your home country. It contains no answers on purpose: it describes no tax rule of any country, and the same question may have very different answers depending on where you are and what you own.

Why tax questions can arise in two countries

Property sits in one place, but its owner may live in another. The country where the property is may take an interest in the purchase, in the ownership itself, in any rent and in the sale. Your home country may take an interest in what you own abroad and in any income or gains connected with it. Each country looks at the situation through its own rules, and those rules were not written with each other in mind.

This is why a single adviser in one country is rarely enough. You need a picture of how both sides see the same facts, and of how they fit together — or fail to.

Finding advisers and getting them to talk

Look for a qualified tax adviser in the country where the property is and one where you live, each with experience of cross-border situations. Before engaging them, ask:

• Which questions does your engagement cover, and which fall outside it?
• Have you worked alongside advisers in the other country before?
• Are you willing to speak directly with my adviser there, and how would that be arranged?
• What information do you need from me, and in what form?
• How will your advice be given — in writing, in a meeting — and how is your work charged?

Then introduce the advisers to each other, share the same fact summary with both, and ask each to flag anything the other should look at. How these specialists fit alongside lawyers, agents and valuers is described in who does what in an overseas property purchase.

Questions about the purchase

• What taxes or charges may apply when buying a property of this kind in this way?
• Who is responsible for paying each of them — buyer, seller or both — and when?
• Does the way the purchase is financed or structured change which charges apply?
• Is there anything I should declare or register in my home country when I buy?
• Which purchase documents should I keep, and in what form, for later tax purposes?

The wider list of purchase costs to plan for appears in categories of cost when buying abroad.

Questions about holding the property

Even a property that sits empty can bring recurring obligations. Useful questions:

• Are there periodic property taxes or local charges on ownership, and who assesses them?
• Does the property need to be registered with any local tax authority, and by when should I ask?
• Do I need a local tax identification number or a local representative?
• Does my home country expect me to report assets held abroad, and if so, which details?
• Would anything change if family members use the property, or if it stands empty for part of the year?

Questions if the property is let

Letting the property adds a further layer, in both countries:

• How may rental income be looked at in the country where the property is?
• How may the same income be looked at in my home country?
• Which expenses connected with the letting can be recorded, and what evidence is needed for each?
• Which filings would be required, in which country, and who prepares them?
• Does it matter whether the letting is short-term or longer-term, or arranged through a manager?
• Does the way the property is owned — personally, jointly or through a company — affect how rent is treated?

If someone manages the letting for you, ask your adviser what records that manager should provide. Arrangements for managing a property from afar are covered in owning property from a distance.

Questions about currency

When the property is bought, let and sold in one currency and your life is lived in another, movements between the two can matter conceptually for tax. Questions to raise:

• In which currency should amounts be recorded for each country's purposes?
• Which exchange values should be used for the purchase, for income and for the sale, and where should I record them?
• Could currency movements on their own be relevant to how a sale is looked at in either country?
• If I hold money abroad in a local account, does that raise separate reporting questions at home?

Questions about selling

• What taxes or charges may apply on sale in the country where the property is?
• Could the sale also be relevant in my home country, and how would the two positions interact?
• How are gains on sale worked out in each country, and which costs over the years of ownership may be taken into account?
• Which records will be needed to show the original price, purchase costs and improvements?
• Are there filings or notifications to make around the sale, and who handles them?
• Could the buyer or a notary be required to withhold anything, and how would that be reconciled?
• Does the timing of the sale in relation to my own circumstances change anything?

Questions about your home-country position

How your home country views income and gains from abroad is often the part people overlook. Ask your home adviser — and expect careful, conditional answers:

• How does my home country look at income or gains from property in another country, given my tax connections?
• If tax is paid in the country where the property is, is there any relief for it at home, and what is needed to claim it?
• Is there an agreement between the two countries that is relevant to my situation, and what does it mean in practice?
• What would change if I moved to live in another country, or came back home after a period away?
• Which documents from abroad will my home adviser need, and in what form?

Inheritance and succession

Property abroad does not disappear from the picture when its owner dies, and the questions can be among the most complex. Raise them early:

• What happens to the property on my death, and which country's rules may be relevant?
• Could taxes on death arise in the country where the property is, in my home country, or both?
• Does my will cover the property, or should a separate document be prepared in that country?
• What would giving the property, or a share of it, to family during my lifetime involve in each country?
• What would my heirs need to do, and which documents should they be able to find?

These questions belong with both a tax adviser and a lawyer in each country, ideally talking to each other.

Ownership structure and tax

Whether a property is held personally, jointly, through a company or through another arrangement can affect the tax questions at every stage. Your advisers should be asked:

• How would each ownership option be looked at for tax in each country, at purchase, while holding, on letting, on sale and on death?
• What ongoing costs and filings would each option bring with it?
• Would changing the structure later be possible, and what would that involve?

The broader questions about structure, beyond tax, are set out in ownership structures for property abroad.

Records to keep from day one

Many future tax conversations depend on records made at the start. Keep, in an organised folder:

• the purchase contract, completion documents and title records;
• proof of every payment made, with dates and currencies;
• invoices for professional services connected with the purchase;
• invoices for improvements, repairs and maintenance, kept separately;
• rental agreements, statements from any manager and records of expenses;
• copies of every tax filing and official notice, in both countries;
• correspondence with advisers, including their written answers.

Preparing for the adviser meeting

A short brief makes each meeting more useful. Before you sit down with an adviser, prepare:

• A one-page summary: where you live, your family situation, what you own or plan to own, how it is or will be held and what you intend to do with it.
• Documents: the key items from the list above, or drafts if you have not bought yet.
• A question list: drawn from the sections above, with the questions most relevant to your plans marked first.
• The other adviser's details: so both can coordinate.

Afterwards, write down each answer, who gave it and any conditions attached, and share it with the adviser in the other country.

In short

Property abroad can raise tax questions at purchase, while holding or letting, on sale and on succession — in the country where the property is and in your home country. Find advisers in both places, get them talking, bring a clear brief and a question list, and keep records from the first day. The answers themselves must come from qualified professionals who know your facts.

If you would like help organising your facts and questions before meeting tax advisers in each country, you can talk to Wobridge.