Overseas property laws in 2013

May 14, 2013 No Comments

It looks like investment in overseas property markets will continue to be cautious in 2013, as UK investors continue to grapple with the ongoing uncertainty in the Eurozone. Financial analysts believe that overseas property law changes are having an effect on demand for property in traditional strongholds like France and Spain – but don’t let them deter you. Be aware of the laws, and there are still bargains to be found!

France

Buyers in France were hit this year by a new addition to Capital Gains Tax (L’impôt sur les plus-values) that came into force on 1st January 2013. This imposes a social tax on those who own second homes. This social tax is set at 15.5%, and brings the total tax payable on selling a second home in France to 34.5%.

It is worth noting, however, that this only applies to second homes – so if your investment is with a view to moving out to France then this would not apply.

It is also worth noting that the French have permitted a ‘one-off’ discount of 20% on the capital gains tax bill for anyone selling their second home in 2013, so if you already have an investment out there, now could be the time to sell! CGT and the social tax are also exempt on the sale of a second home if you are a French resident and you have owned your second home for more than 30 years.

Spain

The overseas property market was rocked earlier this year, as Spain passed a new law requiring all residents to declare all assets worth more than €50,000 held outside the country by an April 30th deadline. The law included huge fines for non-compliance. Expats who spend more than 183 days a year in Spain are considered resident, as are those who live with their partner of children.

It is thought the aim of the law is to allow the government to cross check all self-employment tax return declarations, as they believe money is being sent abroad by Spaniards keen to avoid paying local taxes. The fines for non-compliance are astronomical, and include €10,000 up front, top rate tax on the value of undeclared assets (currently 52%), plus a 150% uplift on the final bill, and 4% interest on the amount owed, backdated four years.

The law means that foreign assets will need to be declared every year by the end of March, although previously declared assets will only have to be declared again if they have increased in value by €20,000 or more.

The biggest issue is that the majority of people in Spain with large overseas assets are British expats – not native Spaniards. Certainly something to be aware of if you currently live in Spain or you’re planning to move there.

Positive news elsewhere in Europe

However, the legislative environment for overseas property investors is not all doom and gloom. There are some success stories, and chief among those has to be Portugal.

A new law over there allows pensioners to apply for a legal status as ‘non-habitual resident’. This allows a foreign citizen to own property and spend time in Portugal, and for any income derived from a foreign-sourced pension to be received in Portugal tax-free. The result is that pensioners can live in Portugal without paying any tax, something that has already attracted more than 200 millionaire pensioners to the country since the beginning of 2013.

Nick Branch, a contributing writer for Contact Law, wrote this article for Property Abroad. Nick received his LLB in 2004 from the University of the West of England. He later went on to work as a director of two property-related businesses and now currently continues his studies, often writing on legal news topics.

Tags: , , , , European Property News, Global Property Data, International Property, Investment Opportunities

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