buying a property overseas - icaew
TRANSCRIPT
Buying a Property Overseas
IN ASSOCIATION WITH BLEVINS FRANKS
FACILITATED BY RICHARD BERTIN, MEMBER OF THE ICAEW
PERSONAL FINANCIAL PLANNING ADVISORY GROUP
© ICAEW 2018
© ICAEW 2018
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POLLING QUESTION – why have you joined this webinar?
© ICAEW 2018
• For personal interest
• For advice when advising clients
• Both
Do you own a property in OR are you looking to buy in:
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• France
• Spain
• Portugal
• Multiple
© ICAEW 2018
Today’s speaker
JASON PORTER
BUSINESS DEVELOPMENT DIRECTOR
BLEVINS FRANKS
Overseas Property:Matters to Consider
When Buying an Overseas Home
Jason Porter Director | Blevins Franks. London
Agenda
Blevins Franks…Who we are, what we do
A Second Home… Don’t Forget the Foreign Tax Factor
The Inbetweeners… Trusts & Companies under the spotlight (again)
Brexit…how long can I spend in the EU?
Closing Comments
Blevins FranksWho we are and What we do
Who are Blevins Franks?
The leading international tax and wealth management
advisers to UK nationals living in Europe
Blevins Franks Group
Advising clients for over 40 years7 countries
22 Offices43 Partners and Private Client Managers
200+ Employees5,100 Families
€2.5 billion Funds Under Advice.
Blevins Franks Group OFFICES IN EUROPE
…tax driven
financial planning and wealth management advice
What do we do?
Comprehensive Financial Planning
Cross-BorderTax Planning
Investment Advice
Estate Planning
Pensions Advice and Planning
Blevins Franks Specialist Advisers
Deep understanding of UK Nationals living in France, Spain, Portugal, Cyprus and Malta
Cross-border expertise
Based locally in the country where our clients live
Qualified and Regulated – UK & EU
A Second Home…Don’t Forget the
Foreign Tax Factor
A Second Home…
Two main scenarios –
Buying a holiday home
Moving abroad whilst retaining a UK home
Buying a holiday home
A Second Home…Buying a Holiday Home
Simplest scenario
Subsequent sale at a profit - CGT liability in the UK, and in the country where the property is located
DTT – allows tax paid overseas to be set off against the UK tax liability
A Holiday Home…France Spain Portugal
Tax Rate 19% 19% 28%
Surcharge 2% - 6%
Social Charges 7.5% (EEA)17.2% (Non-EEA)
Reductions Taper relief on tax and social charges.
Eliminated at 22 and 30 years respectively
Option - tax as Portugal res. 50% gain, and
inflation relief after 2 years. Add to income.
Moving abroad whilst retaining a
UK home
Moving abroad whilst retaining a UK home Common for UK expatriates to retain their UK home when
they move overseas…
A fall back option
To rent out
Retaining a foothold in the UK property market
But now liable to new jurisdictions tax rules, reliefs and exemptions on the eventual sale of the UK home
Can be completely different to those of the UK.
Retaining UK main homeFrance… Exempt provided it is your habitual/actual residence at time of
sale
‘All-or-nothing’ relief – just main home at point of sale
BUT - leave property before sale, and could lose relief entirely, even though may have been your main home for many years
There is no ‘time-apportionment’ for periods of occupation
An exemption of up to one year can apply year from the date the main home is vacated by occupant
Taxpayer must show he has done his best to sell the house
Retaining UK main homeSpain… Main residence relief on sale of UK property if:
You lived in the property for a continuous period of at least 3 years
You buy new main home within a period of 2 years before/after sale
Must live in the new property for minimum of 3 years
Full proceeds are re-invested in new main home in Spain or EEA
Partial reinvestment – partial CGT liability
Fall foul of any of these exclusions and potentially whole UK gain is taxable in Spain!
Retaining UK main homeSpain…Over 65 years -
No requirement to reinvest whole or part of sale proceeds
But – must be Spanish resident at point of sale
Would not exempt Spanish home after exiting Spain
Savings Income & Capita Gains Rate
Up to €6,000 19%
€6,000 to €50,000 21%
Over €50,000 23%
Retaining UK main homePortugal…
If Non-Habitual Residence (NHR) regime applies…
Will need to hold NHR certification, and sale of UK property during first 10 years of residence in Portugal
Under NHR, gain is exempt in Portugal if it may be taxed (under the DTT) in the country of source
UK/Portugal DTT says that property gains may be taxed in the UK, so gains are exempt in Portugal.
Retaining UK main homePortugal…
If NHR does not apply…
Resident in Portugal – taxable on worldwide property gains
Main residence relief on sale of UK property if:
You lived in the property for a continuous period of at least 3 years
You buy new main home within a period of 3 years, from the date of sale, or two years before
Full proceeds are re-invested in new main home in Portugal or EEA
Partial reinvestment – partial CGT liability
Retaining UK main homePortugal…
If NHR does not apply…
Tax treatment same for Portuguese and overseas properties
Only 50% of gain taxable
Held for more than two years - inflation relief
Net gain added to other income and taxed at scale rates of tax (max 48%).
The Inbetweeners… Trusts & Companies under the spotlight
(again)
Structured Overseas Property PurchaseTrust & Company Structures…
Common tax planning in Spain and Portugal, as both countries welcomed international investors in late 20th C
Still a significant number of properties owned this way
Most advice has never been updated since inception
Overseas issue never really highlighted by UK advisors, even after the HMRC’s “shadow director” - Dimsey v Allen push.
Structured Overseas Property PurchaseTrust & Company Structures…
Civil law jurisdictions - no concept of trusts
Assumed the structure and therefore the property fell outside of the domestic tax system
1991 - Spain issued Real Decreto 1080/1991 – a list of countries considered tax havens
1998 - Spain began taxing non-residents owning property
2016 - Portugal introduced laws taxing trusts
Structured Overseas Property PurchaseEU’s Fifth Money Laundering Directive (2018/843)…
Need to establish the Ultimate Beneficial Owner (UBO)
Member states to set up beneficial ownership registers for corporate and other legal entities by 10 January 2020
Trusts and similar by 10 March 2020
Central registers, connected via the European Central Platform required by 10 March 2021
EU member state tax authorities will be able to access these registries freely.
Brexit… How long can I spend in the EU?
Brexit…How long can I spend in the EU?
Legal residency is the right to live in a state
Brexit will have an impact on:
UK nationals who visit their EU holiday home regularly
UK nationals who permanently move to the EU
Strictly when you know you will exceed 90 days – must apply for residency permit
BUT - Freedom of Movement has meant UK nationals come and go as they please.
Brexit…How long can I spend in the EU?A Soft Brexit…
A “Transitional Period” until at least 31 December 2020
Move then and obtain temporary residence card during Freedom of Movement
Have up to 6 months after Transitional Period ends to obtain permit
Renewable annually for five years
If already present for 5 years – apply for a permanent residence card.
Brexit…How long can I spend in the EU?A Soft Brexit…
To qualify for residency permit during Transitional Period:
Proof of sufficient resources, so the individual is not deemed a burden on a Member State’s social care system
Proof of medical insurance
Sufficient resources…
“…shall not be higher than the threshold below which nationals of the host Member State become eligible for social assistance, or, where this criterion is not applicable, higher than the minimum social security pension paid by the host Member State.”
Brexit…How long can I spend in the EU?
A Soft Brexit…
After Brexit existing residency cards would be replaced by new-style cards
No certainty what “sufficient resources” might be
Expectation is those arriving pre-transition - requirements will remain the same.
But - those arriving after Brexit could find it more difficult.
Brexit…How long can I spend in the EU?A Hard Brexit…
“Cliff-edge” legal residency scenario for UK nationals who spend more than 90 days a year in the EU
Become restricted to 3 months in any 6 month period
Only alternative - obtain a residency permit
Move to the EU after UK leaves - much more onerous requirements to become legally resident, particularly around income.
Brexit…How long can I spend in the EU?A Hard Brexit…
UK would fall to become a “third state”, to the EU where sufficient resources rules may become far more onerous
Other third state agreements - have a minimum income level
Often the state’s legal minimum wage.
Eg., France - currently €18,250 per annum
Also, must apply at the French embassy or consulate in their own country of residence before the expiration of the first three months in France – not in France itself.
Closing comments
Closing Comments Keeping up to date with UK and EU tax and legal changes is a
constant battle
EU states becoming far more adept at gathering data and aggressive in chasing tax avoiders and non-disclosers
EU states changing tax law far more quickly and often than before
Brexit means the position for UK nationals is even more difficult to predict and plan for
Taking advice is more important than ever.
The tax rates, scope and reliefs may change. Any statements concerning taxation are based
upon our understanding of current taxation laws and practices which are subject to change.
Tax information has been summarised; an individual should take personalised advice. All
figures quoted in this presentation are for illustration purposes only.
Blevins Franks Financial Management Limited (BFFM) is authorised and regulated by the
Financial Conduct Authority in the UK, reference number 179731. Where advice is provided
outside the UK, via the Insurance Distribution Directive or the Markets in Financial Instruments
Directive II, the applicable regulatory system differs in some respects from that of the UK.
Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services
Authority for the administration of trusts and companies. Blevins Franks France SASU (BFF),
is registered with ORIAS, registered number 07 027 475, and authorised as ‘Conseil en
Investissements Financiers’ and ‘Courtiers d’Assurance’ Category B (register can be
consulted on www.orias.fr). Member of ANACOFI-CIF. BFF’s registered office: 1 rue Pablo
Neruda, 33140 Villenave d’Ornon – RCS BX 498 800 465 APE 6622Z. Garantie Financière et
Assurance de Responsabilité Civile Professionnelle conformes aux articles L 541-3 du Code
Monétaire et Financier and L512-6 and 512-7 du Code des Assurances (assureur MMA).
Blevins Franks Tax Limited provides taxation advice; its advisers are fully qualified tax
specialists. This promotion has been approved and issued by BFFM.
Any questions?
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© ICAEW 2018