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In a significant policy shift outlined in the Spring Budget 2024, Chancellor Jeremy Hunt has announced comprehensive reforms to the tax treatment of non-UK domiciled individuals (non-doms) residing in the UK.
These changes, aimed at restructuring the non-dom regime, will notably impact potential purchasers of UK property.
Here, we delve into the key aspects of the proposed adjustments and what they mean for buyers of UK real estate.
Non-doms are individuals whose permanent home is not in the UK, yet who spend part of the year living in the country.
Under the current system, non-doms can avoid UK tax on their foreign income and gains (FIG) by not bringing these funds into the UK, leveraging the ‘remittance basis’ of taxation.
The UK Government plans to eliminate the non-dom regime, transitioning to a new residence-based tax system effective from 6 April 2025.
Under this new regime, individuals moving to the UK after spending at least a decade abroad will enjoy a four-year period during which they are exempt from UK tax on their worldwide FIG, regardless of whether the income is brought into the UK.
The transition period in 2025/26 and 2026/27 will also introduce specific reliefs.
It’s important to note that while the UK Inheritance Tax (IHT) exposure for non-UK assets may change under the new rules, the IHT treatment for UK residential property remains unchanged.
This means all property owners, regardless of their domicile status or eligibility for the four-year exemption, will still face IHT on UK properties.
For non-residents purchasing UK property, the upcoming changes will have no direct impact, provided they manage their days spent in the UK carefully to avoid becoming tax residents.
Conversely, those relocating to the UK might find the new regime more favorable, as they can bring FIG into the UK without tax implications for the first four years of residence—a simplification of the current system.
However, buyers planning a long-term move should consider the broader implications on their worldwide assets, as residing in the UK beyond four years subjects their global FIG to UK tax, and a ten-year stay brings their entire worldwide estate under the UK IHT regime.
Investors purchasing properties for their children or for investment purposes need to consult with advisors to navigate the best funding strategies and understand their IHT exposure.
A Singaporean buying a property in Mayfair for rental and capital appreciation purposes will remain unaffected by the tax regime changes, given their non-resident status.
However, the tax rate on gains from UK residential property sales will adjust from 28% to 24% starting 6 April 2024.
A couple from the Middle East buying a London property for short stays will need to carefully manage their time spent in the UK to avoid residency and its tax implications.
Consulting with tax advisors is crucial to understanding the residency thresholds.
An American buying a flat in London for his daughter presents a unique case due to the US’s global taxation on citizens.
The entrepreneur might face lesser impact from the UK’s tax changes and should explore ways to optimize his tax position, considering the US and UK tax obligations.
These changes mark a pivotal moment for non-dom individuals engaged in the UK real estate market.
It’s imperative for potential buyers and existing non-dom property owners to seek comprehensive advice to navigate the evolving tax landscape effectively.
Final thoughts
If you have any queries on this article on the Spring Budget 2024: Implications for Non-Dom Real Estate Buyers, or UK tax matters more generally, then please get in touch.
The NSW First Home Buyer Choice introduces significant changes to property tax payment options, offering eligible first home buyers the flexibility to choose between upfront transfer duty or annual property tax.
Here’s what you need to know about this initiative and its potential impact on your property purchase:
Enacted under the Property Tax (First Home Buyers Choice) Act 2022, this scheme allows eligible first home buyers purchasing properties valued up to A$1.5 million to opt for either upfront transfer duty or annual property tax payment.
This option is in addition to existing first homeowner grants or assistance provided by the NSW Government.
To qualify for the First Home Buyer Choice, purchasers must meet certain criteria:
Buyers can opt for their preferred tax option based on their financial circumstances and long-term plans:
The NSW First Home Buyer Choice provides valuable flexibility for eligible buyers, offering an alternative to traditional transfer duty payments.
By weighing the benefits and implications of each tax option, buyers can make informed decisions aligned with their financial objectives.
If you have any queries about this article on the NSW First Home Buyer Choice, or Australian tax matters in general, then please get in touch.
The UK government mandates reporting and payment of Capital Gains Tax (CGT) within 60 days of disposing of non-primary residential properties.
This guide explains the essentials of this rule, which has been in effect since April 2020.
Initially known as the “CGT 30-Day Rule,” the timeframe for reporting CGT was extended to 60 days in October 2021.
This rule applies when you sell, gift, or transfer a residential property that isn’t your main residence.
Not all property disposals require reporting under the 60-day rule. Key exemptions include sales of your main home.
However, disposals of second homes, holiday properties, HMOs, and buy-to-let or buy-to-sell properties must be reported.
Non-UK residents are also subject to the 60-day reporting requirement for any residential property disposal within the UK, regardless of profit or registration for self-assessment.
The gain calculation involves subtracting the purchase price from the sale proceeds or fair market value, deducting allowable expenses and the annual tax-free allowance, then applying the appropriate CGT rate based on your income level.
You’ll need to register for HMRC’s online services to report the gain and pay any CGT due. This process is essential for compliance and avoiding potential penalties.
If you’re already completing a self-assessment return, you must declare the disposal and gains therein.
Otherwise, fulfilling the 60-day CGT reporting requirement suffices, eliminating the need for a separate self-assessment.
Missing the 60-day deadline can result in penalties and interest charges on the overdue CGT.
Immediate reporting, even if late, is better than non-compliance.
You may appeal penalties or request mitigation for delays due to valid reasons such as illness or bereavement. Providing evidence and explanations is crucial for a successful appeal.
The countdown starts on the property’s completion date, marking the legal transfer of ownership.
Accurate record-keeping of this date is vital for determining the reporting deadline.
The 60-day CGT reporting rule requires awareness and timely action to avoid penalties.
While the process may appear daunting, understanding your obligations and seeking professional advice can ensure compliance and minimize tax liabilities.
If you have any queries about this article on the UK’s 60-Day CGT Reporting for Residential Property Sales, or any other UK tax matters, then please get in touch.
Starting in 2024, France’s real estate wealth tax legislation introduces a significant change concerning the deductibility of certain debts.
This alteration ensures that debts incurred by entities unrelated to a taxable asset are excluded from the wealth tax assessment.
The Finance Law for 2024 has refined Article 973 of the French tax code, thereby affecting the valuation of shares for wealth tax calculations.
Under the new law, debts “not related to a taxable asset” by a company cannot influence the wealth tax.
This shift brings the rules for indirect debts, via companies, in line with those already set for direct taxpayer debts.
Prior to this update, there were no specific restrictions on the types of company debts that could be factored into the wealth tax calculation.
It meant that even debts for non-taxable assets, like movable or financial holdings, could be deducted.
However, starting with the 2024 tax year, the law will align the treatment of all debts, ensuring a consistent approach whether the debt is direct or through a company’s liabilities.
The FTC doesn’t explicitly define what constitutes a debt “relating to a taxable asset.”
Hence, guidance may be sought from Article 974, which outlines several deductible debt categories, including those for acquisition, maintenance, improvement, or associated taxes of real estate assets.
There’s an interesting twist in the amendment: the valuation cap.
The law states that the taxable share value after considering deductible debts should not exceed the market value of the shares or the market value of the company’s taxable real estate, less related debts – whichever is lesser.
This clause requires careful interpretation to safeguard taxpayers from undue taxation.
Nonetheless, this cap will not impact the enforcement of other deductibility limits, like those on shareholder loans.
In light of these changes, it’s crucial for taxpayers to diligently track the purpose of corporate debts to affirm their connection to taxable assets. Clear accounting practices and well-documented loan agreements outlining the use of funds are now more important than ever to ensure compliance and avoid potential overtaxation.
With the scope of wealth tax evolving, sensible planning and administration are key to navigating these changes effectively.
If you have any queries about this article on French Real Estate Wealth tax and the 2024 changes, or French tax matters more generally, then please get in touch.
In a bid to address the housing supply crisis, British Columbia (BC) has announced plans to introduce a provincial legislation that targets real estate investors with a new home flipping tax.
Aimed at discouraging quick resale for profit, this tax could significantly affect the dynamics of property transactions in the province.
Scheduled for homes sold from 1 January 2025, onwards, the proposed tax specifically targets properties resold within two years of acquisition.
Here’s a breakdown of how it’s designed to work:
Mrs Miggins bought a property on 1 February 2024 and sold on 1 January 1, 2025.
Mrs Miggins will incur a 20% tax on sale proceeds, as the sale falls within the first 365 days.
Mr Blackadder bought a property on 1 February 2024 and sold on 1 April 2025.
This falls into the second year post-purchase, attracting a tax rate lower than 20% (though not yet determined.
Baldrick purchased a property on 1 May 2023 and sold on May 15, 2025.
Baldrick escapes the tax entirely as the sale falls outside the two-year window.
Notably, the legislation considers life changes and other circumstances, providing several exemptions to the tax.
These include cases of divorce, job relocation, and personal safety concerns, among others.
Additionally, selling one’s primary residence may allow an exclusion of up to $20,000 from taxable income generated from the sale.
There are also provisions for exemptions in situations enhancing the housing supply or involving construction and development activities.
It’s crucial to note that the proposed provincial tax will complement, not replace, Canada’s existing Residential Property Flipping Rule.
This federal rule already treats income from properties sold within 365 days as taxable business income, disallowing capital gains exclusion rates or the Principle Residence Exemption.
Consequently, properties flipped within the first year post-purchase in B.C. will be subject to both federal business income tax and the provincial flipping tax.
The introduction of this new tax undoubtedly represents as potential extra cost of doing business for real estate investors and developers, They will, of course, need to recalibrate their strategies.
The new tax is clearly designed to curb speculative buying and support the local housing market.
However, those who are active investors and developers, will need to consider how these new tax proposals will effect their activities
If you have any queries about this article on ‘British Columbia Proposes New Home Flipping Tax’ or Candian tax matters more generally, then please get in touch.
For non-resident individuals investing in Spanish real estate, understanding and complying with the specific tax obligations is crucial.
Our Tax Natives can offer comprehensive guidance throughout the acquisition process and beyond, ensuring clients meet their tax commitments effectively.
Non-resident owners of properties not put up for rent are subject to the Spanish Non-Resident Income Tax Law.
They face taxation on a deemed income, calculated as 1.1% of the cadastral value in cities like Barcelona (2% in other areas without recent cadastral reviews).
This approach does not permit deductions for any property-related expenses. The applicable tax rate is 19% for EU residents (including Iceland, Norway, and Liechtenstein) and 24% for those residing outside the EU.
The first year’s tax is calculated based on the period the property was owned.
When non-residents rent out their Spanish property, the income received is taxable under the same law.
EU residents can deduct property-related expenses from their rental income, while non-EU residents cannot.
The tax rate mirrors that for non-rented properties: 19% for EU residents and 24% for non-EU residents.
Rental agreements with related parties must reflect market values, adhering to transfer pricing rules.
The Wealth Tax targets non-resident individuals owning assets within Spain, taxing the net value of such assets.
Debt incurred for asset acquisition within Spain is deductible. A recent legal amendment extends this tax to non-listed companies owning significant Spanish real estate.
Tax rates progress from 0.2% to 3.5%, with a 700,000 euros exemption threshold for non-residents.
The applicability of Double Tax Treaties or Spanish exemptions should be analyzed.
The Real Estate Tax (IBI) applies to both rural and urban property ownership, based on the cadastral value set by local authorities, typically below market value.
The tax rate varies by locality, with the owner as of January 1st each year responsible for payment.
Automatic payment arrangements are available.
Non-resident property ownership in Spain involves various tax obligations, from income tax on deemed or actual rental income to wealth and real estate taxes.
Proper understanding and management of these obligations are essential to avoid penalties and ensure compliance.
If you have any queries about this article and non-residents owning or buying real estate in Spain, the get in touch.
We have Tax Natives ready and waiting to assist you, or your client, through every phase of property investment, offering expert advice on tax compliance and planning.
In a surprising move, Wednesday’s budget revealed the abolition of the Stamp Duty Land Tax (SDLT) Multiple Dwellings Relief (MDR) effective from 1 June 2024.
This announcement marks a significant shift in tax policy affecting buyers of residential property in England and Northern Ireland.
SDLT MDR offers relief to purchasers acquiring two or more residential dwellings in a single or linked transaction.
Although the relief’s rules can be complex, especially when combined with the higher rates for additional dwellings (HRAD), its essence lies in allowing tax calculation on the average value of the properties, rather than the total combined value, subject to a minimum 1% tax rate.
This relief has enabled buyers to significantly save on tax, leveraging lower SDLT rates more effectively.
Following a consultation in November 2021 on SDLT mixed property rules and MDR, the government found that MDR did not significantly influence institutional property investors’ decisions, mainly because most new built-to-rent properties are developed through forward funding, which MDR does not affect.
The discontinuation of SDLT MDR introduces changes in how property transactions are taxed.
For instance, contracts signed before the announcement but completing after 1 June will still benefit from MDR.
However, future transactions, especially those involving second-hand assets between institutional investors, will see altered tax implications.
Consider a transaction where a company sells a block of 50 flats for £10 million.
With MDR, the tax charge could be reduced by not too far shy of £200k.
Without MDR, the transaction will revert to the higher tax amount.
In another scenario, buying properties to demolish and redevelop would see a shift from a potentially lower tax charge, thanks to MDR, to a significantly higher amount without the relief.
While SDLT does not apply in Scotland (or Wales), both have equivalent reliefs as their corresponding legislation is largely copied and pasted from England and Northern Ireland.
Either or both might decide to mirror the abolition in their own rules as a stealthy way of raising revenue. Alternatively, maintaining the difference might promote investment.
The budget’s unexpected announcement to abolish SDLT MDR from June 2024 will be potentially a costly, and stealth, tax rise for those involved in relevant residential property transactions.
Will the rest of the UK follow suit?
If you have any queries about this article on the Abolition of SDLT MDR, or any UK tax matters in general, then please get in touch.
In 2022, Los Angeles voters approved a significant change in the city’s real estate transaction tax structure through a ballot initiative that introduced the so-called “mansion tax.”
This new city tax, formally known as the ULA Tax, marked a considerable increase in transaction taxes on real estate transfers within the City of Los Angeles.
The tax rate surged from the previous 0.56% of the property’s price, minus any transferred debt, to a staggering up to 6.06% of the price, debt transfer notwithstanding.
Contrary to what its nickname might suggest, the “mansion tax” applies across all asset classes, not just to large single-family residences.
Despite facing legal challenges, including a notable case brought forward by the Howard Jarvis Taxpayers Association against the City of Los Angeles, the ULA Tax has remained in effect.
The plaintiffs argued that the tax constituted a “special tax” prohibited by the California Constitution unless approved by a two-thirds vote.
However, the court ruled that such restrictions did not apply to taxes introduced through citizen initiatives, leading to the dismissal of the claim, which is currently under appeal.
A pivotal moment looms in November 2024, as California residents will vote on a constitutional amendment aimed at imposing uniform limits on state and local tax increases.
This amendment, known as the Taxpayer Protection and Government Accountability Act, or the “Taxpayer Protection Act,” seeks to redefine the passage requirements for local special taxes, among other provisions.
If enacted, the Act would necessitate a two-thirds majority vote for any local special taxes, a significant leap from the simple majority currently required for such measures.
Given the ULA Tax was specifically designed to fund affordable housing and tenant assistance programs, it falls under the category of a special tax and would be subjected to this new requirement.
Moreover, the Taxpayer Protection Act proposes to retroactively invalidate any local special tax enacted after January 1, 2022, unless it is re-approved by the electorate under the tougher supermajority conditions.
This clause directly threatens the ULA Tax, passed in November 2022 with 57.77% of the vote, as it would necessitate re-adoption within a 12-month window or face repeal.
Complicating matters further, California’s Governor Gavin Newsom and the state legislature have initiated legal action to prevent the Taxpayer Protection Act from appearing on the November ballot.
Their challenge contends that the Act constitutes an unconstitutional overhaul of the California Constitution via voter initiative and could severely impair vital governmental functions.
The outcome of this legal battle remains pending.
As November 2024 approaches, the fate of the ULA Tax hangs in the balance, poised to be a central issue in the broader debate over tax regulation and government funding mechanisms in California.
If you have any queries about this article on the Los Angeles Mansion Tax, or other US tax matters, then please get in touch.
In December 2023, the Victorian Government enacted the State Taxation Acts and Other Acts Amendment Act 2023 (Vic), heralding a suite of state tax reforms with significant implications for the real estate sector and landowners engaged in leasing or licensing land for high-value infrastructure projects, including power generation facilities.
One of the act’s pivotal reforms is the expansion of the Vacant Residential Land Tax (VRLT), previously confined to inner and middle Melbourne, now extending across Victoria from 1 January 2025.
This tax targets residential land vacant for more than six months within a tax year, aiming to incentivize property development and usage.
From 2026, it will also encompass land zoned for residential use but remaining undeveloped for five years or more, regardless of its residential status.
The VRLT rate will progressively increase from 1% to 3% based on the duration of the land’s vacancy, encouraging land development and reducing speculative holding.
Additionally, a three-year VRLT exemption for newly constructed residences, subject to conditions, is introduced to foster property sales post-construction.
Significant changes to land tax legislation now invalidate clauses in land sale contracts apportioning land tax to the purchaser, effective 1 January 2024.
This prohibition, punishable by fines, aims to streamline tax liabilities and reflect them indirectly in property market prices, impacting the negotiation and structuring of land sale contracts.
The amendment also addresses the WGT, levied on significant increases in land value due to rezoning. From 2024, sale contracts can no longer pass WGT liabilities from seller to buyer, a move designed to absorb these taxes into the land’s sale price and streamline transaction processes.
The amendment clarifies that the capital improved value of land for tax purposes includes the value of all fixtures, expanding the definition to encompass items fixed to the land by any party. This adjustment is particularly relevant for land leased or licensed for high-value infrastructure, potentially affecting tax liabilities based on the property’s enhanced valuation.
The State Taxation Acts and Other Acts Amendment Act 2023 introduces substantial changes to Victoria’s taxation landscape, with far-reaching consequences for the real estate and infrastructure sectors.
By expanding the scope of VRLT, prohibiting tax apportionment in sale contracts, and refining the treatment of windfall gains tax and fixtures valuation, the legislation aims to encourage property development, ensure fair taxation practices, and reflect tax liabilities more transparently in property prices.
Stakeholders in these sectors must navigate these changes carefully, considering their significant impact on investment strategies and operational decisions.
If you have any queries about Victoria’s State Tax Reforms, or Australian tax issues more generally, then please get in touch.
Tanzania’s property sector has witnessed significant legislative reforms aimed at modifying the tax framework for premium payments on land and capital gains from property transactions.
These modifications are encapsulated in the Land (Fees) (Amendment) Regulations Government Notice (GN) No. 448C of 2023, also known as the Land Amendment Regulations 2023, and the Finance Act No. 2 of 2023, which amends the Income Tax Act [Cap 332 R.E. 2019].
These changes reflect Tanzania’s ongoing efforts to streamline property-related transactions and tax obligations, fostering a more transparent and efficient real estate market.
In Tanzania, obtaining a granted right of occupancy (GRO) over land involves the payment of a premium.
The determination of this premium takes into account several factors, including land use, market value, government auction prices, and assessments by registered valuers.
The evolution of the premium rate has seen a substantial decline from 15% between 2010 and 2015 to a mere 0.25% in 2023.
This reduction aims to alleviate the financial burden on landholders and stimulate property development and investment within the country.
The rate for premium payments in regularized urban areas has also seen adjustments, with the initial rate set at 1% in 2018 and subsequently reduced to 0.5% in 2021.
This scaled-down approach towards premium rates highlights the government’s initiative to make land ownership more accessible and affordable to the public.
Failure to comply with premium payment schedules is treated as a breach of the GRO conditions, which may lead to the revocation of occupancy rights, emphasizing the importance of adhering to these financial obligations.
The taxation of capital gains from property dispositions is another critical area of reform.
Historically, the Income Tax Act required resident individuals to pay a 10% tax on gains, while non-residents were subject to a 20% rate.
The introduction of the Finance Act 2023 marks a significant shift by setting a uniform capital gain tax rate of 3% on the incomings or approved value of the asset, targeting resident individuals without cost records of their assets.
This revision is intended to simplify and expedite the process of property transactions, reducing the protracted negotiations with the Tax Revenue Authority (TRA) over the property’s cost.
While this may streamline the transaction process, it also raises concerns about potential increases in tax liabilities, given that the taxation is applied to receipts or approved values without confirming the actual costs incurred.
These legislative amendments signal Tanzania’s commitment to reforming its property taxation framework, aiming to create a more conducive environment for real estate development and investment.
By lowering premium rates and adjusting capital gain tax rates, the government seeks to encourage property ownership and development, especially in urban areas.
Stakeholders must navigate these changes carefully, considering the potential implications on tax liabilities and compliance requirements.
As Tanzania continues to refine its property tax regime, it is essential for property owners, investors, and developers to stay informed and seek professional advice to ensure compliance and optimize their tax obligations in this evolving landscape.
If you have any queries on this article on Tanzania’s property tax changes, or Tanzanian tax in general, then please get in touch.