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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.
Ontario property owners are gearing up for important tax-related deadlines today [29 February 2024] affecting a wide range of areas from the Vacant Home Tax in Toronto to tax relief applications and charity rebates.
Being proactive and well-informed about these deadlines is crucial for managing property taxes effectively.
A notable deadline for Toronto homeowners is the requirement to declare the 2023 occupancy status of their residential properties by 29 February 2024.
This declaration is mandatory for all residential property owners, including those whose properties are their primary residences, are tenanted, or qualify for an exemption.
Failure to submit this declaration will result in the property being presumed vacant and subject to a Vacant Home Tax of 1% of its current assessed value, alongside a fee of $21.24.
Owners who dispute their Vacant Home Tax assessment can file a complaint via the city’s online portal starting in early April.
The deadline also looms for Ontario property owners seeking tax relief due to various circumstances such as changes in tax classification, land vacancy, exemption status, property damage, inability to pay taxes due to sickness or poverty, removal of a mobile unit, overcharging due to clerical errors, or due to renovations inhibiting property use.
Applications for tax relief must be submitted to the relevant Ontario municipality by 29 February 2024.
Registered charities operating within commercial or industrial tax classes in Ontario may be eligible for a 40% rebate on their realty taxes if they apply by the February 29 deadline and meet all requirements.
Ontario municipalities have the discretion to offer property tax relief ranging from 10% to 40% to owners of eligible heritage properties, as per section 365.2 of the Municipal Act, 2001.
The adoption of this program requires a municipal bylaw, and program details, including application deadlines, may vary by municipality.
For most people, the 29 February 2024 is an extra day in the calendar. For those with vacant properties in Ontario, it is also the deadline for them to sort out a number of property tax issues.
If you have any queries about this article on Ontario’s Vacant Home Tax then please get in touch
The Ministry of Finance and the State Cadaster Agency recently issued an important joint instruction titled “On Income Tax from the Transfer of Real Estate,” which was officially published on January 17, 2024.
This instruction aims to provide clarity on the application of capital gains tax arising from real estate transactions, particularly focusing on differentiating the tax obligations of individuals and entities engaged in the sale of real estate.
Entities and individuals conducting real estate sales as part of their business operations are exempt from personal income tax on these transactions. Instead, they are subject to:
Individuals not registered as taxpayers will incur a 15% personal income tax on the capital gains from real estate transfers.
The capital gain is calculated as the positive difference between the sale and purchase prices of the property. In instances where the sale results in a loss, the capital gain is considered zero.
The instruction defines “act of transfer of real estate” to include sales, exchanges, donations, inheritances, and ownership waivers.
The sale price for tax purposes is the higher of the agreed transaction price or the reference price set by the Council of Ministers.
Additionally, a 1% annual depreciation from the date of ownership acquisition applies to the reference prices, capped at 30%.
For buildings (excluding apartments and constructions legalized post-facto) with depreciation over 50%, the tax value must be assessed by licensed real estate appraisers, and this value is recognized for the specific transaction by the State Cadaster Agency.
Real estate transfers must be registered with the State Cadaster Agency post-tax payment by the seller.
In cases of donation, inheritance, or property renunciation, the tax is paid by the recipient before registration. Documentation proving tax payment is required for registration.
Exemptions are available for:
This instruction underscores the government’s commitment to ensuring transparency and fairness in the real estate market, particularly by imposing tax obligations that reflect the nature of the transaction and the parties involved.
Real estate owners, potential buyers, and legal heirs should familiarize themselves with these new regulations to ensure compliance and make informed decisions regarding property transactions.
Entities and individuals involved in real estate transactions should consult with legal and tax professionals to navigate these changes effectively and align their transaction strategies with the new regulatory framework.
If you have any queries about Tax on Transfer of Real Estate in Albania, or Albanian tax matters in general, then please get in touch.