Capital Gains Tax Selling Property Abroad

This article will attempt to unravel your potential liability for capital gains tax when selling property abroad.

The rules relating to whether capital gains tax has to be paid on the sale of property abroad depend a great deal on where in the world the property is located, where in the world the vendor is located, how long they’ve been living there, how long they’ve owned the property and whether or not the property was their primary residence.

If you’re confused then read on and this article will attempt to unravel your potential liability for capital gains tax when selling property abroad.

Firstly it’s very important to state that we are not international taxation experts and that anyone concerned about their current taxation liability or a liability that could arise in the future as a result of owning property abroad should seek advice both in the country in which property assets are held and in which the investor resides.

Anyone who is UK resident for taxation purposes and who has a property abroad that is not their primary residence could be liable for capital gains tax when they sell that overseas property.  Of course it’s important to mention that many countries around the world levy their own capital gains tax on any property owned in that country - especially when the property in question is not someone’s primary residence.  Countries where this is the case and where there is a double taxation agreement in place with the country in which the property owner resides will take their CGT but the vendor will not usually be liable to then pay CGT in their country of residence as well.

Some countries in the world have a tapered rate of capital gains tax that is paid depending on the length of time the property has been owned, others charge a flat fee.  In the UK everyone has a capital gains taxation allowance and this can be used by those who sell property abroad and remit the proceeds and profits of the sale to the UK to reduce the overall amount of taxation potentially due.

Anyone who is tax resident in the UK and who wishes to legally avoid UK capital gains taxation on property assets held abroad could consider leaving the UK for a period of 5 years and disposing of their property assets some time after their first full year of non-residence.  As long as they remain outside of the UK for at least the 5 year period they will legally avoid having to pay UK CGT on the profits of the sale of overseas property assets.

Because capital gains taxation rules and rates differ from country to country and depend on so many different factors, anyone who has already bought or who is considering buying property overseas should seek personalised international taxation and financial advice to ensure they do not make a costly mistake in their tax planning.