France Tops Table As Most Expensive Country To Sell Your Home In
Research conducted by Taxand, the world's largest independent global network of specialist tax advisors to multinational businesses, has shown that France is the most expensive country in the World in which to sell a residential property, with over 22% (22.03%) of the value swallowed by tax.
The tax rate is the highest of the 23 countries analysed in the research; well ahead of other major economies such as the USA and the UK ranked 18th and 22nd respectively. Other countries with a considerably high total tax take for the sale of homes included the Netherlands (21.25%), Portugal (20.87%), and Germany (19.82%).
This alarming tax take on a residential property sale in France is predominantly the result of the high rate of corporate income tax, at 33%, combined with a VAT rate of nearly 20% on residential sales, and is a significant factor for property investors to consider when looking at purchases in the country given the attractive tax rates of neighbouring European jurisdictions.
The research identifies Malaysia as the cheapest location to sell a residential property where the tax take from the income of the sale stands at a astoundingly low rate of 5.40% and the UK is not far behind with a total tax take of just 6.39%.
Poland, Luxembourg and India are countries also boasting relatively attractive tax rates for the sale of residential property with rates of 11.04%, 11.68% and 12.09% respectively.
Franck Llinas, Manager at Arsene Taxand in Paris said: "It is the crippling combination of a high corporate income tax rate and VAT that gives property sellers in France such a significant tax burden. VAT in particular, at nearly 20%, is significantly higher than much of Europe. Indeed, when selling residential properties, other European countries may either apply a reduced VAT rate, as is the case in Poland and Luxembourg, or the transaction is simply exempt from VAT, as in the UK."
"Furthermore, the VAT reforms, currently being debated by parliament are unlikely to bring any future relief to property sellers from a tax perspective."
Keith O'Donnell, Global Head of Real Estate, at Taxand, also commented: "Our research throws up some interesting trends with regards to residential property within Europe as well as worldwide. Perhaps most interesting is the disparity shown in the rates within Western Europe with France topping the list alongside the Netherlands, Portugal, and Germany."
"Property investors may well be surprised by these results and in light of them consider a shift in their investment portfolios to less tax-heavy jurisdictions in order to boost overall profits. Certainly, with governments expected to reverse previous tax concessions in order to generate revenue, a growing number of investors could be tempted by the attractiveness of countries already exhibiting a lower government tax take."
Also featured in Les Echos on 18 March 2010
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NOTES TO EDITORS
To arrive at the figures, Taxand has taken into account VAT (or its local equivalent), corporate income tax, and property taxes. The property taxes were usually subject to various country specific assumptions and modifications as they often differ on a municipality basis or sometimes just location basis.
Those were reviewed by the coordinating Taxand team to assure comparability. Administrative fees, notary fees, court fees were excluded as having a relatively low impact on the overall tax take.
To ensure comparability of the results, certain data has been fixed such as size of the building, investment costs, and 100 percent non-interest bearing equity financing. With all of that built into the model, each real estate team from Taxand adopted it to the local law to ensure comparability.