UK Cheapest for Residential Investment
Research conducted by Taxand, the world's largest global organisation of tax advisors to multinational businesses, has shown that the UK is the cheapest country in the world for investment in residential property.
The latest Taxand total tax take (T3) research into the real estate market, now expanded to 29 countries across the globe, reveals that taxes on residential home and flat sales in the UK cost investors just 9.48% and 4.86% respectively. The 4.86% take for flat sales is the cheapest in the world and the take of 9.48% for home sales is only beaten by Malaysia which boasts a total tax take of just 8.41%. The UK is also the second cheapest for buy-to-let investors with rental income on residential property hit with a tax take of just 21%.
The UK's low tax take on residential real estate is affected by a number of factors including the SDLT (Stamp Duty Land Tax) threshold on residential units and the absence of VAT on the construction and the sale of residential property in the UK.
The UK's position as the second cheapest for buy-to-let is explained by the lack of VAT on the rental of residential units and a mid-level income tax rate.
The low rates in the UK across the residential sector contrast with those of other jurisdictions. Austria and India are the most expensive countries for residential sales with 27.14% and 25.24% swallowed up by tax respectively. This is mainly caused by the high rates of transfer tax on the acquisition of land and on sale (4.60% and 8% respectively) and VAT on sale of residential units (20% and 10% respectively).
Keith O'Donnell, Head of Real Estate at Taxand, said:
"Each edition of Taxand's T3 research shows ever more interesting conclusions regarding the benefits and disadvantages of locations from a real estate investors' perspective. The addition of four new countries this year allows Taxand to provide an even broader view across all regions around the world.
"The disparity shown across the globe was surprising, with a number of asset classes showing a 500% increase from the lowest to the highest rankings. It is not necessarily the developed countries that experience the highest rates of tax taken, with many Western European countries sitting at the cheaper end of the tables."
Jonathan Hornby, from the Taxand UK Real Estate Team, said:
"In the residential sector, the UK remains an attractive option for investors with low tax takes on home and flat sales, as well as providing attractive opportunities for buy-to-let investors. The introduction of a new relief that reduces stamp duty land tax where multiple dwellings, such as a block of flats, are purchased together should further minimise the total tax take in respect of the construction and sale of residential property."
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