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UK Firmly Positioned In Top Two Cheapest Countries To Sell A House & To Invest In Buy-To-Let Property

UK Firmly Positioned In Top Two Cheapest Countries To Sell A House & To Invest In Buy-To-Let Property

Research conducted by Taxand, the world's largest global organisation of tax advisors to multinational businesses, has shown that the UK provides relatively attractive rates for real estate investors looking to sell a house or apartment and for those investing in residential buy-to-let.

The Taxand Total Tax Take (T3) research into the real estate market, conducted across 23 countries across the globe, reveals that the UK occupies the cheaper end of the table, boasting a relatively low total tax take of 6.39% for a house sale, 4.37% for the sale of an apartment and 22% taken on residential rental income.

However, the total tax taken from commercial property investment ranks much higher in the global tax league with the UK occupying positions in the top ten most expensive countries. Tax taken on commercial property rentals was evaluated at 33.80%. Only 3 countries feature above the UK in the table for tax take in this area.

The research has found that the lowest rate of tax for commercial rental income was in Finland with just 8.99% recouped by the taxman. Other jurisdictions with low levels of total tax take on commercial rent income were Cyprus (11.4%) and Switzerland (13.28%).

The scope of the research has also extended to the total tax take on the sale of commercial property, with the UK in ninth position with a rate of 10.42%. Norway, with a rate of 21.18%, is the most expensive country in the world for commercial sales, with India, Brazil and the USA also included in the top five.

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.

Keith O'Donnell, Head of Real Estate at Taxand, said:

"Our research draws some interesting conclusions regarding the appeal of particular locations for investment in residential real estate. The disparity in rates within Europe is particularly startling - the seven costliest countries in which to sell property are scattered across Central, Northern, South Western and South Eastern Europe and yet the UK, Poland, Luxembourg and Switzerland all offer attractive rates."

"As governments, combating the global economic downturn, continue to bolster their total revenues through increased tax on residential property, investors need to carefully consider where their next buy-to-let purchases will be, given these greatly varying rates across the World."

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Taxand T3 research methodology
Taxand has updated and expanded its T3 data.

To arrive at the figures, Taxand has taken into account VAT (or its local equivalent), corporate income tax, and property taxes based on 2010 rates. The property taxes were usually subject to various country-specific assumptions and modifications as they often differ on municipality basis or sometime 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, Taxanders adopted it to the local law.

Also featured in the Financial Times, 27 May 2011

Your Taxand contact for further queries is:
Abigail Tarren, Global Operations Director
T. +44 (0)207715 5243

Taxand's Take

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