Back to EU Member states NEXIA Property and Taxation

Back to EU Member states

NEXIA

Property and TaxationProperty and Taxation


Instructions

This document provides basic information on the taxation of property inthe EU member states and non EU countries. It is not intended to be a detailed analysis of all taxation issues, but a general introduction which can be used as a starting point when advising or working with clients.Assuming more detailed information is required, then the author for eachcountry can be contacted.

John Voyez Smith & Williamson

Tel: 00 44 (0)20 7131 4285Email: [email protected]


EU Member States

AustriaBelgiumBulgariaCyprusCzech RepublicDenmarkEstoniaFinlandFranceGermanyGreeceHungaryIrelandItaly Latvia

LithuaniaLuxembourgMaltaNetherlandsPolandPortugalRomaniaRussiaSlovakiaSloveniaSpainSwedenUkraineUnited Kingdom


Non EU Countries

1. Croatia


[Country Name]

Contents

1. Introduction – why buy real estate?

2. Contact details

3. Forms of property ownership

4. Taxes and other costs on property acquisitions

5. Issues during Ownership

6. Disposal of property

7. Non resident owners of property

8. Sundry issues


1. Introduction - Austria

Why buy real estate ?

a) Backgrounds• Austria is a world wide leader in nature protection• Solid values - no speculative bubbles • Centrally situated in Europe – a four hours drive to the

Adriatic seab) Civil law• Ownership and mortgages are recorded in the land title

register which is open to the public


2. Contact Details

Mag. Wolfgang Korp K & E Wirtschaftstreuhand Gesellschaft m.b.H. Wirtschaftsprüfungs- und Steuerberatungsgesellschaft Hofgasse 3 A-8010 Graz, Austria Tel.: +43 316 38 46 40 Fax: +43 316 38 46 40 - 20 Mobile +43 664 [email protected] www.ketreuhand.at


3. Form of property ownership

The usual form in Austria is outright freehold by individuals or legal entities

Longterm rental agreements with the option to outright freehold are usual for factory estates

Holyday property and luxury business estates often are rented for limited time


4. Taxes and other costs on property acquisition

Acquisition is subject to a transfer tax of 3,5 %

The registration fee is 1% on the purchase

Price.


5. Issues during ownership

Ownership is subject to a local tax of about 0,4 to 0,84 % of the tax value which is generally lower than fair value.

VAT for rent is generally 20%, for housing rent 10%.



Capital gains are only taxable for individuals if theproperty has been held for less than 10 years.

Capital gains within businesses are normal income.

There is no inheritance or gift tax.



Most double tax agreements allow Austria to tax the rental income.

The same principle is for capital gains.

Acquisition of real estate not to be used as principal residence or business to be founded there is restricted in some tourist regions equally for foreigners as for Austrians.


8. Sundry issues

Acquisition by non EU individuals or non EU legal entities is subject to approval of a local authority.

Such approval is easier to get if the Property is purchased by an Austrian legal entity or is needed for founding a business. Foreigners may also use the Austrian Privatstiftung (a legal entity) to invest in Austrian real estate.



Belgium

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2. Contact details






8. Sundry issues


1. Introduction - BelgiumAcquiring real estate is often seen as a solid investment as the value fluctuations are fairly limited compared to movable property (especially shares)

Moreover, Belgium provides for a fairly beneficial taxation regime for physical persons on residential real estate. First of all, taxation on effective rental income is avoided and secondly future capital gains are generally exempt. For companies and professional users, real estate is not regarded any different from other business assets. However, real estate leases may offer tax planning opportunities.

Belgian real estate taxation is however becoming increasingly complicated due to the fact that the 3 regions (i.e. Brussels, Flanders and the Walloon Region, have acquired increasing taxation power

Only the income tax (strictu sensu) and VAT have remained federal taxes. Registration duties and the property tax are now regulated by the different regions. As a result thereof, tax rates, tax reliefs, … vary across the country.

Specifically for the property tax, it is important to note that also the provinces and communities are allowed to place important surcharges. It follows that the effective real estate tax burden can vary substantially across the country. Specific and detailed advice has become inevitable.


2. Contact Details

Edwin Vervoort

Tax Partner

VGD Accountants en Belastingconsulenten

Schaliënstraat 5 Bus 3

2000 Antwerpen

Tel.: + 32 (0)3 247 43 00

Direct: + 32 (0)3 247 43 43

Fax: + 32 (0)3 247 43 02

Filip Viaene

VGD Accountants en Belastingconsulenten

Kortrijksestraat 99

8520 Kuurne

Tel + 32 (056) 35 85 51

Direct + 32 (056) 36 37 15

Fax +32 (056) 37 07 15


3. Form of property ownership Besides full ownership, Belgian civil law (applicable to the 3 regions) provides for a number of “partial ownerships”. The most common are:

- usufruct or “vruchtgebruik” being the legal right to use and derive benefit from a property that belongs to another person- long lease or “erfpacht”, implying full ownership over the land and the buildings for a limited period of time- building and planting right or “opstalrecht”, allowing to build on someone elses land and becoming full owner of the building for a limited period of time

The last 2 “partial ownerships” are governed by civil law principles that are older than the Belgian State itself. Nevertheless, they have remain popular as they are often used within the framework of a real estate leasing for industrial premises, offices, storage spaces, etc.

Real estate leasing works in exactly the same way as movables leasing. Upon instruction of the company, a leasing company will buy an existing building or construct a new one. The lessor hereby takes out a long-term lease on the building in question (usually 15 to 20 years). At the end of the lease, the lessor can acquire ownership of the building by exercising the purchase option.

Real estate leasing offers a number of advantages, amongst others the 100% financing, transfer option of the contract, no collateral demanded … For new buildings (cfr. point 4 hereafter), the lease can be subject to VAT. For existing buildings, a 0,2% registration duty will be applicable on the cumulative lease payments.

Depending on whether or not the periodically payments allow to reconstruct the initial investment capital with interest (the so-called full pay out), the lease can be an on or off balance operation.



Registration tax is generally applicable to sales or exchanges of Belgian real estate. Since registration tax is a regional tax, the rates vary. In Flanders, the rate is generally 10% whereas in Brussels and the Wallon Region a 12,5% rate applies. Houses with a limited notional rental value can be acquired at a reduced rate of 5% in Flanders or 6% in the other regions provided certain conditions are met.

“New” buildings can be sold under 21% VAT, and thus with exemption of registration tax provided certain formalities are met. A building is considered as “new” for VAT until December 31 of the second year following the [year of occupation] of putting into use. Up until now, VAT could only apply to buildings but never to land itself. The sale of land always remained taxable with registration duties.

Recently, the EU has ordered Belgium to alter its legislation. Belgium will be obliged to allow that soil which is sold together with a “new” building is sold under VAT (and thus with exemption of registration tax). So far, it is uncertain how the federal state and the regions will alter their legislation. It is equally unclear whether they will impose 21% VAT or a reduced rate.

Mortgages on Belgian real estate trigger a 1% registration tax. In Flanders, a draft bill is pending to abolish this 1% tax as of January 1, 2009. So far, Brussels and the Walloon Region will not abolish the 1% right.

Apart from registration tax and/or VAT, also notary fees will become due. These fees depend on the transaction amount involved and on the file costs implemented by the public notary.



Property tax

All the real estate is listed in the national land registry and an annual net rental income is assigned to it, the so-called cadastral income. This value corresponds to the deemed net rental income of the property and is yearly “indexed” to adjust for today’s prices. The cadastral income is revised if the characteristics of the property change (i.e. extension, rebuild, ...). The property tax is equal to a percentage of the aforementioned indexed cadastral income. To calculate it, you need to know the regional tax rate plus the provincial and community additions, as there is is no harmonization at the federal level.

The quality of the [owner] landlord (i.e. physical person or company) is irrelevant in determining the amount of property tax. The property tax can form a deductible expense for income tax purposes for a company or a professional user, but it is not to be considered an advance payment, withholding tax or alike.


5. Issues during ownership….(cont’d

Income tax – physical persons

The own family home is in principle fully tax exempt. Moreover, anyone deciding to take the plunge and acquire a property can benefit from a substantial tax cut.Since 2005, the law permits a new overall deduction of interest, capital redemption and life insurance premiums paid by the taxpayer who buys, builds or converts his own and only home.

When the owner does not rent out a property (other than his own family home), he is charged on the basis of his cadastral income multiplied by an coefficient (1,40). In case the owner of a property rents out his property to a person that uses it for professional purposes or to a company, the owner will be taxed on the effective rental income. If the hirer does not use the property for professional purposes, the owner is taxed like in the first situation. Certain cost deductions are allowed, but these fall outside the scope of this text.

Income tax – companies

Companies are always taxable on the effectively received rental income minus the proven costs, regardless of the capacity of the tenant (i.e. professional use or not, company or physical person).



Physical persons

If the real estate was a professionally used asset, any capital gain will be considered as taxable profit under the ordinary progressive tax rates. Capital gains realized on the disposal of other real estate (being part of ones private patrimonium), are in principle tax exempt.

However, when a building is sold off within 5 years after the date of acquisition, the capital gain will be taxed at a flat rate of 16,5%. When land is sold off within 5 years after the date of acquisition, the capital gain is taxed at 33%. If the land is sold off between the fifth and eight year after acquisition, the rate is reduced to 16,5%.

The calculation of the taxable capital gain is specifically described in the income tax code. For specific cases, please contact one of the persons mentioned before.

Companies

Companies are always taxable on the realised capital gain (i.e. sales price minus net book value). There is no separate taxation rate provided for (it is possible to spread out the payment of capital gain tax in case of reinvestment of the selling price). Realised capital losses on the sale of real estate are tax deductible (assuming that the transaction prices were set at arm’s length).



• a withholding tax on the sales proceeds of real estate is due in case of non-resident sellers. To the extent the foreign owner has no permanent establishment or permanent basis in Belgium, the withholding tax is liberatory. In case the Belgian real estate was part of a Belgian permanent establishment of permanent basis, the withholding tax will be settled with the overall tax due in Belgium.

• for non-resident physical persons, the real estate tax can be liberatory if they do not obtain other taxable income in Belgium and to the extent a certain threshold is not exceeded.

Belgian law contains no limitations on the acquisition or sale of real estate for foreign companies or foreign physical persons. There are however a few tax regulations that specifically apply to non-residents, the most important being:


8. Sundry issuesLike registration tax and property tax, environmental legislation also rests with the regions. In Flanders for instance, it is impossible to sell off real estate without obtaining a soil certificate. Such a soil certificate normally indicates that the government has no indication of soil contamination. Under certain circumstances however, a soil investigation will be imposed and/or soil decontamination will need to be processed before the real estate can be sold off.

In the Walloon region, no such stringent legislation applies. Nevertheless, taking into account the overall trend in western Europe, it is likely that at some moment in time, the Walloon region will implement similar legislation. In 2004 a regional Walloon decree was launched, but it has not (yet?) entered into force.

Apart form environmental legislation, also building regulations are fairly stringent. All new building activity and nearly all adaptation works to an existing building need a formal permit. If not, the building site can be sealed and, next to paying fines, the landlord may be forced to restore the building into its original state.

For advice about these specific regulations, public notaries and architect agencies may be an important source of information, next to your accounting firm.



Bulgaria

Contents


2. Contact details






8. Sundry issues


1. Introduction – Bulgaria

This should be a brief introduction as to why real estate might be acquired eg. residential owner, business owner occupier, business owner investor, holiday property, residential investment etc.


2. Contact Details

[Name 1][firm][telephone][email address]




[For example, outright freehold, leasehold rental etc for private persons and businesses]



[For example, a brief note on property tax (stamp duty), VAT, legal fees, funding costs etc for private persons and businesses]



[For example local taxes due, VAT payable rental income/payment etc for private persons and businesses]



[For example capital taxes, inheritance tax, legal fees etc for private individuals and businesses]



[For example, the treatment of rental income, property development, gains on disposal etc for private persons and corporates]


8. Sundry issues

[For example, any miscellaneous comments which may be of relevance for property investors not covered elsewhere eg. registering a property interest, building legislation etc.]



Cyprus

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2. Contact details






8. Sundry issues


1. Introduction – Cyprus



2. Contact Details



















8. Sundry issues




Czech Republic

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2. Contact details






8. Sundry issues


1. Introduction – Czech Republic



2. Contact Details



















8. Sundry issues




Denmark

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2. Contact details






8. Sundry issues


1. Introduction - Denmark



2. Contact Details



















8. Sundry issues




Estonia

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2. Contact details






8. Sundry issues


1. Introduction - Estonia



2. Contact Details



















8. Sundry issues




Finland

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2. Contact details






8. Sundry issues


1. Introduction - Finland



2. Contact Details



















8. Sundry issues




France

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2. Contact details






8. Sundry issues


1. Introduction - France



2. Contact Details



















8. Sundry issues




Germany

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2. Contact details






8. Sundry issues


1. Introduction - Germany

There are several reasons as to why a person would buy or build property in Germany. Amongst them are the following:

• Investment: Real estate is an important and necessary asset in any diversified portfolio. This applies to private persons as well as to institutional investors. Furthermore as of January 2008 special tax rules now apply for real estate investment trusts.

• Owner occupation: There are two main aspects to buying property in Germany; first to use as a holiday home and second to reside permanently in Germany.

• Business use: If a foreign company intends to set up a subsidiary or a permanent establishment in Germany, it could be advantageous to buy or build their business premises instead of leasing them.


2. Contact Details

Mr Carsten FrankeEbner Stolz Moenning BachemTel.: 0049 40 370 97 – 169Email: [email protected]

Mr Sten GuenselEbner Stolz Moenning BachemTel.: 0049 711 2049 - 1258Email: [email protected]



The main forms of property ownership in regards to both private persons and companies are:

• Freehold• Leasehold• Rental• Statutory heritable building right (“Erbbaurecht”)



There are four important matters of expenses which must first be considered by the purchaser of German property.

• Real property transfer tax (“Grunderwerbsteuer”)

In general, subject to the real property transfer tax is the transfer of ownership with some exceptions. In January 2006 the federal states were being granted authority to autonomously determine the real property transfer tax rate. Nevertheless in practice the real property transfer tax rate amounts to 3.5 % of the assessable property value. Exceptions can be seen for example in Berlin and Hamburg where the tax rate has been increased to 4.5 %.

Notwithstanding any agreements to other effect the real property transfer tax must be paid in half by the buyer and in half by the seller. However in practice, it is normally agreed, that the purchaser pays the entire real property transfer tax.


4. Taxes and other costs on property acquisition (cont’d…)• VAT (“Umsatzsteuer”)

Usually, the acquisition of property is exempt from VAT. However, if the seller and the buyer are both entrepreneurs, the option of VAT can be utilised, so that the sale is subject to 19% VAT. The exercise of this option may be advantageous for the seller to avoid input VAT repayments in some cases; the buyer is likely to agree on this if he is able to claim the VAT from the purchase as input VAT.

If the buyer is a private person, the acquisition is always exempt from VAT.

• Cost for notary and entry in land registerThe cost for the notary and for the land register entry amounts to approximately 0.5 - 2 % of the purchase price. The cost is dependant on several factors (for example entry of a mortgage) and must be paid usually by the buyer.

• Estate agent fees (Maklergebühr)Estate agent fees (also known as ‘courtage’) are often calculated at about 5 – 7 % of the purchase price. The fees are not regulated by law and as such are negotiable.


5. Issues during ownership One must always distinguish the use of the property for private, business or rental purposes. • Private residential use / rental use

The German property could basically be used for two purposes. On the one hand it could be used for private residential purposes (for example as family home or as a holiday house). In this case German income tax would not apply.

On the other hand the German property could be used by a private person for achieving rental income. The rental income is subject to income tax. The rental income will be assessed at revenues basically less cost for building depreciation (2% p.a.), operation, maintenance and interest.

• Business use / rental use within a business

On the one hand the property can be used as business premises. In this case the business activities on the property usually create a permanent establishment in Germany.

Furthermore the property can be used for rental purposes within a business. If the German property is used for rental purposes within a business the income is subject to income tax. The rental income is determined as the difference between the rental revenue and the deductible business expenses (for example interest cost within the interest deduction limitation, depreciation, operation, maintenance costs, etc.) on an accrual basis. The building may basically be depreciated over its expected life-span (usually 3 % p.a.).


5. Issues during ownership (contd…)

The German tax burden depends on the legal form of the investor. If the owner of the German property is a corporation the realised rental income is subject to corporate tax as well as, in most cases, trade income tax. The corporate tax rate amounts to 15 % plus 5.5 % solidarity surcharge thereon. The trade income tax depends on the municipal rate fixed by the municipality, the average trade income tax rate amounts to 14 %. Altogether, the average nominal tax rate of corporations would be approximately 30 %.

If the activities of the Corporate Investor are limited to the management of property assets and if the Corporate Investor elects to do so, he may enter the so called “extended exemption regime“ (erweiterte Grundstückskürzung) and therefore avoid paying trade income tax. The exemption is only applicable if the investor would be considered as ‘not in the business of trading in real estate’.

• Real estate taxProperty owners will be charged with real estate tax every calendar year. The tax amount is calculated as the sum of assessed value multiplied by the tax rate (2.6 ‰ - 6.0 ‰) and the municipal rate fixed by the municipality (usually between 350 % - 550 %). In the case of the use for business or rental purposes the real transfer tax is deductible for income tax matters.

• Net wealth tax („Vermögenssteuer“)Net wealth tax has not been levied since 1997.



The capital gains from the disposal of property are usually subject to corporate or income tax. A capital gain is calculated as the difference between the property’s purchase price and its book value plus any disposal costs.

In cases where the seller is a private person the tax liability of a capital gain from the disposal of German property is dependent on how the property has been used by the seller. If the property has been used by the owner for own residential purposes the capital gain is usually tax exempt. If this is not the case then the capital gain is subject to income tax plus solidarity surcharge thereon (maximum nominal tax rate would be 47 %) within 10 years after acquisition.

If the seller is a corporate investor then the capital gain from the disposal of the property is subject to a corporate tax rate of 15.82 % (including solidarity surcharge) as well as, in usual circumstances, trade income tax. As a result the capital gains are subject to an nominal tax rate of approximately 30 %. Under certain circumstances the trade income tax may be avoided there the seller successfully enters the “extended exemption regime” (see section 5.2). For the taxation of non resident corporate investor see section 7.

Furthermore, provisions for roll-over relief exist in Germany for businesses so that the taxation of the capital the capital gain from the disposal of German property may be avoided for a period of time. However it must be recognized that the utilization of the German roll-over relief system is dependant on the fulfilment of strict conditions.



The following description highlights the distinction between a direct investment in Germany by a private person and by a corporate investor. In both circumstances it is assumed that no German subsidiary has been or will be established in Germany due to the investment. Both the private investor and the corporate investor are subject to limited tax liability.

In cases where the property has been rented out by a private person the revenues minus the tax deductible expenses (e.g. depreciation, operation, interest, maintenance) is subject to German income tax plus solidarity surcharge. The maximum tax rate for a single individual as of 2009 is about 47 %. The rental income is calculated on a cash basis and the foreign investor is obliged to file a tax return in Germany.

Concerning the taxation of capital gains from the disposal of property, there are no differences to the taxation regulations attached to of a resident owner (therefore see section 6.)


7. Non resident owners of property (contd…)

The Corporate Investor is subject to limited tax liability with respect to all the rental income and capital gains resulting from the use and sale of the German property. Unless the Corporate Investor does not have a permanent establishment in Germany the realized rental income is only subject to corporate income tax and solidarity surcharge. Under German law, a permanent establishment of the corporate investor is established if it has a fixed place of business in Germany which serves its business activities. Usually, the Corporate Investor does not create a permanent establishment in Germany if it merely holds legal title to German property which is leased to third party.

Taking effect from 1 January 2009 rental income of corporate investors will be calculated on an accrual basis. As mentioned above the Corporate Investor can deduct certain expenses as long as they have been incurred in relation to the rental income.

In general, interest costs are deductible. However, as from January 2008 the interest deduction limitation also applies to non-resident corporate investors. Accordingly, the tax deducibility of interest costs may be limited to 30 % of the taxable EBITDA if the net interest costs are higher than EUR 1 million (minimum threshold) and the corporate investor is part of a companies group.


8. Sundry issues

Since the beginning of 2008 property investments in Germany can be conducted via German Real estate investment trusts (GREIT). The purpose of the introduction of the GREIT was to attract property investments to Germany by using the international accepted vehicle of a REIT. The GREIT should enable property fund raising on a broad basis. A GREIT is a stock corporation listed at the stock exchange. The GREIT can be tax favourable if certain conditions are met.

The German double taxation treaties usually grant the right to tax to the state of source. Double taxation then will be eliminated for some countries by the credit method whilst for others by the exemption method.



Greece

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2. Contact details






8. Sundry issues


1. Introduction - Greece



2. Contact Details



















8. Sundry issues




Hungary

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2. Contact details






8. Sundry issues


1. Introduction - Hungary



2. Contact Details



















8. Sundry issues




Ireland

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2. Contact details






8. Sundry issues


1. Introduction - Ireland



2. Contact Details



















8. Sundry issues




Italy

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2. Contact details






8. Sundry issues


1. Introduction - Italy



2. Contact Details



















8. Sundry issues




Lativa

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2. Contact details






8. Sundry issues


1. Introduction - Latvia



2. Contact Details



















8. Sundry issues




Lithuania

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2. Contact details






8. Sundry issues


1. Introduction - Lithuania



2. Contact Details



















8. Sundry issues




Luxembourg

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8. Sundry issues


1. Introduction - Luxembourg



2. Contact Details



















8. Sundry issues




Malta

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2. Contact details






8. Sundry issues


1. Introduction - MaltaThe property market has long been one of the most valuable asset classes in Malta with both development and construction considered as a solid investment yielding a satisfactory margin. Malta offers a wide range of both commercial and residential property, in very distinct locations. There is a broad selection of office space available: a firm can choose between purpose built office blocks, converted houses or flats or a location within some of the new, large mixed use areas currently under development. On the residential side, Malta has long been renowned for quiet retreats in the form of converted farmhouses and traditional houses of character while at the same time providing the possibility of acquiring high class apartments in new residential complexes at prices which are still considerably lower than the equivalent in mainland Europe.


2. Contact Details

Mr Karl Cini

Brian Tonna & Co

[email protected]



The main distinction that is normally made with respect to forms of property ownership is that of whether it being residential, commercial or industrial.

Within each segment one can decide to either rent or outright purchase a property for their specific use. When it comes to commercial properties there are various designated areas that are more suited for commercial dealings.

Malta offers very attractive industrial rentals. With the help of the Malta Enterprise, a government agency, incoming firms can be directed towards the right location whilst offering rates that normally average out at €10 per m².


3. Form of property ownership (contd…)

COMMERCIAL RENTALS

Top End Portomaso: € 300 - € 420 per sq.m. per annum Ta’ Xbiex Whitehall Mansions: € 186 - € 239 per sq.m. per annum

Mid End Sliema / St Julians / Ta’ Xbiex / Gzira Smart office blocks: € 58 - € 116 per sq.m. per Annum

Bottom End Central / North / South part of the island € 34 - € 58 per sq.m. per annum

RESIDENTIAL RENTALS

Top End Portomaso / Sliema / St Julians seafront: € 1,397 - € 3,400 monthly per apartment (designer finish)

Mid End Sliema / St Julians / Ta’ Xbiex seafront: € 580 - €1,200 monthly per apartment (non designer finish)

Bottom End Central / North / South part of the island and basic apartments in Sliema / St Julians: € 230 - € 690 monthly per apartment



All property bought in Malta is subject to stamp duty at the rate of €5 per €100 or part thereof, which payment is due to the Commissioner of Inland Revenue. This percentage is based on the higher of the consideration and market value of the property and is paid in two stages, 1% at the time of signing of the preliminary agreement (konvenju) and the remaining 4% settled at the time of signing of the contract of sale. There is no property tax that is applicable to immovable property in Malta.

Notarial fees are normally circa 1% of the selling price of the immovable property and are paid by the purchaser.


6. Disposal of property The disposal of immovable property situated in Malta gives rise to income tax. There exist two methods of settlement of this tax. A complete exemption from tax is applicable where the immovable property has been the registered main residence of the person who is making the disposal for a minimum of three years and is being sold within a year of when it was vacated.

In all other cases the following tax regime will apply:

On the signing of the Final Deed of Sale, provided the property that is being transferred has been owned for less than 5 years the seller is given an option on how to be taxed. He can either choose to be taxed under the regime whereby tax is paid on the selling price as reduced by a number of allowable deductions or he can choose to be taxed under the new Final Property Transfer Tax system whereby a final withholding tax of 12% of the transfer value is applied. If the immovable property is held for more than 5 years the aforesaid option is not available and in this instance the final withholding tax of 12% is applicable.

Apart from the above agency costs associated with the sale of property normally range from 3.5% to 5% of the total selling price of the immovable property in question.


7. Non resident owners of property Non residents wishing to acquire immovable property in Malta require a special permit and may do so only under certain conditions. The resale of immovable property by a non-resident is allowed as long as this is to a Maltese resident. A release permit is required in other cases. Repatriation of full resale price, including profits, is allowed without complications. Since Malta joined the European Union in 2004 many of the previous restrictions have been abolished for EU citizens.

Mortgages are available for property purchase by non-residents or non-Maltese citizens residing in the islands. Renting out of property purchase is allowed in special circumstances. More than one property can be purchased in Malta by a company or trust if located in particular designated areas.

All EU citizens who have resided in Malta for a minimum of 5 years at any time preceding the date of acquisition may freely acquire immovable property without the necessity of obtaining a permit.


7. Non resident owners of property (contd…)

Rental of property by non-residents

Non-residents have through the years realised that property in Malta yields a good return and many have opted to purchase and subsequently rent immovable property. Rentals for short or long term lets are governed by contractual lease agreements. Letting agents and property brokers generally charge fees of one month’s rental.

The letting of immovable property is exempt from Value Added Tax (VAT) except where the lessor is a limited liability company.

A non-resident deriving income from the rental of property in Malta has to be registered with the Inland Revenue Department. Payments made to non-residents in respect of rent are required by law to be made net of withholding tax at rates stipulated by law which differ according to whether the payment is being made to an individual or a limited liability company.


8. Sundry issues

The price brackets that are normally associated with immovable property vary considerably. One would expect to pay in the region of €72,000 to €320,000 for an apartment depending on the location, whilst the cost of a village house or a farmhouse will range between €175,000 to €480,000. Prices for high end apartments, town houses and farmhouses vary between €800,000 to €2million.

Over the years the Maltese property market has enjoyed a growth rate of 8% per annum, this rate increasing to between 12% and 15% during 2005 and 2006. As an investment, property in Malta does offer some excellent opportunities. One of the advantages of Malta’s small size is that commuting times between Malta International Airport and an office is rarely greater than 20 minutes and it almost never takes more than 40 minutes to get to anywhere else on the island.

Besides appreciating in value, investment in the Maltese property market is an ideal rental investment with returns averaging 5% per annum, in a destination with over 7000 years of history, culture and over 300 days of sunshine.



Netherlands

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2. Contact details






8. Sundry issues


1. Introduction - Netherlands

There are several reasons for businesses to buy, build or rent real estate in the Netherlands. Below is an outline of the main reasons for both businesses and private individuals.

Businesses

The Netherlands provides a strategic location to serve the markets within Europe. The central geographical position of the Netherlands, combined with accessibility and an excellent infrastructure are some of the reasons why numerous European, American and Asian companies have established their facilities in the Netherlands.

Since January 2007 the Dutch tax environment for international companies has become very attractive. The corporate tax rate has been lowered to 25.5%, which is well below the EU national average. Dividend tax has been reduced from 25% to 15%. Furthermore, a patent box with a 10% tax rate on income from innovations was introduced. Combined with other traditional features of the Dutch tax system (wide tax treaty network, participation exemption, 30% tax break for highly qualified foreign employees) the fiscal climate is one more reason to establish or expand European operations in the Netherlands.


1. Introduction – Netherlands (cont’d…)

Private individuals

The Netherlands has a high standard of living, while maintaining an affordable life for its residents. The costs of living, housing, education and cultural activities are lower than in most Western-European countries. This makes it a very attractive place to live or to have a holiday home.

In the Netherlands people (and businesses) have long seen the benefits of buying property. In general buying is cheaper than renting for private individuals. The flexible mortgage system and tax reimbursement make it very attractive for the people who plan to stay for at least a few years. However, the Netherlands is one of the most densely populated countries in the world. This leads to situations, particularly around the major cities, where property demand exceeds supply and therefore prices become inflated beyond the reach of many potential buyers.


2. Contact Details

Please contact one of our contact partners (tax) for more information.

KroeseWevers Tax ConsultantsEnschede office Emmen officeHans Eppink Marcel KocksTel: +31 (0)53 850 49 00 Tel: +31 (0)591 65 78 00Fax: +31 (0)53 850 49 01 Fax: +31 (0)591 61 91 [email protected]

[email protected]

KroeseWevers Tax Consultants is a member of Nexia Netherlandswww.kroesewevers.nl


3. Form of property ownership The ownership of real estate is defined and regulated in the Dutch Civil Code (Burgerlijk Wetboek). The owner has the uninhibited use and enjoyment of the real estate. Ownership may however be subject to thefollowing restrictions:• Rights of other persons to the real estate• Restrictions arising out of legislation in force.

These restrictions aim at protecting rights of third parties including the government as representative forthe general interest.

Other important statute laws regarding real estate outside the Dutch Civil Code are in force, for instance, land registration (Kadasterwet).

The jurisdiction in the Netherlands recognises several forms of property ownership in which exist:Full ownership• Co-ownership• Long lease• Apartment• Servitudes• Superficies.

There are also some secondary real rights like pledge, mortgage and use.



Transfer tax

Real estate transfer tax (RETT) is charged for private individuals and businesses on the acquisition of Dutch real estate at 6% on the higher of the fair market value and the purchase price of the property. Also the acquisition of shares in an entity owning Dutch property can under circumstances be qualified as a deemed acquisition of property and thus be subjected to transfer tax at 6% of the market value of the underlying property, although exemptions may apply. When the property is newly constructed there is no levy of transfer tax.

VAT

VAT is generally due at the standard rate of 19% on any supply of goods and services in the Netherlands and the import of goods into the Netherlands. VAT registration is compulsory for any VAT taxable person (i.e. an individual or entity which independently carries on a business activity) irrespective of their residence, making VAT taxable supplies in the Netherlands. However, for foreign suppliers certain exceptions may be applicable whereby the customer has to self-account for the VAT due. As a result, the foreign supplier does not have to register in the Netherlands.


4. Taxes and other costs on property acquisition (contd…)

The sale of real estate is VAT exempt, unless the property is newly constructed or less than two years old (19% VAT). However, if certain conditions are met, there is an option for businesses to let the supply become taxable.

If the property is newly constructed (or less than two years old) the Transfer tax is replaced with the 19% VAT.

Transaction costs

Total transaction costs are between 10% and 13%, of the total dwelling price for existing property, including the transfer tax (6%) legal fees and registration fees and estate agent’s commission. This is moderate by international

standards. The bulk of these costs are paid by the buyer.


5. Issues during ownershipOwner-occupied propertyIf private individuals own a property that serves as a principal residence (at least six months a year), they should add an amount to their income in this respect. This amount is known as the notional rental value. It is a percentage of the market value of the owner-occupied property. This value is determined by the authorities of the Dutch municipality in which the property is situated. The notional rental value can be offset against interest and charges of (mortgage) loans, and against payments towards a ground lease or building and planting rights in relation to the owner-occupied property. The notional rental value only applies to the property that serves as the principal residence. For second homes – e.g., a holiday home – and other immovable property another system applies (see next). For businesses there is no such a tax on the use of property.

Rental incomeFor private persons the annual income tax on renting property is 30%. In reality it is not really an income tax, but a flat tax, with 30% levied on the assumed rental yield. The basis of this assumption is that a rental yield of 4% is made on the property. In effect, an annual tax of 1.2% is imposed on the average value (start and end of the year) of the property minus the mortgage (loan). So if your rental property yields more than 4%, the proportionate tax rate is lower.


5. Issues during ownership (contd…)If the real estate forms part of the individual’s business enterprise or the real estate itself is very actively exploited, the individuals will be subject to income tax at progressive rates of up to 52%.

For businesses rental income on property is taxed at the standard rate of corporate income tax (CIT). As of 1 January 2009, the standard rate of CIT in the Netherlands is 25.5%, with the first € 100,000 being taxed at 20%. CIT is payable by Dutch-resident entities as well as by non-resident entities. CIT is reportable to the tax authorities on an accounting year basis. For specially defined investment institutions CIT is charged at 0% provided certain strict conditions are met.

DepreciationFor businesses, depreciation on real estate has been restricted to the assessed value, the so called WOZ, which is determined by local municipality annually. Only if the real estate is used for the companies own business depreciation is restricted to 50% of the assessed value.

VATAs a rule, rent is exempt from VAT. Parties may, however, opt for VAT-increased rent if 90% or more of the business activities of the tenant are subject to VAT.

Property taxProperty tax is charged annually by the local authorities in the Netherlands on ownership based on the market value of the property. The use of property is no longer taxed by local authorities since the year 2006. Typical rates of property tax are generally between 0.1% and 0.3% for the owner of a property.


6. Disposal of propertyCapital gainsIn general no capital gains tax is levied on the profits realized on the sale of property owned by a private individual.

For businesses capital gains are generally chargeable to CIT at the standard rate. However, taxation of capital gains realised on the disposal of certain fixed assets such as real estate can be deferred by forming a tax-free reinvestment reserve. Such a reserve generally requires the replacement within 3 years of the disposed asset by an asset with a similar economic function.

The Dutch participation exemption, effectively exempts capital gains derived from a sale of shares in a qualifying subsidiary (having at least 5% of the shares).

Inheritance taxProperty acquired by inheritance or gift from an individual (living in the Netherlands) is subject to inheritance or gift tax. Several forms of wealth transfer such as gifts made by the testator within 180 days prior to death and the proceeds of a life insurance contract for which the testator paid the premiums are treated as an inheritance for tax purposes. Property acquired through inheritance or gift is valued at fair market value less liabilities (debts such as tax debts, funeral costs, and other expenses).

The tax is generally paid by the recipient. For both gifts and inheritances, a large number of exemptions apply.

The heirs are also required to pay transfer tax and it is calculated on the value or sales price of the acquired Dutch property at the current tax rate of 6 %. Transfer tax can be offset by gift tax on property.



Non resident owners of property are still liable for Dutch income tax in case of owning property here. They will be regarded as non-resident taxpayers for Dutch tax purposes. If someone is considered as a non-resident taxpayer, income tax in the Netherlands has to be paid on the Dutch income. However, this income need not always be taxable in the Netherlands: it may be that the Netherlands is not allowed to tax certain income under a tax treaty that the Netherlands has concluded with the country of residence.


8. Sundry issues

System of registrationThe territory of the Netherlands is divided into land registry parcels. Each of these parcels is recorded separately with the name of the titleholders. Lease agreements, rental agreements and other facts that relate to personal rights with respect to a registered property cannot be entered in the register. Ownership of the property is only acquired by the purchaser after registration of a certified copy of the notarial deed of transfer. This also applies for the other forms of ownership and real rights mentioned in paragraph 3. Non registered rights regarding real estate cannot be invoked against a purchaser in good faith if these rights should be registered.

FinancingDutch law does not contain specific rules for entering into a loan agreement for the financing of a real estate acquisition, it provides more for rules pertaining to the furnishing of securities. In real estate financing in the Netherlands, the mortgage is still the pre-eminent form of security and most financing is still in the form of mortgage-backed loans. For the creation of mortgage rights a notarial deed and registration is needed. It is a principle of Dutch law that all creditors have resource against all assets of their debtor. Mortgages give priority against specific assets.



Poland

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2. Contact details






8. Sundry issues


1. Introduction - Poland



2. Contact Details



















8. Sundry issues




Portugal

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2. Contact details






8. Sundry issues


1. Introduction - Portugal



2. Contact Details



















8. Sundry issues




Romania

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2. Contact details






8. Sundry issues


1. Introduction - Romania



2. Contact Details



















8. Sundry issues



YOUR RELIABLE PARTNER


Russia

Contents


2. Contact details






8. Sundry issues


1. IntroductionIntroduction - Russia - RussiaRussian market remains one of the very growing in the world. Volume of retail property, office real estate and warehousing property is about 100 billion $. There is considerable lack of hotels, especially in Moscow and St.-Petersburg.

Market average income level of retail, office and warehousing property investments is over 8% in Moscow region, and about 12% in other regions of Russian Federation.


2. Contact details:3, bld. 1, Krivokolenny side-street,

Moscow, Russia

Tel.: + 7 (495) 628-55-60, 621-10-15

Fax: +7 (495) 621-56-87

www.mkpcn.ru

[email protected]


3. 3. Forms of property ownershipForms of property ownership

• ownership

• leasehold


4. Taxes and other costs on property acquisition4. Taxes and other costs on property acquisition

4.1. Stamp duty for the registration of the rights on property, contracts on property acquisition:

private persons – 500 RUR (~ 11 €)

businesses – 7 500 RUR (~ 170 €)



4.2. VAT

VAT payers have the right to reduce the total amount of VAT by tax deductions (amounts of tax paid when purchasing or renting property to carry out operations recognized as items of taxation).



4.3. Corporate profit tax Value of the property (except land) with the term of beneficial use over 12 months and with the initial cost thereof over 20,000 RUR is amortised by imposing depreciation charges. Taxpayer is entitled to include into the expenses as a lump sum (so called the depreciation premium) expenses incurred as investment in an amount not exceeding 10% (not exceeding 30% for 10% (not exceeding 30% for fixed asset itemsfixed asset items with the term of beneficial use 3-30 years) of the initial value of the fixed asset items and/or expenses incurred in the event of an additional construction, additional equipping, reconstructing, upgrading, technical refurbishing, or a partial liquidation of fixed asset items. Rent expenses can also be an outlay.



4.4. Personal income tax Taxpayer is entitled to the property tax deductions in the amount spent by a taxpayer for a new construction or acquiring on the territory of the Russian Federation an apartment house, flat, room or a share (shares) in them in the amount of his actual expenses, and also in the amount used to repay interest on the purposive loans (credits) received from credit and other organizations of the Russian Federation and actually spent by him on the new construction or on the purchase of an apartment house, flat, room or a share (shares) in them on the territory of the Russian Federation.The total amount of property tax deduction may not exceed 2,000,000 RUR (~ 45 454 €).


5. Issues during ownership5. Issues during ownership

Land:Owners pay land tax (local tax, tax rates are established by municipal bodies, maximum tax rate is 1,5% of the cadastral value of land). Tenants pay rent.

Other property: Owners pay corporate property tax (local tax, tax rates are established by municipal bodies, maximum tax rate is 2,2% of the value of property) or personal property tax (local tax, tax rates are established by municipal bodies, maximum tax rate is 2% of the value of property). Tenants pay rent.


6. 6. Disposal of propertyDisposal of property

6.1. VAT

Sale of property and lease services is VAT taxable. Tax rate is 18%.

Exempt from taxation: letting out premises by a lessor on the territory of the Russian Federation to foreign subjects or to organizations accredited in the Russian Federation when by law of a corresponding foreign state a similar procedure is established concerning citizens of the Russian Federation and Russian organizations accredited in this foreign state (Australia, Austria, Belgium, Brazil, Canada, China, Croatia, Czech Republic, Germany, Great Britain, Greece, Denmark, Iceland, India, Ireland, Korea, Netherlands, Norway, UAE, Poland, Portugal, USA, Finland, France, Switzerland, Sweden, Japan, etc.).


6. 6. Disposal of propertyDisposal of property

6.2. Corporate profit tax

Profit received from sale of property and lease services are taxable. Tax rate is 20%.


6. 6. Disposal of propertyDisposal of property 6.3. Personal income tax Income received from sale of property and lease services are taxable. Tax rate is 13% for residents and 30% for non-residents. Incomes received by donation are relieved from taxation if the donor and the donee are members of the family and/or close relatives (spouses, parents and children, including adoptive parents and adopted children, grandfather, grandmother and grandchildren, fully natural or partially natural (having a common father or mother) brothers and sisters). The taxpayer is entitled to the property tax deductions in the amounts received by the taxpayer over a tax period from the sale of apartment houses, flats, rooms including privatized residential premises, summer cottages, garden houses or land plots, including shares in the said property which have been owned by the taxpayer for less than three years, but in general not more than 1,000,000 RUR (~ 22 727 €), and also in the amount received in a tax period from the sale of other property owned by the taxpayer for less than three years, but not more than 125 000 RUR (~ 2 840 €). When selling the said property which have been owned by the taxpayer for three years or more the property tax deduction shall be granted in the full amount. Instead of exercising his right to the property tax deduction the taxpayer shall have the right to reduce the sum of his taxable incomes by the amount of his actual expenses, proved by documents that are involved in the receipt of these incomes, except for sale by the taxpayer of securities owned by him.


7. Non resident owners of property7. Non resident owners of property

Non-residents pay taxes on tax rates mentioned above.


8. Sundry issues8. Sundry issues 8.1. Proof of property rights

The state registration is mandatory for (1) rights of ownership and other rights in rem to real property (acquisition, conveyance, termination of the rights), (2) all encumbrances of such rights, (3) all transactions with real property. However, if the term of lease is less than one year, such transaction does not require state registration.

The rights and transactions are recorded in the Unified State Register. State registration of the rights to real property is confirmed by the certificates while the state registration of transactions is confirmed by special “registration inscription” on the relevant documents.


8. Sundry issues8. Sundry issues

8.2. Building law

Building law consits of the Building Code, other federal and territorial laws and normative acts of Russian Federation.

The building permit certifies the right to build, reconstruct and make capital repair of the bulding.


8. Sundry issues8. Sundry issues

8.3. Mortgage

The Mortgage Law significantly improves the potential of mortgages as an instrument for investments. Buildings and structures can only be mortgaged together with the land plots on which such buildings and structures are located.



Slovakia

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8. Sundry issues


1. Introduction - Slovakia



2. Contact Details



















8. Sundry issues




Slovenia

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2. Contact details






8. Sundry issues


1. Introduction - Slovenia



2. Contact Details



















8. Sundry issues




Spain

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2. Contact details






8. Sundry issues


Spain

Contents


2. Contact details






8. Sundry issues


1. Introduction - Spain

Real estate in Spain might be acquired for residential reasons, as a holiday property, or due to business needs or convenience (owner occupier or investor).


2. Contact Details

Xavier EcheverriaLaudis Consultor00 34 932 387 [email protected]

Maite FandosLaudis Consultor00 34 932 387 [email protected]



Real estate property in Spain is mostly held through outright freehold.

Sometimes, splitting the property within bare ownership and usufruct between two people might be convenient, but this is casuistic.

Multi-property systems have been implemented some years ago in some holiday property cases and zones.



Transfer Tax (2 to 7%, depending on the property location) if bought to an individual or secondhand to a Company or an entrepreneur.

VAT (house: 7%; business premises: 16%) if bought new to a Company or an entrepreneur.

Public Notary and Mercantile Register expenses.



Holding: Local Tax on Real Estate Holding (“Impuesto sobre Bienes Inmuebles”): municipal annual tax that depends on the property cadastral value.

Occuping:2% of the property cadastral value is imputed as income to individuals when second house (not when habitual home).

Renting:Profit is included among income subject to tax (scaled rate for individuals – maximum rate 43%-; 25 to 30% rate for Companies).


6. Disposal of property Depends on the seller condition (individual, entrepreneur, Company) and the way of disposal (sale, inheritance).

Local Tax on the Land Increase Value (“Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana”) is levied in any case: municipal tax depending on the land holding period and its cadastral value.

Individuals: capital gain is taxed at a 18% rate (profit included in the Personal Income Tax return). Corrections for inflation are applicable. Other reductions are applicable if the property sold was acquired before 01.01.94. Profit on habitual home disposal is exempt if the proceeds are reinvested in a new habitual home within 2 years (a property is considered the individual’s habitual home when living there for a minimum of 3 consecutive years -few exceptions).

Companies: capital gain is taxed at the normal rate (25 to 30% -included in the accounting result). Corrections for inflation are applicable. Exemptions are applicable in some cases if reinvestment under certain conditions is made.

Inheritance: heirs are subject to the Inheritance Tax. The rate depends on several conditions (property value, prior assets, relationship, residence, etc.)



Holding: apart from the Local Tax on Real Estate Holding, also Special Real Estate Tax is levied for non-residents (annual 3% on the cadastral value -some exemptions).

Rental Income: Non-residents are subject in Spain on the gross income amount at a 4% flat rate, unless a Permanent Establishment through which the rental activity is arried out exists in Spain (they are then taxed as a Spanish Company -25 to 30%- on the profit).

Disposals: Local Tax on the Land Increase Value (“Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana”) is levied in any case (see 6 before).

Non-residents are taxed on the capital gain obtained (profit) at a 18% rate (unless Permanent Establishment: 25 to 30%). Corrections for inflation are applicable.

Individuals will be withheld a 3% of the selling price by the purchaser, as a payment on account of the tax due.


8. Sundry issues

Building in Spain is subject to other several municipal minor taxes and licenses.

Carrying out any economic activity in Spain is subject to a special municipal tax (“Impuesto sobre Actividades Económicas”) that depends on the kind of activity, though some exemptions might be applicable (for instance, for the 2 first years of activity, or for Companies with a turnover lower than €1.000.000).



Sweden

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2. Contact details






8. Sundry issues


1. Introduction - Sweden

• There exists very different reasons for a decision to buy or rent a commercial real estate or a private real estate.

• Most business or commercial related acquisitions has a ground in an investment, for a long or a short period. The possibility to use an efficient legal tax planning where disposal of the real estate ends in close to a non-taxation situation has increased the interest of investment in real estates.

• Many of the companies who conduct business in Sweden has often an interest of lease a part of a commercial real estate, an opportunity to the owner to receive rental income of the business owner occupier.

• Other owner of private real estates, have their ground in an interest in owning the property as a residential estate for resident living or holiday.


2. Contact Details

Name: Lotta Abrahamsson

Firm: Synneby Revisionsbyrå

Phone: + 46 31 719 17 02

Email address: [email protected]



The following forms of owner ships exits:

• outright freehold for business and private persons

• leasehold rental for business and private persons

• owner-occupied flat or house for business and private persons

• the ownership of the site can be combined with one of the three first mentioned forms.



The fee for stamp duty depends on if the buyer is a natural person or a legal entity.

Purchase made by natural persons, the standard rate is 1.5% of the purchase price.

Purchase made by legal entities, the standard rate is 3.0% of the purchase price.

Additional to this is the fee for application of registration of land of 825 SEK (approx 83 Euro).

The fee related to real estate mortgage is 2% of the mortgage debt. Additional to this is the fee for application of 825 SEK (approx 83 Euro). The fees are equal for natural persons as well as legal entities.

The transaction and acquisition of real estate is exempted from VAT.

To avoid stamp duty, it is possible to buy a limited liability company, with assets of real estate.


5. Issues during ownership Sweden’s tax system is based on taxation of the owner.

Profit / Losses

The profit based on rental income of the commercial real estate, or apartment building will be included in the taxable income.

If the legal entity is a limited liability company the taxable income, i.e. the net after the costs are deducted, be subject to a flat tax rate of 28 per cent. The tax rate will probably be lower during 2009, and changed to 26.3 per cent. No additional local taxes.

If the commercial real estate is directly own by a natural person the profit based on rental income of the commercial real estate, or apartment building will be subject to a progressive tax rate between 33 % up to 57%, including local community taxes.

Annual depreciation of building will be done by the owner, which will be a deductable cost which will cut the profit.

If the deductable costs has been higher then the income, the net will be a loss, which will be carried forward. There is no time-limit for carrying the forward, and these accumulated losses can be set off against profits in the future.


5. Issues during ownership (cont’d..)

The profit of rental income of private outright freehold or owner-occupied flat for privatepersons, owned by a natural person, is subject to a flat tax rate of 30 per cent.

VATThe amount of rent is excluded from VAT. This can easily be changed, hence there is an option to register for VAT, at the Swedish Tax Agency, and are often used in the purpose to set off the taxpayers input VAT.

Property-taxIf the property is a outright freehold for private persons, it is subject to an annual property tax of maximum 6 000 SEK (approx 600 Euro) (level 2008). If the property is apartment building, with either a owner-occupied flats, or leasehold rental, the annual property tax is maximum 1 200 SEK per flat (approx 120 Euro) (level 2008).

If the property is a commercial real estate, the annual property tax is based on an assessment value.



Most business or commercial related acquisitions has a ground in an investment, for a long or a short period. As mentioned earlier there is a possibility to use an efficient legal tax planning where disposal of the real estate ends close to a non-taxation situation has increased the interest of investment in real estates.

When dispose a commercial real estate, 90 per cent of the profit (net amount between purchase-prise and the amount for disposal) will be subject to tax (28 per cent).

An efficient way is to dispose a real estate, is by using holding companies subsidiaries. It’s possible to dispose the real estate to a new subsidiary and the purchase pricing is matching the taxable value, i.e. no capital gain in this stage. Stamp duty will be trigged. The real estate then will be disposed wrapped in a subsidiary – a shell company – to market value. The capital gain of the business related shares are exempted from taxation in Sweden.

When dispose an outright freehold or owner-occupied flat for private persons, the profit (net amount between purchase-prise and the amount for disposal) will be subject to capital gain tax of 22 percent.

Sweden has no inheritance taxes.



All income related from real estates located in Sweden will be subject to taxation in Sweden.

DDT will be applicable in the most cases, since Sweden has DDT with more the 90 countries over the world.

A commercial real estate can render a taxable permanent establishment in Sweden. This situation will trigger: section 4: Stamp duty, section 5: Profit / Losses – if it is a Ltd, VAT, Property tax section 6: Disposal of the property

Depending on the owner, if it is a natural person, who owns the commercial real estate, the tax on profit will be a flat tax rate of 25 per cent. An outright freehold or owner-occupied flat for private persons will trigger: section 4: Stamp duty, section 6: Disposal of the property


8. Sundry issues

The estate agentMost properties are on the market at estate agents. The seller pays the estate agent´s fee based on the purchase-price. The agreementTo purchase a real estate, legal assistance is often required. The buyer has an obligation to investigate the property, considering the building construction and legal obstacle.

There exists a construction standard, of course changed during the time, how building must be constructed to fulfil this standard.

The purchase-agreement has to fulfil several requirements to be a legally binding agreement. Inter alia, it has to be written and contain detailed information. The signed agreement has to be registered at a Registry Office, (Sw. Inskrivningsmyndighet).


8. Sundry issues (cont’d…)

Building companyConstruction of new buildings is exempted from property tax, and will be taxed first when the construction of the building is finished.

Construction services can be object to a VAT system of reverse charge. A real estate company, who builds a commercial real estate, can register for VAT during the construction. A building company, with employed e g constructions-workers, shall be aware of the situation that the company and the constructions-workers are often bound, or will be bound by collective agreement, where the level of salary and other benefits, working-hours are expressed.



United Kingdom

Contents


2. Contact details






8. Sundry issues


1. Introduction – United Kingdom

Property ownership and investment is a very important part of the UK economy. The level of residential owner-occupation, at over 70%, exceeds the EU average. The residential buy-to-let market has experienced significant growth over recent decades.

Commercial property ranges from city centre office and retail properties to out-of-town shopping centres, industrial estates and business parks.

Investments in property are made for both income potential and capital growth.


2. Contact Details

Mark McGarry (Direct Tax)Saffery Champness Chartered AccountantsLion HouseRed Lion StreetLondon WC1R 4GB Direct line: 020 7841 4063 Email: [email protected]

Douglas Gordon (VAT)Saffery Champness Chartered AccountantsLion HouseRed Lion StreetLondon WC1R 4GB Direct line: 020 7841 4059 Email: [email protected]



Property may be held either as freehold or leasehold. Freehold is an indefinite interest, while leasehold is for a fixed time period.

Leases are generally categorised as being either “short” or “long”, depending on whether the term of the lease exceeds 50 years.

The same property can be subject to more than one interest where, for example, the freeholder grants a lease to a person who then grants a sublease to another.

Long leasehold interests are generally granted in return for a capital sum, or premium, plus an annual ground rent. Shorter leases are generally granted in return for an annual rent only.


3. Forms of property ownership (cont’d)

Less formal arrangements include a tenancy and a licence to occupy.

Property may be owned directly or indirectly through companies, trusts or partnerships. Also, life assurance and pension funds may include property in the range of assets that they invest in.

Types of trusts include public or private unit trusts and real estate investment trusts (‘REITs’). Although called trusts, REITS are listed property companies.


3. Forms of property ownership (cont’d)

Partnerships may take the following legal form:

• ordinary partnership, where the partners have unlimited liability

• limited partnership, the members of which are a general partner, who has unlimited liability, and any number of others whose liabilities are limited to the capital introduced (“limited partners”)

• limited liability partnership, which is a separate legal entity to its members, who may be both individuals and companies, but like other partnerships this is transparent for tax purposes.



VAT may be payable on the purchase price or the rental payments of commercial property at the option of the seller or the landlord but it is not due on residential property. Accordingly, it is essential that, before agreeing terms, it is established whether VAT will be payable and that this is made clear in the formal agreement.

The consideration paid (including any VAT) on the transfer or grant of an interest in property is subject to stamp duty land tax (‘SDLT’), which is payable by the person acquiring the property.

The rates of SDLT range between 0% and 4% depending on the amount of consideration as shown in the following table(s):


4. Taxes and other costs on property acquisition (cont’d)

Residential land or property

SDLT rates and thresholds

Purchase price / lease premium or transfer value SDLT rate

Up to £175,000* (until 2 Sept 2009 – see note above) Zero

Over £175,000* up to £250,000 1%

Over £250,000 up to £500,000 3%

Over £500,000 4%

* £175,000 was introduced for one year and is expected to reduce to £125,000 with effect from 3 September 2009



Non-residential land or property

rates and thresholds

Purchase price / lease premium or transfer value (non-residential or mixed use)

SDLT rate

Up to £150,000 – annual rent is under £1,000 Zero

Up to £150,000 – annual rent is £1,000 or more 1%

Over £150,000 up to £250,000 1%

Over £250,000 up to £500,000 3%

Over £500,000 4%



SDLT of 1% is also payable on lease rentals where the net present value of the rent exceeds £125,000 for residential and £150,000 for non-residential property.

Before entering into a transaction, parties are advised to seek appropriate professional advice, including solicitors, tax advisers, property valuers and surveyors and should, therefore, include these advisers’ fees in their financial budgets for the project. Also, providers of loan finance, such as banks and building societies, may charge loan arrangement fees and valuation fees and may expect the borrower to pay the lender’s legal costs.

Occupiers of property pay annual taxes to the local authorities. In the case of commercial properties, the tax is called business rates and for residential it is council tax. Purchasers or proposed occupiers of property are advised to make enquiries of the taxes due prior to agreeing to a purchase or occupation. The taxes are assessed annually in advance but may be collected by instalments throughout the year, which runs from 1 April to the following 31 March.


5. Issues during ownership – taxation of rental income

Net rental income is generally subject to income tax (on individuals, trusts and non-UK companies) or corporation tax (on UK companies).

Expenses incurred in a property business, for example, repairs, interest, professional fees and administrative expenses, may be deducted from the gross rents receivable in arriving at the taxable amount. Capital expenditure may not be deducted from rental income but capital allowances may be claimed.

The standard rate for capital allowances is 20% per annum based on the balance of expenditure brought forward. A reduced rate of 10% applies to long-life assets, which are assets expected to have a useful economic life of 25 years, and to integral features (eg, electrical systems, heating systems, lifts and escalators). Allowances of 100% are available for certain energy and water efficient equipment.

Interest incurred on borrowings to acquire or improve let property may be offset against rental income and, in the case of UK companies, other taxable profits. There is no tax relief on interest on loans used to acquire a person’s private residence.


5. Issues during ownership – taxation of rental income (cont’d)

Individuals may carry forward rental losses against future rental income of the same rental business. In certain limited situations, a loss may be set against the person’s other income for the year or the previous year.

Companies subject to corporation tax may elect to offset rental losses against other profits, including capital gains, for the year of the loss or of future years.

Special rules apply to furnished holiday letting businesses that allow owners to claim some of the reliefs that are normally only available to trading businesses.



In determining the appropriate tax, it is essential to distinguish between property that is held for the purpose of sale in the course of a trade (a “property trade”) and property held for use in a trade or for investment (a “capital gain”). The profits of a property trade will be subject to income tax, if carried on by an individual or trust, or to corporation tax, if carried on by a company. This also applies to non-residents unless they are protected by a tax treaty between the UK and their country of residence.

A capital gain is computed by reference to the consideration received on disposal, net of incidental selling costs, and to the original costs of the property and any enhancement expenditure that is still reflected in the value of the property at the time of the disposal. Companies may index the costs of a property to take account of inflation. In certain circumstances, the actual consideration may be replaced by the market value in arriving at the taxable gain.


6. Disposal of property (cont’d)

Certain interests in property are treated as ‘wasting assets’ for capital gains purposes, which means that the costs, for example a premium paid on the grant of a lease, are reduced over the lifetime of the interest. This typically applies to leasehold interests of less than 50 years.

Capital gains tax is, generally, payable by individuals and trusts at a flat rate of 18%. Subject to certain conditions, the lower rate of 10% may apply to gains on property used in a trade.

An individual’s principal private residence (“PPR”) is exempt from capital gains tax on sale. Individuals who own more than one property can elect which one should be treated as their PPR.


6. Disposal of property (cont’d)

Certain interests in property are treated as ‘wasting assets’ for capital gains purposes, which means that the costs, for example a premium paid on the grant of a lease, are reduced over the lifetime of the interest. This typically applies to leasehold interests of less than 50 years.

Capital gains tax is, generally, payable by individuals and trusts at a flat rate of 18%. Subject to certain conditions, the lower rate of 10% may apply to gains on property used in a trade.

An individual’s principal private residence (“PPR”) is exempt from capital gains tax on sale. Individuals who own more than one property can elect which one should be treated as their PPR.


7. Non-resident owners of properties

Non-residents are liable to income tax on their net rental income derived from property in the UK. Letting agents and tenants are required to deduct basic rate income tax, currently 20%, from rents, less certain expenses, paid to a non-resident landlord unless the landlord has applied to HMRC for rents to be paid without deduction of tax and HMRC has issued a certificate to the agent or tenant authorising rents to be paid gross. Non-residents are required to complete a self-assessment income tax return and any income tax deducted will be available to

offset against their final income tax liability.



Ukraine

Contents


2. Contact details






8. Sundry issues


1. Introduction - UkraineIn spite of crisis real estate in Ukraine is a great investment whether you are planning on reselling or renting. Investing in the Ukrainian property is absolutely of great interest for the investors with those looking for housing focusing on main elite areas such as the capital, Kyiv, the fashionable Crimean coast and the quickly-growing ski resorts of the Carpathian Mountains

Reasons to buy in Ukraine

- NO Capital Gains Tax on apartments (first property);- NO restrictions for foreign ownership on residential property; - Tiny 1% Inheritance tax; - Minimal purchasing costs;- Minimal maintenance costs;- LOW prices on Real estate.


2. Contact Details




3. Form of property ownership The Constitution of Ukraine and the Civil code of Ukraine identify three forms of property: private property, state property and communal property. Owners have the right to use their property for commercial purposes, leasing, receiving rental payments and receiving profits from other business. Civil code provides several means of acquiring rights to real estate property, the most widely used being sale and purchase agreements or lease agreements.

The following real property rights are required to be registered according to Ukrainian law: ownership; proprietary rights: which include right of possession; easement; rights of permanent use of land plot; right of use of land for agricultural purpose (emphyteusis); superficies; leases of real property having a term of three year or more; and limitations of proprietary rights, arising out of mortgages, decisions of courts and other competent authorities, court injunctions.

Easement is in general granted for an indefinite period when resulting from a court decision and for a definite period when granted by the agreement. Easement, as a right which affects the property of land, is transferable with the land. The purchaser acting in good faith which acquires the land encumbered with an easement has the same obligations towards the beneficiary of the easement as the initial owner. Therefore, the acquisition of land or buildings requires a careful examination for the existence of easements.

Emphyteusis (a right of use of land for agricultural purpose) can be granted on the basis of the agreement. This right may be alienated and transferred as a heritage.

Superficies (a right of use of another’s land for construction) shall arise on the ground of an agreement or a will and may be established for definite or indefinite period. Superficies may be alienated by the land user or transferred as a heritage. The transfer of the property right in the land to another person shall not affect the scope of right of the owner of construction (structure) to use the land.



• The buyer typically pays registration, notary and other fees but it can be agreed among parties. Notary fees range from UAH75 (€11.50) at state notary and UAH200 to UAH400 (€30 - €62) at private notary. The buyer must also obtain certificates from the Bureau of Technical Inventory and the Center of State Land Cadastre that the property is duly registered. All of these adds to the complexity of purchase process but not much to the cost. Registration and other fees should not exceed 0.05% of the property value.

• When buying real estate a 1% tax is paid on the sales amount and another 1% is paid to the Ukraine Pension Fund. Buyers and sellers settle on who is to pay these fees and state this in the sales agreement. Real estate agencies typically charge 3-5% of the property price for their services. Finally, buyers may buy an insurance policy on the property for 1% from their real estate agency.


5. Issues during ownership Natural persons

Taxpayers are:• Residents receiving either income originating from the territory of Ukraine or foreign income.

The standard tax rate (for residents) in Ukraine is 15% . This rate usually applies to employment income, rental income, investment income, in the event of inheritance by any heir from a non-resident testator, income from the sale of an object of movable property.

• Non-residents receiving income originating from the territory of Ukraine.Tax rate for income received by non-residents as interest, royalties, dividends and salary paid by a Ukrainian employer is 15 %.

Tax rate for income from bank deposit rates is 5 %.

And tax rate for any other form of income gained from sources in Ukraine, including salary and directors fees paid by anon-resident employer is 30%.

A person is a tax resident in Ukraine if he has a place of residence in Ukraine.

If the person has a permanent place of residence in Ukraine and another country, the person is deemed to be resident ofUkraine if his centre of vital interests is in Ukraine, or if he stays in Ukraine at least 183 days during the tax year (calendaryear).

Property maintenance costs in Ukraine are generally very low. Utilities usually amount to $30-50 per month for anaverage apartment, and there are no property taxes (other than the tax paid when selling real estate and taxes on income).


Legal entities

Ukrainian entities and foreign entities doing business in Ukraine through a permanent establishment are liable for corporate profit tax.

The Corporate Tax Law provides for the taxation of the following persons:

Legal entities organized under the laws of Ukraine and which carry out business in Ukraine;

Foreign entities which get a profit from sources in Ukraine (the profit arises from activities performed or property located in Ukraine, in case of dividends, interest, royalties and other passive income, the income is paid by a resident of Ukraine)

Non-resident legal entities which carry out business activities on the territory of Ukraine through a permanent establishment;

The corporate Tax Law established a basic corporate tax rate of 25 %. This is a standard rate from the clean income (i.e. gross income) for the entities and natural persons - private entrepreneurs. However, small legal entities may choose the simplified taxation. Thus VAT - registered entities pay 6% of their sales proceeds under the simplified tax system, while non -VAT - registered entities pay 20%.



• Tax rate on income received by a taxpayer from the sale of a house, apartment or room not more than once during a reporting year, if the total surface area of the house, apartment or room does not exceed 100 square meters is 0 % for residents and non-residents.

• Tax rate on income received by a taxpayer from the first sale of a house, apartment or room not more than once, during a reporting year if the total area of the object exceeds 100 square meters. The subject to taxation is the part of income proportional to the amount of exceeds is 1 % for residents and 30 % for non-residents.

• Tax rate on income from the sale of more than one object of real estate property during a calendar year is 5 % for residents and 30 % for non-residents.



After purchasing real estate property in Ukraine by non-residents, there mightbe several complications related to using this property in course of economicactivity of the business enterprise (or the owner of the property who does nothold Ukrainian citizenship) (for example in case of property being rented to athird party).

The options for non-residents owning real estate property in Ukraine are listedbelow:

• The owner of the real estate property may sign a contract directly with maintenance enterprise, which will be responsible for keeping property in operating conditions. A separate contract should be signed in case of property being rented.

• In case of non-resident is being represented by a separate entity, which is in charge of renting the real estate, registration in accordance with current Ukrainian legislation is in order.

• A real estate management contract may be signed with a resident of Ukraine, who will be in charge of the property.


The most viable and effective option from economic standpoint is signing a real estate management contract. (option № 3)

Option №1 has several drawbacks. Non-resident will lose a lot of time and resources on legal registration of the contracts, control over payments and other similar operations. It might be difficult for a non-resident to effectively and efficiently manage the real estate property located in the Ukraine being at distance.

The second option is associated with additional costs for non-resident related primarily to staff wages, office maintenance and other costs associated with an activity of individual enterprise which is renting the property or the non-resident’s representation party. Only the 3 rd option guarantees time and cost efficiency, and will help to avoid additional problems related to doing business in the Ukraine.


8. Sundry issuesThe buyer should verify the seller’s title by reviewing the titledocuments.

Title documents should include: • a certificate of privatization, or purchase contract (usually notarized), or

evidence of inheritance or gift; • a certificate from the Bureau of Technical Inventory (BTI) stating that the

seller is the owner and citing the BTI registration number; and • a certificate from the Unified Register of Prohibitions on Disposal of

Immovable property showing the absence of mortgages, arrest or other encumbrances.

The passport of both parties is also important. The notary also requiresthat the state duty and pension fund fee have been paid. After thepurchase contract is executed before a notary, the buyer should thenapply for the transfer of the property to be registered at the appropriateBTI office. Transfer only becomes effective when sale purchasedocuments are registered.


Ukrainian law makes a distinction between the title to land and the title to the buildings, constructions and other items located on the land. These rights are granted and exist separately. Therefore, an owner of a building does not always have the right of ownership to the land underneath. It is a very common situation in Ukraine when the ownership of the building differs from the ownership of the underlying land. The purchase of a building does not automatically result in the acquisition of the title to the land on which it stands.

Foreign individuals, foreign legal entities and joint ventures established by Ukrainian and foreign persons are not allowed to own agricultural land.


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