Buying a holiday home, a flat for your children or for your retirement, or simply diversifying your assets, there are numerous opportunities for purchasing property abroad.
Before you sign anything, it is best to ask the right questions.
WHAT ARE THE DIFFERENT WAYS OF OWNING PROPERTY?
Depending on the country in question and the purpose of the acquisition - rental for income, furnished, family inheritance… - the terms and conditions can differ. The “direct” ownership of a real estate property can, for example, be envisaged for the simplicity of the administrative, accounting, legal and fiscal management of the property. For gift and inheritance rights, it is best to own a property via a company, from the country in which the property is being purchased (or from another country), or even, in certain cases, a Luxembourg non-trading partnership.
WHAT ABOUT THE FINANCING?
The attractiveness of low interest rates and the possibility of obtaining tax credits, depending on the legislation in the country, can be advantageous financially. In the case of a mortgage, make sure that you insert suspensive clauses linked to the granting of the financing, so that the buyer can cancel his or her acquisition if he or she is not granted a mortgage.
CAN OWNING PROPERTY GENERATE SPECIFIC TAXATION?
If in Luxembourg, there is no particular recurring taxation involved in the owning of property, this is not the case everywhere. In Belgium for example, the ownership of a secondary residence is subject to the estimation of a rental value which is taxed by the State. It is therefore important to inform yourselves about this issue in the country which you are planning to buy the property in.
WHAT HAPPENS IN THE EVENT OF A TRANSFER OF PROPERTY FREE OF CHARGE OR AN INHERITANCE?
Should there be an international aspect to the transfer of property or inheritance, there are two taxation systems. Exclusive taxation is when the inheritance is only taxable in one country; property is often taxed in the country in which it is located. In the event in which the heirs are taxed in all the countries concerned by the inheritance, they have the possibility of imputing the inheritance tax onto the taxes which have already been paid in their own country. This imputation system avoids double taxation.
From a fiscal point of view, you must try to find out whether an agreement exists in order to avoid or to limit double inheritance taxation. From a civil law point of view, the regulations will depend on the existence of a matrimonial property scheme and, if applicable, a will.
IMPORTANT INFORMATION TO REMEMBER:
Whatever the planned asset transaction, as soon as a foreign element comes into play, you must get advice to ensure that you comply with the form and the content of the specific civil and fiscal legislations in force and anticipate any consequences. If you need any further information, please contact your private banker who will put you in touch with our experts.