Britons Urged To Be Aware Of Tax Liabilities Of European Property Investing

by Jason Gorringe, Tax-News.com, London

15 June 2004

British investors hoping to snap up cheap property in the newly acceded EU states of Eastern Europe have been warned to be fully aware of the tax implications of such investments to avoid any potentially nasty confrontations with the Inland Revenue.

Investors have been targeting properties in the Czech Republic, Poland, Hungary and Slovakia, which often sell for as little as £10,000, hoping to cash in on a property boom that could see prices rise by 50% according to some estimates.

However, experts fear that many investors are unaware that they may have to pay taxes both locally and back in the UK.

“I am worried that some investors will become aware of this only when the Inland Revenue identifies them as a problem case because they have not filed returns or paid enough tax,” Stephen Humphreys of accountant Moore Stephens told The Times.

Investors may also be unaware that local taxes apply on gains made from sale of property as well as rental income, although foreign tax liabilities may usually be offset against a person's UK tax bill. Dividends paid by a company may be liable for tax in both countries.

Many Britons who have bought second homes in France and Spain through a company structure to lighten the tax load have been informed that their homes are to be taxed as benefits in kind.

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