Western Europe Has World's Highest Property Taxes

by Ulrika Lomas, Tax-News.com, Brussels

25 July 2016

Western European economies feature prominently in the top ten countries that most heavily tax prime properties, according to a study from UHY Haines Norton

UHY said Belgium has the highest average property tax rate on a property worth USD1m at 11.3 percent. Spain was in second place, with a transfer tax of eight percent on a USD1m property.

France and Germany were fourth and sixth respectively, charging transfer taxes of USD50,901 and USD50,000 respectively on properties worth USD1m.

Pakistan (USD60,000), India (USD50,262), Croatia (USD50,000), Malta (USD50,000), Australia (USD48,155.50 - representing an average of local variations), and Uruguay (USD40,000 - based on cadastral value of property, not market price) make up the rest of the top ten.

UHY said that the world average property transfer tax rate is 3.3 percent, with the European average slightly higher at 3.8 percent.

At the other end of the scale, New Zealand and Russia have the lowest taxes in the table, effectively charging zero percent on prime property purchases. Transactions taxes are also low in the United States, at an average of 0.9 percent across the country's localities.

Romania (0.2 percent), Ireland (one percent), Italy (1.7 percent, based on cadastral values), and Canada (1.8 percent, based on an average of local rates) all charge transactions taxes of less than two percent on prime properties.

Tim Livingstone, Director of UHY Haines Norton (Auckland) Ltd said that governments risked "exploiting" property in their search for revenues, as well as pricing ordinary local buyers out of the property market.

"Higher property purchase taxes can put a strain on domestic buyers, who may not actually be particularly wealthy, given house price inflation in some locations over the last decade or two," he observed.

Livingstone also said that high property taxes can constrain labor market mobility. "If businesses have to offer much greater incentives for senior executives to relocate, this could have a serious impact on job creation and business investment, and ultimately on the wider economy."

"Prime properties, especially in capital cities, are particularly desirable for wealthy investors from overseas, but where there are excessively high taxes, these markets could become less attractive," he noted. "Capitals such as Paris or Berlin could lose out to locations such as Auckland and Wellington."

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