A taxing question

[andyk2]

Good Morning,

An interesting situation has arisen for investors who purchased property when the pound was stronger against the Euro.

In theory, it is now possible for a UK investor to sell their property for the same Euro price as they purchased back in 2004/5/6 and make 40%+ profit. Example -

December 2005 Purchase price in Euros 80.000 Purchase price in Sterling 54.420

December 2008 Selling price in Euros 80.000 Selling price in Sterling 76.765.

My question is -

Obviously there is no capital gains tax liability in Bulgaria, but what if the investor wants to repatriate his/her funds back into the UK? Does the UK government take the view that the investor has made a profit and tax them anyway?

I appreciate that there are different scenarios depending on the tax situation of an individual, but advice with sources of information would be welcome.

Thank you

Andy

 

[Lysos]

Andy,

Apart from the fact your post begs the question, "Just who is going to buy this property at any price, in today's market ?", if you are classed as UK resident for tax purposes you are liable for tax on any gains (less your CGT allowance) made anywhere in the world, whether you repatriate the proceeds or not.

 

[andyk2]

Thanks

I posted this in the Bulgaria forum because it seemed more active than many of the other Euroland destinations, but the same scenario would apply for any property sold in Europe - or anywhere that has a currency stronger than sterling.

I found out that the UK government will tax you on any gains made irrespective if it was through an increase in the value of the property or as a benefit of a weak pound. The good news is that the tax rate in 2009 is down to 18% with an exemption on the first £9600.

Andy

 

[Jain and Chris]

We are assuming here that it is an apartment bought in individual names in Bulgaria. However, there is also a difference regarding what the Brits call "capital gains tax" if you own your Bulgarian property via a company rather than as an individual.

1. For those who are resident in Bulgaria and own the property as an individual, then there is no "capital gains tax" (or profit tax") if this is the only residence you sell in a financial year (Bulgarian financial year!).

However, if you are not resident in Bulgaria for fiscal purposes, you would still be liable to capital gains tax / profit tax in your own country where you are fiscally resident - less any tax paid in Bulgaria and less any personal allowances in your own country, whether you re-patriate those profits or not.

2. For those who own the property via a Bulgarian company vehicle, there is 10% Bulgarian corporation tax (corporate tax) to pay on any profits made by the Bulgarian company.

Then there is the situation of re-patriating those funds if you are fiscally resident outside Bulgaria, there may of course be additional tax to pay on any gain, less tax paid in Bulgaria.

We did quite a big article about this only recently, however, nothing makes up for sound independent professional advice, so get in touch with an expert immediately as your own individual circumstances will affect how much tax you are likely to pay.

All best wishes, Jain and Chris