Real Estate Investment

Real Estate Investment

Buying a property abroad provides certain benefits to high-net-worth individuals. Residency and citizenship by investment programs have provided these advantages to thousands of investors worldwide. 

International real estate investment provides certain tax savings, EU residency, and asset protection. This type of investment benefits the families of investors as well. 

You can be a resident of one country and get residency in another through buying property. In this way, you can both live in that country and produce income through this property. Some countries also offer citizenship in return for real estate investment. 

There are certain important points regarding property purchase abroad. You can find detailed information about this below. 

Property Taxes While Buying Property

Certain tax obligations come with buying property. So, you need to check the requirements in the relevant country before investing.

Mostly, countries determine property taxes based on the property’s value. They may also vary based on your intention in buying. In this respect, in Portugal, taxes on urban or rural properties are different. Similarly, Greece entails a 15 percent annual tax on your property under the name of your company. 

Annual Property Tax

In Europe, most countries entail an annual tax for property ownership. These taxes are not usually high though. Still, countries demand it because they are easy to collect. 

An exception to this is Malta. There are no real estate taxes as a result of your initial purchase. 

Taxes on Capital Gains and Property Sale in International Real Estate Investment

If you plan to sell your property in the future, you need to consider the terms of the sale beforehand. Note that certain changes in legislation may occur. However, it is advisable to get an overall understanding of the terms beforehand. 

In some European countries, capital gains tax may reach 50 percent. Also, whether you’re a resident or not determines the percentage you pay. 

Taxes on Real Estate Transfer 

In many countries, real estate transfer taxes exist. Usually, they’re calculated as a percentage of the purchase fee. Before your international real estate investment, it must be factored in your investment cost.

Inheritance Laws and Gift Taxes

Another important issue while buying property is inheritance taxes. Some countries encourage making a will when you buy a property. 

Different laws apply in different countries. If, for example, you’re a resident of Spain and you have a property there, your children can have it after you. If you want it otherwise, you must make a will. Also, Spain has a progressive inheritance tax. It’s calculated as a percentage of the property inherited. The rates of inheritance and gift taxes can be as high as 80 percent as well. In Malta, it is five percent. In Portugal, there’s no inheritance tax imposed on citizens. France, on the other hand, requires all real estate properties in France to be subject to French inheritance and forced heirship rules. Again, other countries may apply foreign inheritance laws to domestic real estate. So, conflicting laws may occur as well. 

Because of the varying applications, it’s important to be aware of the local inheritance laws. Also, consulting an expert will be quite helpful. Your special conditions may be affected by these laws. For example, some countries may impose inheritance laws on your country of origin. 

Some countries allow you to avoid such taxes depending on the foreign or domestic structures. However, it’s been more difficult recently. 

Varying Residency and Citizenship Rights

The rights you get from residency and citizenship in Europe vary depending on the country. Also, each program may provide you different rights. So, it’s advisable to check the agreements your target country has with other countries. The rights include access to the Schengen area. It’s also useful to check if there are other agreements regarding freedom of movement. For example, not all European passports have the same degree of effectiveness. Some are more powerful, and this affects the limitations of travel and business agreements. 

To give an example, Portugal offers a Golden Visa if you buy qualified real estate here. In this case, you can travel to the Schengen countries visa-free. Yet, if you want to become a Portuguese citizen, you need to wait five years for citizenship. 

Some countries like Spain entail full-time residency for citizenship. The citizenship by investment program in Turkey allows citizenship within four to six months. However, a Turkish passport does not offer visa-free travel to the EU. 

Personal Tax Liability Is Another Important Issue

Tax liability may occur if you live in the property you’ve bought for a long time. For example, you’ll be a tax resident in Portugal if you stay there for at least 183 days a year. 

In some cases, you may need to pay double taxes because of your tax residency in another country. So, it’s important to check if your target country has tax treaties with your country of origin. 

Some Popular Real Estate Investment Options To Get EU Residency

Portugal Golden Visa

Portugal Golden Visa offers four real estate investment options to get residency in Portugal. You can buy real estate for sale worth at least €500,000 in Portugal. If it’s in a low-density area, the minimum amount drops to €400,000. 

If the real estate is older than 30 years and in an urban rehabilitation area the minimum amount is €350,000. If such property is also in a low-density area, it drops to €280,000. 

As of 2022, the real estate option will not be available for residential properties in Lisbon and Porto though. 

Greece Golden Visa

Greece Golden Visa offers the least investment amount to get EU residency. It’s sufficient to buy real estate in Greece for at least €250,000 to get residency in Greece. 

Spain Golden Visa

You can get Spain Golden Visa by buying real estate worth at least €500,000 in Spain. 

Buying a real estate property abroad comes with certain obligations. Careful research about each country’s requirements will save you from unexpected circumstances.