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Real estate planning and inheritance tax law

At these hardship times that shocked the world and global economy, people had an opportunity to re-evaluate their plans and consider things that were not taken into account before the lockdown.

One of the interesting topics that investors should consider is real estate investment planning, tax planning and the succession of their investment, although this sounds harsh, yet it is a realistic approach. So let’s have a look at this topic more in depth for the countries that offer citizenship and residency by real estate investment and their taxation laws noting that specialized advice is needed in each of the countries noting that a specialized consultancy is needed in each of the countries depending on the special circumstances of the investor.

Cyprus:

When you want to look into buying properties whether to enjoy your life or to spend your holiday, then you can consider Cyprus as one of the options. Other than the excellent climate throughout the year, Cyprus today hit the list of safest countries in the world to be ranked the 5th, as well as being one of the top countries in efficient performance to handle the COVID 19. 

One of the European countries that offer two immigration routes, a route towards Permanent residency and another towards direct citizenship of which both are through real estate Investments. Real estate tax planning in Cyprus is an advantage to foreign investors with its incentives and high threshold before starting any payments to income tax, also having specialized real estate planning using succession tools like Wills and Trusts, of which real estate would be distributed as per the request of the owner in case deceased, with an advantage given by the government of Cyprus imposing zero Inheritance Tax and zero Gift Tax, thus, enabling tax optimized solutions. By Will, a portion of ¼ of the real estate goes to any person the owner wishes to give to, and the remaining ¾ shall be distributed by law of Cyprus (statutory portion) to immediate family members in equal shares.

One of the most attractive European residency programs through real estate Investment is Portugal, Lisbon being the main attraction point to most investors and recently more attention going towards Porto, Algarve and other rural areas in Portugal with a tax law that is considered fairly low, and some could be exempted from annual property tax, but mainly, to plan your property purchase in Portugal, you have some calculations to do before doing so, by checking the required costs and the advantage that might eventually protection of succession.

Generally, the property transfer tax depends on the location of the property, Land and building value and else, and this might be exempted for urban properties for rehabilitation purposes, another addition when purchasing a property is the stamp duty of 0.8% along with other legal expenses such as the registration and notary as well as the annual property tax ranging between 0.3% and 0.8%.

Immediate family members are exempted from paying Inheritance tax, which rules in Portugal state that the distribution process should be governed by the home country of the deceased. In practice, this means that unless otherwise stipulated in a Will, the estate will be dealt with and taxed according to inheritance laws practiced in your home country. A Portuguese Law shall apply on the Portuguese Will if written prior by the deceased listing all heirs and beneficiaries subjecting the estate to Zero inheritance, yet a flat 10% stamp duty applies along with some administrative fees to translate and authenticate any documentation required. Successors would then have a choice to follow the tax rules of Portugal, or that of their home country, whichever that is more suitable yet again; a special consultancy from professionals will be required to give advice on a case by case basis. 

Portugal

One of the most attractive European residency programs through real estate Investment is Portugal, Lisbon being the main attraction point to most investors and recently more attention going towards Porto, Algarve and other rural areas in Portugal with a tax law that is considered fairly low, and some could be exempted from annual property tax, but mainly, to

plan your property purchase in Portugal, you have some calculations to do

before doing so, by checking the required costs and the advantage that provide protection of succession.

Generally, the property transfer tax when purchasing a property in Portugal depends on the location of the property, Land and building value and other factors, yet this might be exempted for urban properties for rehabilitation purposes. Another addition when purchasing a property is the stamp duty of 0.8% along with other legal expenses such as the registration and notary fees as well as the annual property tax ranging between 0.3% and 0.8%.

Immediate family members are exempted from paying Inheritance tax in the case the owner is deceased, noting that the inheritance tax rules in Portugal state that the distribution process should be governed by the home country of the deceased. In practice, this means that unless otherwise stipulated in a Will, the estate will be dealt with and taxed according to inheritance laws practiced in your home country, this means a Portuguese Will is an advantage making the wishes of the property owner more clear and avoid abiding by laws of other countries. A Portuguese Will is a listing of all heirs and beneficiaries subjecting the estate to Zero inheritance, yet a flat 10% stamp duty applies along with some administrative fees to translate and authenticate any documentation required. Reach Immigration always advises you to get a special consultancy from professionals to give advice on a case by case basis.

 Spain

Whether you are buying a property in Spain to acquire residency status and/or to diversify your investments and maybe to enjoy your holidays in Spain, purchasing a property in Spain involves payments of different taxes for different percentages depending on many factors including the location of the property, type of property whether it is newly developed or a resale, of which Value Added Tax (VAT) of 10% flat rate and Stamp duties of 1.5% applies on new build properties, while property transfer tax applies on the resale of which tax percentages differ from one region to another. 

As for the inheritance tax, it seems that heirs have no exemptions on this kind of tax when they inherit a property in Spain for nonresident successors (residence in Spain is less than 6 months per year), this is paid as well as gifts tax on the inherited property which depends on where the property is located. Bottom line, and since the taxation law in Spain depends a lot on the nature of the property, a legal personalized consultancy is definitely needed depending on your personal circumstances.

Caribbean 

The citizenship by Investment program, a well-known program to most of the interested investors and one of the oldest in the economic citizenship industry. Real estate investment is one of the options that offer a route to direct citizenship in some of the Caribbean countries such as Dominica, St. Kitts & Nevis, Antigua & Barbuda, Grenada, and St. Lucia. The advantages these countries offer are not only direct citizenship and passports but also the tax exemptions on inheritance, gifts, global income, and capital gains.  According to the inheritance tax laws of some of the Caribbean countries, a Will written by the owner of the property is an advantage, without differentiation made between the individual’s status in the country, yet all depends on the location of the property. If the deceased does not have a Will, then all property ownership is transferred to the spouse, or in the case there are children, then the spouse will receive half ownership and the remaining half is distributed equally among the children.

Each Caribbean country has its own way of succession distribution, but they all share the same advantage of free inheritance tax. 

Greece:

Greece offers its residency status to foreigners through real estate investment with a minimum threshold of 250,000 Euros which is subject to 3% transfer tax instead of 10% as of 2014 for new build properties with construction permits issued before 2006, however, for construction permits issued after that date, a 24% transfer tax applies yet the tax payment for the latter is under suspension till the end of the year 2022. Other taxes are also applicable on immovable property, which is the annual tax that depends a lot on the location of the property, age, size, and else. 

The law that applies on succession are the rules of the home country/nationality of the deceased, and if the deceased is a holder of multiple nationalities, then the inheritance tax law of the country with most ties to the deceased shall apply except if the deceased is a Greek national, then Greek laws are applied so heirs will be required to claim their rights within a certain period whether 6 or 12 months depending on whether the successors are inside or outside Greece.

Malta

Although the Individual investor program of Malta, as well as the Permanent residency program, do not oblige the investor to purchase a real estate in Malta, it rather gives the investor the option to rent one within a minimum threshold set by the authorities, however most of the investors after getting the citizenship or the permanent residency eventually purchase a property suitable to their needs. Accordingly, estate planning and tax planning is an important topic to consider while moving forward, so we would like to shed some light on the main property tax laws that investors might be affected by. 

Property tax law involves taxes on buying, renting, and selling properties in Malta, so both buyers and sellers upon the promissory of sale agreement would be subject to paying taxes. A 1% tax applies on the sales price paid by the buyer, and the seller would pay taxes on any capital gains from selling the property, on top of that the property is subject to stamp duty which is subject to the assessment by an architect and the value claimed by the seller.

Malta offers Zero inheritance, gifts, and wealth taxes, however, a 5% stamp duty shall apply on the market value of the property. If there’s no will, then the Maltese tax law is the applicable law for properties located in Malta, and the distribution would be equal to heirs such as spouse and children.

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