Double taxation occurs when an overseas investor is required to pay tax once in their home country and again in the country where they have invested.
Investors are sometimes required to pay tax on their income in their home country as well as the income they generate from an overseas investment such as property.
However, the UK has ‘double taxation agreements’ with many countries to prevent investors having to pay tax twice on the same income. This is because overseas investment in most cases is good for the economy. Double taxation agreements specify which country should tax the individual if both have the legal right to do so. [r]
Countries Exempt from Double Taxation
Countries which are excluded from double taxation laws are not required to pay tax twice on their overseas investments.
Below is a list of some of the countries who may not be required to pay double taxation on their UK property investment income:
For the full details and to find out more please visit http://bit.ly/1Y6Pp3x [r]
Despite some overseas investors still having to pay a substantial amount of tax on their investments in the UK property market, the amount of international interest remains at an all time high.
Asian Investment in the UK
The UK is considered a safe-haven for most overseas property investors, with a friendly and stable government and a high rental demand.
Councillor George Osborne has been promoting the North of England to Asian investors as a strong and competitive investment alternative to the capital. In September 2015, Chancellor George Osborne announced that the North of England would see multi-million-pound investment come directly from China, strengthening the emerging Northern Powerhouse.
Mr Osborne said: "We are building an ever closer relationship with China - it's a partnership that is set to unleash growth and help regions like Xinjiang where we know investment can make a real difference, as well as unleash new growth back home, in places like our own Northern Powerhouse.”[r]
Property in Asia can be extremely expensive, especially in the city centres. In the UK, it would take a skilled service-sector worker approximately 14 years of average earning to be able to afford to buy a 60 square metre property, according to the UBS Global Real Estate Bubble Index. However in Hong Kong, it would take 17 years to make enough money to buy an average apartment in the densely populated city.[r]
UK property is being snapped up by overseas cash buyers who will invest in both on and off plan developments without a second thought. Recent statistics showed that 85% of prime London property purchased in 2012 was bought by overseas investors.
A report by estate agent Savills also found that in 2013, a massive £7billion of international money was spent on ‘high end’ London homes with just 20% of that spent by UK citizens. In addition, two-thirds of these properties were bought by overseas investors for rental purposes. The report also highlights that over the past two years, only 27% of new homes in central London were sold to UK buyers while the rest were sold to Asian and Russian investors.[r]
Hong Kong Property Investors
Hong Kong, in particular, benefits from being excluded from double taxation, and has invested heavily in the UK property market in the last ten years.
The Hong Kong-UK tax treaty benefits people who are resident and working in the city, but who also maintain strong ties with the UK. For instance, if you live in Hong Kong and earn a living as a businessman, whilst also earning money from a UK buy-to-let, you will only have to pay tax on your Hong Kong income. This treaty may have been the catalyst to the increase in investment in the UK from Hong Kong investors.[r]
There is an emerging market of middle-class cash buyers from Hong Kong who are investing heavily in the international property market. There is considerable doubt about the stability of Hong Kong’s political and economic future and so the UK is seen as both an attractive and safe investment decision.
London remains an extremely popular property market for overseas investors, however, Hong kong investors are moving away from the capital and investigating the strong property investment potential in the North, where rental yields can be almost double those of London.[r]
The Heaton Group will be visiting this year’s SMART Expo in Hong Kong. If you are interested in finding out more about our UK property investment opportunities please do not hesitate to contact us on 01942 251949
1. Tax Guide For Students - What is a double taxation agreement?
2. GOV UK - Double Taxation Treaties
3. Hubbis -Understanding tax issues between Hong Kong and the UK
4. The Guardian - London House Prices Most Overvalued World UBS
5. The Guardian - Rich overseas investors UK EU housing market
6. Hubbis - Understanding tax issues between Hong Kong and the UK
7. Barrons - Could Hong Kong property prices fall?