Buy-to-Let Investment: Why not go Abroad?

Published on 28 October 2016

Many individuals choose to invest abroad for a variety of reasons. Not only do some countries offer highly advantageous prices per metre squared, but for certain investors, foreign investments enable them to prepare for retirement in a country of their choosing, or diversify their investments. Effectively, the golden rule of investing is never  to put all your eggs in one basket. 

A LEGALLY-SOUND PROCESS

The first thing to know is that no law prevents you from making investments outside of the United Kingdom, whether they be financial, real estate or otherwise. However, you are still subject to some legal obligations to declare earnings. Purchasing a property abroad means transferring funds to the country in which you wish to buy and although opening a foreign bank account is legal, funds within it must be declared on your UK tax statement. In addition, some foreign transactions may need to be declared to the UK government, but this is your bank’s responsibility, so you don’t have to take action.

On the other hand, you don’t stand to gain anything from choosing a country for its tax rates, as any UK resident is liable to pay British taxes. This obligation covers all income, including that coming in from abroad. Be careful: if you fail to meet these legal requirements you face a range of possible penalties including fines- or jail time for severe cases!

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PRECAUTIONARY MEASURES TO TAKE

Before making your choice, thoroughly research any possible countries for your investment. The economic climate and average price per metre squared shouldn’t be your only criteria for making a decision. It is essential to know the history and predicted future of the real estate market, along with demographic and social information about the country

At the same time, it is a good idea to educate yourself in depth on the legislation of the country, or countries, that interest you: What fees would you be subject to when making your purchase? Does the country have a bilateral tax agreement with the UK? If not, you risk paying taxes for both the UK and the country in which you made a buy-to-let investment.

Some countries also demand that you instruct a notary to make a purchase, while others, such as Spain and here in the UK, allow the act of sale to be drafted by a property lawyer (although your foreign mortgage provider may still require a notary, so make sure you check before finalising the purchase). Don’t hesitate to ask a UK conveyancing solicitor with experience in foreign property, as they can provide advice and support. 

VISIT!

Finally, it’s best to visit the property in person before you make a purchase. Nothing beats a visit to see what the property is really like, as you can check out the surrounding area, local services and the proximity of transport and shops, i.e. anything that makes your property attractive and assures you that it won’t be left vacant. 

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