Buying Foreign Property in Your Own Name? STOP DOING THIS! 🛑

Never, never, never buy a US property in your own name.

Why? Because the global tax and legal game is completely rigged against individual owners. 

Whether it's the hyper-litigious nature of the US, the crushing weight of UK self-assessment brackets, or Spain's brutal beneficiary inheritance laws, owning global real estate personally is a ticking financial time bomb.

In this hard-hitting episode, we look at the global piece of real estate investing. From analyzing LLCs vs. C-Corps to breaking down why the 6th of April tax crossover is costing you an absolute fortune, we give you the raw truth about international property structures.

Stop chasing short-termism and start protecting your legacy. Listen now! 🎧🌍

 | UK Property Tax Options: 
 | 🌐 UK Property Tax Website: https://www.optimiseaccountants.co.uk/
 | 📅 Book a Call: https://optimiseaccountantsltd.as.me/Optimise-accountants-sales-call
 | 📄 UK Property Tax Guide: https://survey.zohopublic.com/zs/qhCNLB
 | 🎧 Podcasts: https://www.buzzsprout.com/2607825
 | 💼 LinkedIn Articles: https://www.linkedin.com/in/simon-misiewicz-fcca-att-ea-caa-mba-61637033b/recent-activity/articles/ 

Transcript

SPEAKER_00 0:00

No matter where you buy property, you should probably buy it in a limited company in that country. Here's why. I wanted to cover off something that came across my desk quite a few times actually in the last few years. Inasmuch as where people will buy a property in a country, whether that's in the United Kingdom, in Spain, Portugal, United States, wherever it might be. And one of the things that I often find is that people buy it in their own name. And I can tell you for one that buying a property in a country like the United States could be problematic in itself because it's very litigious over there. And anything that goes wrong with that property, you are personally liable from a legal perspective, and therefore any challenges, any legal suits will be on you, and your personal assets could be at risk. And then it struck my mind of well, are there any other issues with other countries? And indeed there are. If we think about you owning property as a British person in the UK, then you could be an issue where you have properties all over the world and you have to report that income against your personal self-assessment tax return, which means that you could be forced into being a high rate taxpayer or indeed an additional rate taxpayer. And we already know the things like Section 24 mortgage interest relief cap has its problems. The fact that you can no longer get this capital allowances on holiday lets, even though it's European-wide. And then there's the 10% wear and tear that was removed. So all of a sudden, all these properties around the world could be costing you an absolute fortune. You personally in tax. So there's two aspects of it really. There's the idea that you have this legal risk going at you from certain countries, and then you've got the UK tax position as well. Now, of course, if you have rental income in different countries, you would clearly have to pay taxes in those countries as well. So you'll have to do a tax return in that country as well as potentially in the United Kingdom if you're actually living there. But what if you are like me not living in the UK but you have assets all over the world? Well, most countries are now falling into this regime of taxing you on your worldwide income, no matter where the asset is. Now, if you have property income, let's say in Portugal and you're living in Spain, that is going to be taxable in Portugal and in Spain. Indeed, if you're living in Spain like I am, and you have UK property, then all of a sudden you will have the UK tax to consider as well as the Spanish tax. And you then you've got this nonsense of well, the tax years don't align, do they? Because the UK tax system works on the basis of the 6th of April to the following 5th of April, whereby the Spanish tax return really is the calendar-based system, the 1st of January to the 31st of December. So you've got then this crossover, and how do you prepare your tax returns? How do you protect yourself from this issue of double taxation? It can get very complicated. And then, of course, there's this whole matter of inheritance tax. Now, in most countries where you have inheritance tax, it's normally going to be subject to the parent that's passed, their estate is going to be subject to inheritance tax and they are going to be responsible. But here where I live in Spain, that's not true. Actually, it's the beneficiaries that will need to make sure that the inheritance tax is paid. There is an issue of double taxation even with inheritance tax. So you have to think about that as well. So what is the best solution? Well, unfortunately, I cannot give you the one size fits all solution. There just isn't one. But your particular situation would be dictated based on where you are, where you're going to be in the next 5, 10, 15 years, and then where what you're going to do with that asset again in the next 5, 10, 15 years. You may be in a situation whereby having that property in your own name may be a good idea for the short or for the long term. However, like many people that I'm coming across recently, is I'm saying to people, well, you should never really buy a US property in your own name. Never, never, never. Just because of the tax issue. Now, if you buy that same property in the United States in a company, now there are different company structures that you can have in the United States. There's a limited liabilities company, LLC, and there's going to be a C corporation. An S corporation, for those who've been talking about those, are not going to be applicable because S Corporation deals with services. So you are going to be looking at the LLC versus C corporation. And again, which one is right for you will be dictated based on your situation from a legal and tax risk perspective. Ideally, I know that many CPAs in the United States, accountants, would say you should buy it in an LLC. I'm sitting on the fence to say, well, actually, it could be better in a C corporation because it's an entity in its own right, and therefore you do not need to worry about the income tax perspective in the United K in the United Kingdom based on that property. If you've got a property, a US property in a US company, then that is going to be shielded to a degree from UK tax perspective. The only time that you would pay UK income tax is the dividends that you take from that US company. And you could argue that's a case if you bought a Spanish property. Should you buy it in your personal name in Spain versus buying it in a company or an SL in Spain? Now, again, there are lots of things to think about here. But if you've got a company structure, it says it's got shareholders. And over time, you may decide to pass those shares over to loved ones. And if you do decide to do that for inheritance tax planning in the UK, you also need to think about well, what is the capital gains tax exposure of transferring shares from you as a parent, as an example, to your child. You could end up paying capital gains tax in the UK, but there may be also a tax hit in the country where that company is based. So if you've got a Spanish company that owns a Spanish property and you're transferring shares of that Spanish company to your loved one, you personally may have to pay capital gains tax liabilities. So, all in all, it is always worth considering. Should I buy a property in my own name or indeed a limited company? And there is no one fits all solution, as I said already. But at least what I'm trying to do here is to make you think there is not just a small piece that you need to think about, but the global piece as well. Where you're thinking about moving to, what you might be doing in the long term, how much money you're earning now versus how much money you're going to be paying, earning later on in life. What's your inheritance tax position now versus what might happen in five, ten years? So you have income tax, capital gains tax, inheritance tax, not just in the country you're living in, potentially in the UK, but in the country you are also investing, be it in the United States, Spain, Portugal, wherever, Ireland, UK. So please do get some advice. Don't assume that buying a property in your own name is good from a tax or legal perspective. Of course, you have that final piece, which is financing. Where should you get, you know, what structure should you use to get financing? And most times, I would argue that getting finance in your own name might be cheaper than a limited company. And if that's the case, then most people will go down the route of getting a property in another country in their own name. But again, they're missing that point about tax consequences and legal consequences because they're chasing that short-termism view of cheaper finance. But they that may not be the only thing that they should be thinking about. Indeed, if you're buying a property in the United States, Portugal and Spain, and you're living in the in the UK and you're British, it may actually be cheaper for you to think about raising finance from your own home or your UK properties, and then using the cash that you release from that to then put the cash injection into that foreign property because getting a foreign mortgage may be more expensive because they don't know you, the risk profile is higher, and therefore it's likely that the interest rate is going to be higher as well. I by no means am I a mortgage expert. So please do reach out to your mortgage broker in the UK about potentially raising finance from your own properties, and then compare the rates that they are sharing with you against the mortgage broker of choice in the country that you're looking to invest. I hope this show has been useful just to give you some thoughts and considerations of what you might want to look at before you start buying property in a different country.