Pay No Tax

Date: 05/13/2005

International Living Postcards-- Saturday Edition

Saturday, May 14, 2005
Paris, France

Dear International Living Reader,

Not every country in the world levies a capital gains tax on profits from the sale of a piece of real estate. Be careful when investigating this expense, though, as some countries may not impose a "capital gains" tax per se. Instead, they may tax capital gains as ordinary income.

The list of countries that truly don't tax capital gains on real estate (albeit in some cases with certain restrictions) is growing. For example:

-- Argentina…although you may be subject to income tax on the capital gain under certain circumstances.

-- Croatia…if the property is held for more than three years.

-- France…if the property is held for more than 15 years.

-- New Zealand…if the property is a long-term investment or your primary residence.

-- Poland…if the property is held for more than five years.

-- Portugal…if the property is held through an offshore company and the change of ownership applies to the company, not the property.

-- Spain…if the property is held for more than 10 years or if you are over 65 or if you reinvest the capital gain in another Spanish property within three years.

-- Thailand…although income tax is levied on property, whether the buyer or seller pays is part of the bargaining process.

-- United Kingdom…if you are non-resident.

For U.S. citizens, Uncle Sam has his hand out no matter where your income or capital gain is derived. However, you can defer capital gains tax on foreign property through Section 1031 of the Internal Revenue Code. It's simple to take advantage of, can be used on several properties at once--even between family members--and is an excellent estate planning tool…but timing is critical and the IRS are immovable when if comes to granting extensions. We recommend Janice Houff, of First American Exchange Company.

Lief Simon
Real Estate Editor, International Living

P.S. If you've been following our "May Madness" e-mails, you know we're taking 25% off the price of all IL products for the month of May…including membership of my private investment service, Global Real Estate Investor. This publication helps members find little-known, highly lucrative international property investments. You get a $200 discount when you join…but only until the end of this month…and only with this link.