General strategies
Invest in real estate outside of your country of residence can be an excellent strategy to diversify your investment portfolio, and may provide you with access to markets with attractive returns. However, each country has a tax system differently, and understand how to minimize taxes can be the difference between a profitable investment and a tax burden unexpected.
Here we will share some general guidelines that will allow you to to reduce the tax burden when you acquire overseas properties.
1. Known local tax laws and the tax on properties
Each country has a a tax system that is different when it comes to properties. Before investing, it is crucial to understand how it is levied on properties in the country in question. Ask yourself:
- Are there taxes on the property? Some countries impose annual taxes on the value of the property, while others do not.
- What are the rates of taxes on the rental income? If you plan on renting the property, you will find information on the tax rates in rental income.
- Are there taxes on the capital gains? Some countries impose taxes on the sale of properties and the capital gains obtained from these transactions.
Knowing these regulations can help you to decide if a country is fiscally attractive for your investment.
2. Take advantage of the double taxation agreements (CDI)
The double taxation it is a challenge for many international investors, since it can involve the payment of taxes in two countries on the same income or gain. To avoid this problem, make sure that the country in which you invest to have a double taxation agreement your country of residence. These agreements allow the tax paid in the country of the property are discounted of your tax return in your country of residence, avoiding you to pay twice for the same income.
3. Consider the option of acquiring properties through a society
Instead of buying a property as a natural person, you may be more advantageous to do so through a real-estate company. Societies can provide you with several tax benefits, such as:
- Deductibilidad of expenses: Expenses related to the purchase, maintenance and rental of property may be deductible if they are acquired through a society.
- Lower taxes on the earnings: In some countries, companies can pay a lower rate individuals.
- Protection of heritage: To have the property through a partnership also offers legal protection in case of financial problems or disputes.
However, it is essential to have an expert opinion to see which one is the most suitable option, depending on your personal needs and the current situation.
Yes is your case, schedule a call with our team and we'll see which option is more feasible for you, no worries.
4. Take advantage of local tax incentives for foreign investors
Many countries offer tax incentives to foreign investors to encourage investment in real estate. These may include:
- Tax exemptions during the first years of ownership.
- Tax breaks renovate or develop properties.
- Reduction of estate taxes for owners of real estate.
Investigates whether the country in which you want to invest programs tax incentives or exemptions that could be of benefit to international investors. These incentives can significantly reduce the tax burden of your investment.
5. Minimizes the property taxes with tax planning adequate
Planning tax appropriate it is key to reducing your taxes when buying properties abroad. Some of the strategies that you can consider include:
- Purchase at the right time: Some countries have tax incentives according to the season or the changes in their fiscal policies. If you invest at the right time, you can take advantage of lower tax rates taking or special programs for new investors.
- Use of tax structures favorable: Depending on the country, you can use tax structures as trusts or societies to optimize the taxation of your property.
6. Consider the short-term rental vs. long-term
The taxación rental income can vary significantly depending on if you rent the property to short-term or long-term. Some countries impose higher taxes on the short-term rentals (for example, through platforms such as Airbnb), while others have lower rates for long-term rentals. Assess what is the best strategy for you and considers the taxation of long-term faced with the choice of holiday rental.
7. Keep a focus on the international diversification
If you are planning to invest in several countriesdiversification not only protect your portfolio in front of local risk, but also allows you to take advantage of the different tax advantages of each country. Some nations have lower taxes on the property, while others offer tax advantages for rental income or capital gains.
Strategies for optimizing your real estate investments
Pay less taxes by buying properties abroad is not a question of luck, but of strategy. Know the tax systems of local, take advantage of the double taxation agreements, and properly structure your acquisitions will allow you to optimize your investment and reduce your tax burden. Remember that each country has its own rules and, to make informed decisions, it is crucial to have the right advice.
📢 Are you ready to start investing in overseas properties? Don't let the tax stop you. Contact us to get personalized advice, and optimize your investment. It will help you to pay less taxes and maximize your returns!
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