The Australian accountancy association UHY Haines Norton has recently published a report indicating the countries with the highest and the lowest property transfer taxes. The association examined 26 countries, including G7 jurisdictions and the most prominent world emerging economies. The report estimates the property transfer tax rates applying to the purchase of a residential property that is worth USD 1 million.
Countries with highest property transfer tax rates
Belgium appears at the top of the list as a jurisdiction levying the highest property transfer tax rates in the world. The country charges a property transfer tax at the rate of 11,3%, whereas the global average rate of such tax is approximately 3,3%. It means that a person who buys a real estate in Belgium for USD 1 million will need to pay USD 113.131 to the government. The average Belgian tax rate of 11,3% was calculated on the basis of tax rates applicable in the different administrative regions of the country, namely, Brussels, Flanders, and Wallonia. The rates of the property transfer tax in those areas fluctuate between 9,8% and 12,5%, depending on a number of factors.
The European average tax rate (3,8%) is similar to the global average. However, the rates of the large Western European countries, such as Spain (8%), France (5,1%), and Germany (5%), are above the global average.
Countries with lowest property transfer tax rates
The report reveals that the US, Romania, Russia, and New Zealand levy the lowest tax rates. The effective tax rates applicable in those countries are 0,6%, 0,2%, 0%, and 0%, respectively.
Out of the examined 26 countries, New Zealand and Russia are the only two countries that do not tax residential property transactions. Nevertheless, it should be noted that Russia charges a nominal State Duty of USD 30. Thus, New Zealand appears to be the only country which do not impose any taxes and other obligatory payments on real estate transactions.
It is worth mentioning that the report does not analyze some of the European low tax jurisdictions which levy low property transfer taxes. For instance, in Bulgaria, the property transfer tax varies between 0,1% and 3%, depending on municipality and the location of the real estate.
The high rates of the property transfer tax in Belgium and other West European countries can limit their rapid economic development. Taking into account that high-value properties in populated capitals are especially attractive to wealthy investors, the West European capitals may become less desirable investment locations than low-property-transfer-tax locations, such as Moscow and Wellington. Moreover, the high property transfer taxes may decrease foreign contributions to the local economies (e.g., renovation and maintenance costs) and limit the mobility of employees. In this regard, Tim Livingstone (Director of UHY Haines Norton) stated: “If businesses have to offer much greater incentives for senior executives to relocate, this could have a serious impact on job creation and business investment, and ultimately on the wider economy.”
The table below provides an overview of the tax rates in the 26 examined countries which apply to transactions of residential real estate worth USD 1 million.
|Rank||Country||Rate of property transfer tax on high-value properties|
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