Governments are
targeting wealthy property buyers with higher property purchase fees in an
attempt to help plug their fiscal deficits, shows research by UHY
International.
The average cost of
stamp duty and other compulsory property purchase fees for a property worth USD3.5
million is now 3.4%, compared to the average 2.6% tax burden on more modest properties
with a purchase price of USD150,000.
This has been pushed up by recent purchase tax increases on high end
properties in countries such as the UK and Spain.
Spain and the UK have
some of the highest property purchase taxes targeted at prime properties, which
are seen as attracting a large proportion of overseas buyers.
The UK levies 7% stamp
duty on property purchase over USD3.1 million, while Spain’s average taxes and
charges of 7% mask a shift towards higher marginal rates for the most expensive
properties. In regions popular with
wealthy local and foreign buyers, including the coastal provinces of Andalucía,
Cantabria and Asturias, and the Balearic Islands, rates vary from 8% to 10% for
more substantial properties.
Earlier this year Hong
Kong doubled the rate of stamp duty charged on properties of over HK$2million
to 8.5%. In mainland China, the most
expensive properties attract stamp duties and other taxes of 5% of the
property’s value, compared to 3% for lower value properties.
Ladislav Hornan, chairman of UHY explains: “In the
wake of the financial crisis, national and regional governments have been
desperate to plug their deficits. One
populist way to do this has been by levying new top rates of stamp duty on the
purchase of the most expensive properties, which often attract foreign
buyers. When the new top rate was
announced in the UK, it was in part a response to left-of-centre politicians’
demands for a so-called mansion tax.”
“While some markets might be sufficiently robust to
absorb this, governments do need to be careful not to kill off their property
market altogether. Economies benefit from the added value that wealthy buyers
and an active property market bring to the economy, from spending on
refurbishments, to legal fees and employing domestic staff. Once High- Net- Worth individuals leave, it
is hard to attract them back.”
Ireland, despite moving to a flatter stamp
duty structure in the wake of the financial crisis, still charges double the
rate of stamp duty on the proportion of a property sale exceeding Euro€1,000,000.
UHY also point out that
many European economies that do not target prime properties in particular still
have relatively high overall property purchase taxes, averaging nearly 4.5% for
France, Italy, Austria, the Czech Republic and Germany.
UHY say that by
increasing the costs of buying a new home, these higher property purchase taxes
discourage labour market mobility. By
contrast in North America, property purchase taxes are far lower, typically
below 1% in the USA and no higher than 1.9% for the most expensive homes in
Canada.
Ladislav Hornan adds: “By
imposing often very significant additional costs on the purchase of a property,
governments may be discouraging people from moving for a new job, especially
those with families who might reasonably expect to own their own property.”
“That means that
employers have to offer significant pay rises to lure talented staff to a new
location, workers opt to do jobs that are below their skills and experience
rather than move. High levels of stamp
duty are an easy fiscal option, but in a prolonged recession, they may be a
short-sighted one.”
Bernard Fay, co-managing
partner of UHY Fay & Co, the Spanish member firm of UHY, says: “Since 2010,
regional governments in Spain have made much greater use of their discretion to
set their own stamp duty rates, with the result that rates have gradually
shifted upwards, especially in areas popular with high net worth individuals and
international buyers.”
“Combined with other
tax requirements, targeted at wealthy international families, it is starting to
make Spain look unwelcoming towards exactly the sort of people who have
sustained the economy of many coastal regions of Spain for the last few
decades.”
UHY tax
professionals studied tax and compulsory property registration charges in 25
countries across its international network, including all members of the G7, as
well as key emerging economies. UHY calculated the total taxes
and compulsory fees payable to local, state and municipal government on
property purchases of USD150,000 and USD3.5million.
|
|
For a property of USD3,500,000
|
|
For a property of USD150,000
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||
|
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Amount of tax and charges
paid
|
% of property price
|
|
Amount of tax and charges
paid
|
% of property price
|
|
India
|
$ 280,830.00
|
8.0%
|
India
|
$ 12,830.00
|
8.6%
|
|
Spain
|
$ 245,000.00
|
7.0%
|
Spain
|
$ 10,500.00
|
7.0%
|
|
UK
|
$ 245,000.00
|
7.0%
|
Argentina
|
$ 7,650.00
|
5.1%
|
|
Australia
|
$ 185,830.00
|
5.3%
|
France
|
$ 7,640.00
|
5.1%
|
|
Argentina
|
$ 178,500.00
|
5.1%
|
Germany
|
$ 7,500.00
|
5.0%
|
|
France
|
$ 178,150.00
|
5.0%
|
Austria
|
$ 6,900.00
|
4.6%
|
|
Germany
|
$ 175,000.00
|
5.0%
|
Czech
Republic
|
$ 6,050.00
|
4.0%
|
|
China
|
$ 165,030.00
|
5.0%
|
Mexico
|
$ 5,410.00
|
3.6%
|
|
Austria
|
$ 161,000.00
|
4.6%
|
China
|
$ 4,580.00
|
3.0%
|
|
Israel
|
$ 153,340.00
|
4.4%
|
Italy
|
$ 4,940.00
|
3.0%
|
|
Czech
Republic
|
$ 140,050.00
|
4.0%
|
Romania
|
$ 3,820.00
|
2.5%
|
|
Japan
|
$ 113,930.00
|
3.3%
|
Australia
|
$ 3,660.00
|
2.4%
|
|
Italy
|
$ 105,440.00
|
3.0%
|
Malaysia
|
$ 3,000.00
|
2.0%
|
|
Malaysia
|
$ 105,000.00
|
3.0%
|
Netherlands
|
$ 3,000.00
|
2.0%
|
|
Mexico
|
$ 83,220.00
|
2.4%
|
UAE
|
$ 3,000.00
|
2.0%
|
|
Netherlands
|
$ 70,000.00
|
2.0%
|
Uruguay
|
$ 3,000.00
|
2.0%
|
|
UAE
|
$ 70,000.00
|
2.0%
|
Japan
|
$ 1,810.00
|
1.2%
|
|
Uruguay
|
$ 70,000.00
|
2.0%
|
Ireland
|
$ 1,500.00
|
1.0%
|
|
Canada
|
$ 66,160.00
|
1.9%
|
Canada
|
$ 1,230.00
|
1.0%
|
|
Ireland
|
$ 57,020.00
|
1.6%
|
USA
|
$ 1,110.00
|
0.7%
|
|
Romania
|
$ 55,680.00
|
1.6%
|
Estonia
|
$ 170.00
|
0.1%
|
|
USA
|
$ 28,000.00
|
0.8%
|
UK
|
$ -
|
0.0%
|
|
Estonia
|
$ 3,320.00
|
1.0%
|
Israel
|
$ -
|
0.0%
|
|
Russia
|
$ -
|
0.0%
|
Russia
|
$ -
|
0.0%
|
|
Slovakia**
|
$ -
|
0.0%
|
Slovakia**
|
$ -
|
0.0%
|
Notes
to table
The calculations assume that both
buyers and sellers are private individuals from the country concerned. Special exemptions, e.g. for new properties,
are not taken into account.
Figures for Australia, Canada,
Germany, India, Mexico, Spain and USA are national averages. State and municipal taxes and charges vary.
Russia charges a nominal fee for the
registration of new property purchases. The
UAE charges a compulsory 2% of the property price to register a property
transaction at the local land department.
The total taxes and fees for Austria include a 1.1% land register fee.
**Slovakia abolished real estate
transfer taxes in 2005.
All above percentages have been
rounded-off.
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