The UK levies higher purchase taxes on prime real estate than many key competitors, and risks reducing its attractiveness to globally-mobile executives and high net worth investment from overseas as a result, according to a study by UHY Hacker Young
The firm studied tax data for individuals purchasing a house worth $1m (£762,000) in 26 countries across its international network, including all members of the G7, as well as key emerging economies.
The UK ranks at number 11, charging on average 3.5%, or $35,400 (£27,000), in tax on a property purchase of $1m. This is significantly higher than number of western European neighbours, including Ireland (1% or $10,000/£7,600).
Those ranked below the UK include Denmark ($21,000) and the Netherlands ($20,000). New Zealand and Russia have the lowest taxes in the table, effectively charging 0% on prime property purchases.
Belgium has the highest average property taxes for real estate worth $1m of any country in the study at 11.3%, a charge of $113,131. Other western European economies at the top of the table include France and Germany, charging $50,901 and $50,000 respectively.
In comparison, the US levies just 0.6% on average ($5,970) and Canada charges an average of 1.8% ($17,833).
UHY Hacker Young says that while the G7 economies charge on average 3% $29,560 – broadly in line with the global average – tax charges in the BRIC economies are around a third lower at 2.3% on average ($22,720).
Mark Giddens, head of private client services at UHY Hacker Young, said: ‘Property purchase taxes continue to be seen as a rich seam to bolster public finances, but it’s important not to over-exploit them.
‘Excessively high taxes for purchasing a property could make the housing market less attractive to both domestic and overseas investors. Investment into the property market helps to improve the quality of the overall housing stock and benefits associated sectors, such as the construction industry.
‘Levying significant taxes on the cost of a new property could also constrain labour market mobility. 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 issue of labour mobility is particularly pressing due to the uncertainty created by the recent Brexit vote.’
Residential property transfer taxes for the purchaser of a property worth USD$1,000,000
Rank | Country | Rate** | USD Amount |
1 | Belgium* | 11.3% | $113,131.00 |
2 | Spain | 8.0% | $80,000.00 |
3 | Pakistan | 6.0% | $60,000.00 |
4 | France | 5.1% | $50,900.60 |
5 | India | 5.0% | $50,262.60 |
6= | Croatia | 5.0% | $50,000.00 |
6= | Germany | 5.0% | $50,000.00 |
6= | Malta | 5.0% | $50,000.00 |
9 | Australia**** | 4.8% | $48,155.50 |
10 | Uruguay*** | 4.0% | $40,000.00 |
- | Europe Average | 3.8% | $38,355.94 |
11 | UK | 3.5% | $35,382.68 |
- | World Average | 3.3% | $33,037.99 |
12 | Japan | 3.0% | $30,135.00 |
- | G7 Average | 3.0% | $29,562.09 |
13 | Israel | 2.7% | $27,368.30 |
- | BRIC Average | 2.3% | $22,719.71 |
14 | Denmark | 2.1% | $21,000.00 |
15 | China | 2.1% | $20,585.80 |
16 | Poland | 2.0% | $20,019.40 |
17= | Brazil | 2.0% | $20,000.00 |
17= | Mexico | 2.0% | $20,000.00 |
17= | Netherlands | 2.0% | $20,000.00 |
20 | Canada**** | 1.8% | $17,833.33 |
21 | Italy*** | 1.7% | $16,713.00 |
22 | Rep of Ireland | 1.0% | $10,000.00 |
23 | USA**** | 0.6% | $5,970.00 |
24 | Romania | 0.2% | $1,500.00 |
25 | Russia | 0.0% | $30.45 |
26 | New Zealand | 0.0% | $0.00 |
