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Old 13.07.2013, 12:43
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UK property investment - tax questions

Hi all,

Forgive me if it's been asked before - I did search already but didn't find anything.

If I invested in a UK property on a buy-to-let basis, does anyone know what the implications would be taxwise?

Would it cast doubt on my residency status, i.e. would the UK start considering me as less non-resident than I am now?

Would I have to pay tax on the rental income in the UK or in Switzerland? If in CH, would it be by tax return?

I am B-permit therefore Quellensteuer but have no taxable assets at present so the whole issue is a mystery to me.

Thanks for any info
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Old 13.07.2013, 13:19
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Re: UK property investment - tax questions

This is personal experience and a lot of factors can affect your tax status. So do your own research and seek professional advice if in doubt.

I am German but bought a property in the UK when I lived there and I have been letting it since moving to Switzerland. My employer has been assisting with my UK tax return for the last two years, this last tax year is the first I'll have to do myself. And this is what my UK tax return looks like. My rental income is taxable in the UK but after deducting allowable expenses and my personal allowance I do not actually pay any tax on the rental income. My employment income, earned in Switzerland, is not taxable in the UK in general and the rental income was never any concern wrt my not being a tax resident in the UK.

What has been a concern is how much time I spend in the UK. I spend six plus weeks in the UK for work every year and there are some personal visits on top of that. But I am still not a tax resident in the UK as such. From my tax advisor I understand I'd have to be there for at least 60 days in any year to trigger that question.

Another consideration was what kind of work I do when in the UK because that could also give rise to my Swiss employment income becoming subject to UK income tax or at least the portion I earn whilst in the UK for work. But there are tax agreements between the UK and Switzerland and I still don't pay any tax in the UK.

I am still waiting for my Basel Stadt tax return to be completed by my employer. But based on the conversations I've had with them the value of the property is considered for assessing the asset basis I am taxed on and has a bearing into what asset value bracket, and thus percentage of tax payable, I am in but the UK asset would then be excluded from the actual tax computation, just the possibly higher percentage applied on my Swiss assets. I can also claim the mortgage interest again, even though I did claim that as expense in my UK tax return. But as I said, I've never seen this tax return even in draft.
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Old 14.07.2013, 17:17
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Re: UK property investment - tax questions

Covered multiple times. In CH the income and asset will affect your tax rate which is based on your global amounts but not be taxed in Switzerland (other than indirectly via the tax rate).
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Old 14.07.2013, 19:21
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Re: UK property investment - tax questions

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Covered multiple times. In CH the income and asset will affect your tax rate which is based on your global amounts but not be taxed in Switzerland (other than indirectly via the tax rate).
Thanks for the info. Like I said, I did look before asking.

I guess the way to go is to get professional advice. I've never invested in anything before, so it's all completely new to me.
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Old 14.07.2013, 19:32
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Re: UK property investment - tax questions

In short:

You will be taxed by the UK as on Form SA105. http://search2.hmrc.gov.uk/kb5/hmrc/...rd=OSWvtKIMh2c Unless you assign someone or some firm in the UK to be assessed for tax on your behalf, any payment to you is subject to 25% withholding on the gross until you file a return.

As you may well not make any profit at first if you have a buy-to-let mortgage at current rates, you should try to avoid the withholding.

The tax treaty, Art. IX, provides that any tax paid to the UK is deductible from Swiss income tax, if any. As others have said, the value (supposed to be purchase value but some Swiss accountants use ratable value which actually approximates what is used for Swiss real estate) is used to figure the marginal rate of wealth tax on other (Swiss) assets you have that are so taxed.

Unless you are a British citizen the fact of owning property is unlikely to change your domicile or residence. And Switzerland not being the Seychelles you are unlikely to face the problem Gaines-Cooper had; the tax treaty addresses that issue.

If you show a rental profit there are various ways you can reduce that, setting up your own management company and paying a pensionable salary. But that is too complicated to go into here. If you are buying a multi-million-pound property then see a tax advisor.
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Old 15.07.2013, 13:45
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Re: UK property investment - tax questions

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Another consideration was what kind of work I do when in the UK because that could also give rise to my Swiss employment income becoming subject to UK income tax or at least the portion I earn whilst in the UK for work.
No.

If you live and work in Switzerland and are paid by a Swiss employer,
then when travelling to other countries, on business for the Swiss employer, you are still employed and paid by the Swiss employer, therefore the Country of Residnece and Country of Work is still Switzerland.

If yould only become an issue if, whilst in the UK, you were employed by a UK company, in the UK, and paid wages, in the UK.

I have traveld to many countries around the world, spent up to 2 months working in some of them for my Swiss employer. At no time was I ever working for anyone else. At no time was I subject for local country taxes in the country that I was visiting.
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Old 15.07.2013, 14:29
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Re: UK property investment - tax questions

Here is the UK rule regarding taxation of employment income by employees of Swiss firms, following Art. 15 of the Switzerland-UK tax convention.
http://www.hmrc.gov.uk/manuals/dtmanual/DT18164.htm

AVS/National Insurance contributions are governed by a separate treaty, the Social Security Totalisation Agreement. Where there is no such agreement (and the UK has them only with EU/EEA/Swiss states plus the USA) or a special agreement (as with Canada) to prevent double coverage, countries sometimes impose tax on seconded workers. The USA did that in the 1970s, billing multinationals for days worked in the USA by foreign workers, to force European countries to negotiate such treaties.

So: your mileage may vary in certain cases.
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Old 15.07.2013, 19:30
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Re: UK property investment - tax questions

I spent a few minutes researching this issue further and was slightly surprised to see the following 2012 decision: http://www.findinfo-tc.vd.ch/justice...478546&lines=5

Switzerland is one of very few countries that famously establish Private International Law (conflict of laws) rules by statute not (as with the Restatement, Second, Conflict of Laws in the USA by scholarly suggestion). the LDIP art. 88 no. 1 p. 798 is referred to in the above decision: "This rule thus foresees a Swiss subsidiary competence in the case where the foreign authorities do not deal with the succession of Swiss property..."

In other words, a person (assuming he is not a dual Swiss-foreign citizen) can have his Swiss property dealt with under a foreign Will and foreign legal dispositions, at least if he is domiciled abroad.

I mention this just to show that there are surprises at every corner.

And time is of the essence: in this case, the heir did not bring an action in the Swiss courts in time to make a different result happen.

It is a constant in the practice of law that those without funds - often the most deserving - cannot be assured of justice simply because they can not afford to find out what "justice" is.
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Old 15.07.2013, 21:20
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Re: UK property investment - tax questions

is it possible to be employed by a swiss company but work in your holiday home in another european country for, say, 3 months each year without incurring any tax liability in that country?
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Old 15.07.2013, 21:32
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Re: UK property investment - tax questions

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is it possible to be employed by a Swiss company but work in your holiday home in another european country for, say, 3 months each year without incurring any tax liability in that country?
In general, the USA excepted, one is taxable for work performed in the country where the work is done. That assumes that you reside there 183 days of the year (or in the case of Britain, 91 days a year on average: http://www.hmrc.gov.uk/international/residence.htm

Online workers and investors and others, who spend less than 90 days a year in any country and perhaps more on their yachts in international waters, avoid income taxation in any country.

Except that HMRC in Britain has argued that any retention of a "home" in Britain, and family and financial interests make one tax resident notwithstanding that one's main residence is in the Seychelles: the Gaines-Cooper case.

State Pension (National Insurance, AVS, Social Security) is a separate matter. For example: a US firm that employs a US person anywhere in the world is obliged to deduct and pay FICA unless there is a totalisation agreement to the contrary. Every country has its own laws, and some are very arcane. It's all too much to explain in a forum posting. Especially without facts.

HOWEVER: Your facts imply that you are already taxed in Switzerland, and seek to spend 3 months in, say France or the UK and not be taxed ALSO there. The Tax Treaty (and Totalisation Agreement) may answer your question. Or you might just choose to spend 89 days only. For the rest: it depends on what the nationality of the firm is, and whether it has a permanent establishment in the country where your holiday home is. And perhaps other things that I will have to ponder.
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Old 15.07.2013, 22:27
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Re: UK property investment - tax questions

thanks very much for your answer. I work for a swiss company with no foreign branches and would like to spend the summer months working from my holiday home in Spain
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Old 15.07.2013, 22:46
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Re: UK property investment - tax questions

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thanks very much for your answer. I work for a swiss company with no foreign branches and would like to spend the summer months working from my holiday home in Spain
Logic and reason say that you do not risk taxation. I did a search just to check because I know little about Spanish law except about "vecindad civil" (akin to domicile, but Spanish civil law has domicile as well) because I wrote about it once. https://duckduckgo.com/?q=spain+income+tax+months

My guess would be that in the unlikely event some revenue-hungry Spanish tax collector defied international norms and went after you, the Treaty would resolve the problem with "Competent Authority" of the two countries' tax administration dealing with it.
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Old 17.07.2013, 13:47
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Re: UK property investment - tax questions

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Except that HMRC in Britain has argued that any retention of a "home" in Britain, and family and financial interests make one tax resident notwithstanding that one's main residence is in the Seychelles: the Gaines-Cooper case.
This is no longer true. HMRC introduced the statutory residence test in April 2013.

www.hmrc.gov.uk/international/rdr3.pdf
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Old 17.07.2013, 16:49
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Re: UK property investment - tax questions

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This is no longer true. HMRC introduced the statutory residence test in April 2013.

www.hmrc.gov.uk/international/rdr3.pdf
That's true, thanks. The attribution of "residence" by HMRC can still be exorbitant and conflict with other countries with which one may have a closer tie. Many of those whose income is from investments and who maintain homes in London and elsewhere, traveling at will among them, will have to watch out.

And compare the Canadian rule: http://www.cra-arc.gc.ca/tx/nnrsdnts...sdncy-eng.html

The OECD principle is that all income ought to be "subject" to taxation "somewhere" (even if the actual rate of tax applied is zero) and I suspect it is still risky to claim residence in a tax haven if one has strong connections elsewhere that could be asserted as creating a deemed residence for tax purposes

Jurisdictions are seemingly increasingly aggressive in imposing their tax nets, often, perhaps most often, without coordination with others. See Huckaby v. New York State Div. of Tax Appeals, 4 N.Y. 3d 427, 829 N.E.2d 276, 796 N.Y.S.2d 312, aff'g 6 A.D.3d 988, 776 N.Y.S.2d 125 (3d Dept. 2004). Telecommuters in another state (or country) might be deemed "working" at the place of their employer. Some US states impose income tax based solely upon domicile (defined under their law).

I take an academic interest in cases where tax authorities subject someone to tax on worldwide income when that person has no right to stay for more than, say 90 days, or work in that country, and indeed may have been deported. US tax law on so-called "expatriation" is like that.

It's worth remembering that the UK has tax treaties with many countries, and the referenced memo has to be read in conjunction with those. Employed persons seem to get favourable treatment as compared with retired persons and investors. Still, investments (generally speaking) in any country get taxed there first, then in the country of residence.

Last edited by 5thSwiss; 17.07.2013 at 17:07.
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Old 17.07.2013, 16:55
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Re: UK property investment - tax questions

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If I invested in a UK property on a buy-to-let basis, does anyone know what the implications would be taxwise?
Yes

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Would it cast doubt on my residency status, i.e. would the UK start considering me as less non-resident than I am now?
No

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Would I have to pay tax on the rental income in the UK or in Switzerland?
Switzerland (assuming this is where you are domiciled)

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If in CH, would it be by tax return?
Yes

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I am B-permit therefore Quellensteuer but have no taxable assets at present so the whole issue is a mystery to me.
Umm... don't know... You'd probably need to make a tax declaration... Best ask a Swiss tax expert.

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In short:<snip>
No. (If you are a resident in CH you pay tax here. Trust me on this one.)
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Old 17.07.2013, 17:18
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Re: UK property investment - tax questions

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Yes
No
Switzerland (assuming this is where you are domiciled)
Yes
Umm... don't know... You'd probably need to make a tax declaration... Best ask a Swiss tax expert.
No. (If you are a resident in CH you pay tax here. Trust me on this one.)
Property rented out to another is virtually always taxed FIRST in the country where it is located. I have been paying tax to the UK for 40 years on property there, and all UK tax treaties provide for that.

Here's the tax treaty rule:

"Art. 6 Revenus immobiliers
"1. Les revenus qu’un résident d’un Etat contractant tire de biens immobiliers (y
compris les revenus des exploitations agricoles ou forestières) situés dans l’autre
Etat contractant, sont imposables dans cet autre Etat."

Since the treaty does not say "taxable ONLY in this other State" that means that the UK taxes it first, and then Switzerland taxes it with a credit for tax paid to the UK.

There's more from the UK side (the DT Manual) here: http://www.hmrc.gov.uk/manuals/dtmanual/dt18101+.htm
especially on real property: http://www.hmrc.gov.uk/manuals/dtmanual/DT18155.htm (quoting the English version of the treaty, which doesn't otherwise seem to be online for free)
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Old 17.07.2013, 17:39
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Re: UK property investment - tax questions

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Switzerland (assuming this is where you are domiciled)
Nope. UK. Then the standard double taxation agreement governs what (if anything) is payable in Switzerland.
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Old 17.07.2013, 18:15
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Re: UK property investment - tax questions

A foreign owner who lets out his property in the UK will, as I've said in an earlier posting on this thread, have 25% of the gross rent deducted before funds are remitted to him, her or it. That 25% can be reclaimed on Form SA105
http://www.hmrc.gov.uk/forms/sa105.pdf
http://www.hmrc.gov.uk/worksheets/sa105-notes.pdf

The 25% withholding can be avoided if the owner appoints an agent within the UK who can be assessed for tax instead. When I did it, this was done by exchange of letters.

Lots of renting agents don't withhold the 25%, presumably because they are unaware that they take the risk of having HMRC pursue them if a declaration is not made and tax paid.

There may in fact be no tax due if there is a substantial buy-to-let mortgage. If the property is let fully furnished there is a 10% allowance in lieu of depreciation.
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Old 17.07.2013, 19:40
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Re: UK property investment - tax questions

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Property rented out to another is virtually always taxed FIRST in the country where it is located. I have been paying tax to the UK for 40 years on property there, and all UK tax treaties provide for that.
Linky linky link. As CH resident, CH tax law applies here. Not Uk.

I have been paying Swiss taxes and not Uk taxes as an overseas resident for years on my propery, having signed a declaration. So where does that leave you?

Afaik (and my tax firm too), I am liable for taxes on all income and/or investments and assests globally. The Swiss don't do "off-shore". You are missing the point of the original question(s), the answers to which are: you don't pay tax on uk property in the uk, but rather are liable for tax in CH.
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Old 17.07.2013, 19:51
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Re: UK property investment - tax questions

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Linky linky link. As CH resident, CH tax law applies here. Not Uk.
http://www.hmrc.gov.uk/international/nr-landlords.htm
http://www.pswlaw.co.uk/site/library...Domiciled.html
http://www.hmrc.gov.uk/cnr/revised-g...on-letting.pdf

Although I'm no expert.
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