Skip Navigation Links

Taxation of Individuals

Note: See our country specific brochure for more information

Tax law is complicated and - hardly surprisingly - varies hugely from country to country, so what appears here is only the most basic information supplied for general orientation ONLY.

It is, however, clear that if you live, work or own a property in another country you will, almost always, have to pay some taxes.

It is also clear that you can, simply and cheaply, take steps that can GREATLY reduce your tax bills.

What and who is a tax resident?

How much tax you will pay in any country and on what basis depends in large part upon whether you are classified as 'tax resident' in the country in question.

In many - probably most - countries, people treated as tax resident include people who spend more than 183 days per year in the country, those whose primary home is in the country (however little time they spend there) and those whose main centre of economic interests are in the country.

Most owners of holiday homes or investment properties will not be treated as tax residents in the country where the property is located.

Domicile & Nationality

For people of certain nationalities - for example, the British - the taxes you pay will also be influenced by your Domicile. Domicile is a complex and rather outdated concept which links a person to a particular country. It is designed to identify where your roots lie - and to allow the government of that country to extract tax from you!

For other people - mainly Americans - their tax position will also be affected by their citizenship. For as long as you remain a citizen you will maintain a connection with that country for tax purposes.

For most people, however, taxation is triggered largely by 'ordinary residence' - the fact that your base is in that countrey

A few seconds thought will tell you that these concepts can, and usually do, overlap. I am a UK national, domiciled in the UK and ordinarily residentr in England.

If I went to live in France I would remain British and retain my UK domicile (unless I took major steps to lose it and, even then, it would take several years to do so). However, my ordinary residence would have shifted to France.

A few minutes more thought would lead you to the appalling conclusion that, if (for example) the country where I live tasxes on the basis of ordinary residence but the country of which I am a citizen taxes on the basis of nationality I could face the risk of being taxed in both countries!

To deal with this situation there are a series of international treating called 'treaties for the avoidance of double taxation' - or, more commonly, 'double taxation treaties'. These are intended to eliminate or greatly reduce this risk.

Taxes for non tax-residents

People who are NOT tax resident in a country will, generally, face the following taxes in that country:

Local Property Taxes

The rough equivalent of UK rates or council tax. These are usually very low by international standards. They vary depending upon the value of the property and the place where it is located.

This tax is payable annually.

Income Tax (name)

You will have to pay income tax to the government of the country in a sweries of circumstances set out in the tax law of that country. Generally, this will include tax on the rental income you generate from renting out your property in that country and, sometimes, on various other categories of income earned or generated there. This is irrespective of whether the income is paid to you in that country or elsewhere, such as in the country where you live. Tax rates vary. For none residents they are often in the order of 25%. There are, however and in some places, lots of deductions to set against that income. Many of our clients owning holiday homes ands some owning investment properties find that they pay little or no income tax in the country where the property is located.

This tax is payable annually.

Wealth Tax (name)

Wealth tax is much hated by our clients. It is an annual tax based on the value of your accumulated assets - your house, your bank accounts, your car, your investments etc.

For people who are not tax residents, this tax is usually calculated on the basis of the value of their assets in that country ONLY - in other words, not on the basis of their world wide assets. Tax rates are usually very low and there may well be a substantial tax free allowance below which level of assets you pay no tax at all.

Capital Gains Tax (name)

When you sell your assets at a profit you will, in most countries, have to pay tax in the countrey where the property was located on the profit that you make. Typical rate are 10-25%. There are often deductions to set against this tax. If you keep the assets for more than a certain amount of time the gain may become tax free. Holding the assets for shorter periods can reduce the amount of tax payable.

This tax is payable only when the asset is disposed of.

Inheritance Tax (name)

When you die, your heirs will often have to pay tax on the value of their inheritance. The tax is usually payable in the country where the assets lie. In many cases, tax is only payable on the value of land and buildings, not other assets such as cars or bank accounts. Rates of tax often vary depending upon the relationship to the deceased to the person who inherits the assets, with close blood relatives paying a lot less than people not related to the deceased. Leaving assets to your husband/wife is often tax free.

Miscellaneous other taxes

You will face various other taxes, usually the same as paid by local people.

Taxes in your own country and/or the country where you live

If you earn money or make gains from property abroad you will usually also have to pay tax on this money in the country where you are tax resident.

The assets will also form part of your estate for inheritance tax purposes.

However, you will usually be entitled to various tax allowances to set off against the tax due and you will also usually be able to deduct the tax that you have already paid overseas on the same income or gain, so you don't pay the same tax twice.

See our guide to tax in your country for for details.

Taxes for residents

People who are tax resident in a country will, typically, face the following taxes:

Local Property Taxes (name)

The rough equivalent of UK rates or council tax. The levels of tax are usually the same as for a non-resident. See above.

Income Tax

You will have to pay income tax to the government of the country in which you are tax resident, typically (butt not always) on your worldwide income. This means what it says. Whether the income comes from the country where you are living, the country where you used to live or some investments held 'offshore' it will still be liable to tax in the country in which you are tax resident. This is irrespective of whether the income is paid to you in that country or elsewhere, such as in the country where you used to live.

Obviously, there is a major advantage to living in a place which, even if you are tax-resident, does not tax you on your worldwide income. This is a great tax planning strategy - if you like the country!

Rates of tax vary hugely bfrom country to country. In many places they range from about 10% to 50% of your taxable income. There are, however, usually lots of deductions and allowances to set against your income when calculating the part of it that is taxable. Many of our clients find that they pay little or no tax.

Do not lose sight of the fact that, in many countries and in addition to your Income Tax, on certain categories of income you will have to pay Social Security or other charges. These can be expensive.

This tax is payable DATE.

Wealth Tax (name)

This much hated tax is an annual tax based on the value of your accumulated assets - your house, your bank accounts, your investments etc.

It is payable every year on the value of these assets, subject to any tax free allowances to which you might be entitled. Tax rates tend to be very low (for example, in France starting at 0.55%). This is a tax mainly intended to establish how much you own so that it can be taxed when you die!

Capital Gains Tax (name)

When you sell your assets - wherever in the world those assets are located - at a profit you will usually have to pay tax in the country in which you are tax-resident on the profit that you make. Rates vary. There are often deductions to set against this tax. If you keep the assets for more than a certain amount of time the gain often becomes tax free. Holding the assets for shorter periods can reduce the amount of tax payable.

As in the case of yourincome, some countries tax only on the profits made in that country rather than on the basis of your worldwide gains. As in the case of income, this is a great boon if you would like to live in a country where this applies.

Inheritance Tax (name)

When you die, your heirs will usually have to pay tax in the country where you are tax-resident on the value of their inheritance. If they are not tax resident in the country where those assets are located the tax will, usually, only be payable in respect of any assets located in the country. If they are resident in that country the tax will, again usually, be payable in respect of all of the assets inherited, wherever in the world those assets may be located. Rates often vary depending upon their relationship to you – with closer relatives paying less tax. Leaving assets to your husband/wife is often tax free.

Miscellaneous other taxes

You will face various other taxes, usually the same as paid by local people.

Tax Advice

It will come as no suprise if we tell you that taking good tax advice can save you a great deal of money.

There are two main types of tax advice.

The first involves how to arrange your affairs to reduce your exposure to tax both during your lifetime and on your death.

The second involves making sure that, each year, when you submit your tax returns you claim all of the allowances and deductions that it is possible to claim.

Tax advice does not need to be expensive. The cost, of course, depends upon the complexity of your affairs, but most of our clients can save a lot of money by virtue of a small amount of advice.

The lawyers, accountants and other professionals who are the members of The International Law Partnership Ltd. will be able to either to give you this advice themselves or to introduce you to other professionals who will be able to do so.

Please ask for detailed tax advice.

Next steps

Please look at the Legal Guides, videos, MP3 seminars and other materials set out to the right of this page.

If you would like us to help you, please complete our Client Pack and send it back to us. We will contact you to clarify your requirements and then introduce you to the person most appropriate to deal with your case.

If you do not find the information that you need, please send us an email explaining your problem and we will contact you.

© The International Law Partnership Ltd. Page last revised 8th February 2010

P  Please think of the environment. Do you need to print this page?