Taxes on buying a home now averaging nearly 5% worldwide – with some economies charging over 10%...

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The average tax paid by individuals around the world when purchasing a new home has now reached almost 5%, with some major economies charging more than 10% shows a new study by UHY, the international accountancy network.

 

UHY’s study shows that the average tax charged worldwide on the purchase of a home worth USD150,000 has now reached 4.51% – a cost of USD6,771 even for a relatively modest home (see table below).

 

The average tax paid on a home purchase has risen quickly in recent years. A previous study of property taxes by UHY, in 2013, found that G7 countries charged an average of 2.29% tax on the purchase of a home worth USD150,000. This has now risen to an average of 3.57% in 2020.

 

The study also shows that several major developed economies now charge tax worth more than 10% on the purchase of a home worth USD150,000, including Spain (14.85%), Belgium (11.66%) and Japan (11%).

 

However, the impact of coronavirus on property prices worldwide may force more countries to make emergency cuts to taxes on housing purchases to keep property transactions moving. The UK was recently forced to make a temporary cut to property transaction taxes in an attempt to revive the market.

 

UHY says that more countries could now look at making similar cuts, especially if the UK’s reforms prove successful in reviving the market.

 

UHY says that property transaction taxes are often seen by Governments as an attractive tax to cut when seeking economic stimulus. While they make up a relatively small proportion of overall tax receipts compared to major taxes like income tax and VAT, residential property transactions create broader economic activity such as spending on refurbishment and white goods when people move home.

 

UHY says that in the longer term the cost to Governments worldwide of the coronavirus pandemic could result in pressure to increase property taxes. A combination of lower tax revenues and expensive economic stimulus measures will leave many countries with major budget deficits that will need to be addressed.

 

It adds that while increasing property taxes may be an attractive source of revenue for governments, discouraging property purchases can reduce labour market mobility as there will be a tax charge each time a property owner moves and buys a new home.

 

High property taxes can also distort the market by discouraging older homeowners from downsizing as this would result in a tax charge on the purchase of their new smaller home. Some commentators have also argued that high property taxes disincentivise homeowners from selling properties when housing markets overheat and buying again once prices have fallen. This removes a key mechanism for preventing property bubbles forming.

 

Dennis Petri, Chairman of UHY International, says: “Taxing property purchases is one way to increase tax receipts to address the costs of coronavirus. However, that could hit ordinary people the hardest on what is likely to be the biggest investment they will ever make.”

 

“It has been argued that raising property taxes helps to deflate property bubbles, but their track record in doing that is patchy at best. They also make it more difficult for people to move to areas where their skills are more in demand, impacting economic productivity.”

 

UHY tax professionals studied tax data for individuals purchasing a house worth USD150,000, USD1 million and USD2 million in 27 countries across its international network, including all members of the G7, as well as key emerging economies.

 

Spain, Belgium and Japan all tax a USD150,000 purchase over 10%

 

UHY’s findings show that Spain is the developed economy with the highest levels of taxation on property purchases, levying 14.85% on a purchase of a property worth USD150,000, and 13% on properties worth USD1 million and USD2 million.

 

While the Spanish government has set the national rate of property transfer tax at 7%, many provinces have much higher rates – up to 11% in some cases. When Stamp Duty and other local taxes are added, the overall tax bill can be close to 15% in some regions.

 

Belgium is the second-highest developed economy for property taxes in UHY’s study, averaging 11.66% nationwide – although homebuyers in Brussels and Wallonia pay even more, at 12.5%. Japan also levies very high property transfer taxes, applying its 8% consumption tax (equivalent to VAT) on all residential property purchases. This is in addition to a real estate acquisition tax of 3%.

 

UK targets tax at higher-value home purchases

 

UHY’s study shows that since the Chancellor raised the Stamp Duty threshold in the Summer Budget, a homebuyer in the UK pays just USD19,300 in Stamp Duty on a purchase of a home worth USD1 million, compared with a European average of USD45,294 (see table below). The effective Stamp Duty rate was 3% before the emergency cuts.

 

The cut to Stamp Duty, which will last until the end of March 2021, is aimed at stimulating the residential property market following a sharp drop in transactions during the coronavirus outbreak.

 

UHY explains that although the Stamp Duty cut will help ordinary people buying lower-value properties, it does leave buyers of properties worth USD 2 million and up paying more tax in the UK than in most other countries. Homebuyers of a property worth USD 2 million still pay 5.78% in Stamp Duty, putting the UK ahead of Germany (5.38%) and Italy (0.63%) and an average for the US of 0.39%.

 

“The newly announced cut to Stamp Duty is an encouraging sign for the housing market and should boost property purchases and the associated economic activity.” Says Andrew Snowdon, Partner and Head of Tax at UHY Hacker Young in the UK.

 

United States among the most generous to USD2 million homebuyers

 

UHY’s study shows that rates of tax on a purchase of a home worth USD2 million across the United States average just 0.39%, while Russia levy no tax at all on purchases of residential property, regardless of value.

 

Italy also charges less than 1% tax on the purchase of a USD2 million home. These figures are far lower than the average rate charged in G7 countries (4.49%) or in the BRICs economies (3.56%).

 

UHY explains that low property taxes can act as a significant attraction for high net worth individuals, ensuring that key creators of employment, especially in emerging economies like Russia, are less likely to move overseas.

 

Nikolay Litvinov, Director of Audit and Consulting at UHY Yans-Audit in Russia, says: “Russian property buyers continue to benefit from the most buyer-friendly tax regime in the world. That goes for both ordinary families buying their first home, and for high net worth individuals purchasing luxury property.”

 

All 27 countries ranked by the amount and the percentage of tax paid on a purchase of a USD150,000 property – Spain, Bangladesh, Belgium and Japan all above 10%

All 27 countries ranked by the amount and the percentage of tax paid on a purchase of a USD1 million property – UK Stamp Duty regime much tougher on USD1 million purchases

All 27 countries ranked by the amount and the percentage of tax paid on a purchase of a USD2 million property – USD2 million homebuyers in the US pay virtually zero tax

Notes for Editors

UHY global press contact: Leigh Lyons on +44 20 7767 2624

Email: l.lyons@uhy.com – www.uhy.com

Nick Mattison or Richard Crossan

Mattison Public Relations

+44 20 7645 3631

+44 74 4637 5555

Email: richard.crossan@mattison.co.uk

 

About UHY

Established in 1986 and based in London, UK, UHY is a leading network of independent audit, accounting, tax and consulting firms with offices in over 330 major business centres across 100 countries.

 

Our staff members, over 8,500 strong, are proud to be part of the 17th largest international accounting and consultancy network. Each member of UHY is a legally separate and independent firm. For further information on UHY please go to www.uhy.com.

UHY is a member of the Forum of Firms, an association of international networks of accounting firms. For additional information on the Forum of Firms, visit www.forumoffirms.org

 

 

 

 

UHY strengthens representation in Central America...

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New member firm in Nicaragua joins UHY network

We welcome Morales, Tellez & Asociados CÍa Ltda, our new member firm in Nicaragua, to the global accountancy network UHY, extending our coverage within the Central Americas region. The firm is in the process of adopting the UHY branding and will soon be known as UHY Auditores & Consultores.

 

The firm was established in 2012 as an accounting and consulting firm and is based in Managua, Nicaragua, the largest country in Central America. As part of the growth strategy of Morales, Tellez & Asociados CÍa Ltda, the partners are developing their offering throughout Central America in collaboration with UHY Pérez (Guatemala), a member of UHY since 2008.

 

Morales, Tellez & Asociados CÍa Ltda has four partners and eleven other professional and administrative staff. The firm’s managing partner is Omar Pérez and the senior partner is Mario Tellez who alongside the other partners is a licenced accountant.

 

Managing partner Omar Pérez comments: “The global UHY network has over 8,200 colleagues sharing expertise and knowledge for the benefit of clients and these combined resources strengthen the offering of Morales, Tellez & Asociados CÍa Ltda. We look forward to a successful cooperation together with UHY Pérez (Guatemala) and across the global UHY network to help our clients operate more efficiently in a competitive marketplace”.

 

The firm offers a full range of services include Administration, Management Consulting, Finance, Accounting, Tax Consulting, Human Resources and Auditing. Morales, Tellez & Asociados CÍa Ltda operates across many sectors, specialising in the Pharmaceutical, Shipping, Retail, Technology and Manufacturing sectors and has a client base that includes Costa Rica, Panama, Guatemala, Colombia and Honduras.

 

Dennis Petri, chairman of UHY comments: “Nicaragua’s economic resources offer many opportunities.  Examples include its exports such as clothing, coffee, beef, sugar as well as light manufacturing.  We are delighted to welcome Morales, Tellez & Asociados CÍa Ltda to the UHY network; the firm extends our coverage and capabilities to serve clients in Nicaragua, across Central America and internationally”.

 

UHY liaison office for  Morales, Tellez & Asociados CÍa Ltda  

Contact Omar Pérez, Managing Partner on +502 2503 5900  operez@uhy-perez.com  

W: www.uhy-perez.com

 UHY global press contact: Leigh Lyons, marketing & business development manager, on +44 20 7767 2624  l.lyons@uhy.comwww.uhy.com

 

UHY strengthens representation in the Middle East...

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New member firm in Kuwait joins UHY network

We welcome Pillars Advisory, our new member firm in Kuwait, to the global accountancy network UHY, strengthening our representation in the Middle East.  The firm has adopted the UHY branding and will be known as UHY Pillars with UHY Pillars Advisory as the full member firm and UHY Pillars Audit as its affiliate.

 

Pillars Advisory has both local and international clients across many sectors in over 20 countries with the top five sectors being real estate, non-profit, retail, services and contracting. The firm initially offered consultancy and accountancy reviews services but now also offers assurance services.

 

Managing partner Wael Arafa comments “Being part of the UHY global network underpins our commitment to deliver quality services and enhances the services and advice we can offer our clients.  The global presence of the network combined with the expertise and knowledge shared among UHY’s 8,200 colleagues around the world strengthens our own market position, locally and internationally and will be of great value to our current and potential clients and their operations.”

 

Dennis Petri, chairman of UHY comments: “We are delighted to welcome Pillars Advisory and its affiliate firm Pillars Audit to the UHY network. The addition to our network of the two firms extends our coverage and capabilities in the Middle East. Kuwait has huge reserves of natural resources, a strategic location in the Persian Gulf and is part of the implementation of Gulf Gateway projects.”

 

UHY liaison office for Pillars Advisory

Contact Wael Arafa, Managing Partner on 965 966 26 663  wael@pillarsadvisory.com

W: www.pillarsadvisory.com

 

UHY global press contact: Leigh Lyons, marketing & business development manager, on +44 20 7767 2624  l.lyons@uhy.comwww.uhy.com

 

UHY strengthens representation in United Arab Emirates...

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New member firm in Dubai joins UHY network

We welcome UHY James Chartered Accountants, our new member firm in Dubai, United Arab Emirates (UAE) to the global accountancy network UHY, extending our coverage within the Middle East.

 

UHY James Chartered Accountants, with a total headcount of 77 and five partners, brings wide-ranging experience in audit, advisory, corporate finance, tax and management consultancy services to a portfolio of domestic and international clients across a number of sectors including healthcare, manufacturing, trading, contracting and real estate.

Managing partner, James Mathew comments: “Being part of the UHY global network underpins our commitment to deliver quality services and enhances the services and advice we can offer our clients. The global presence of the network combined with the expertise and knowledge shared among UHY’s 8,200 colleagues around the world, not only strengthens our own capabilities, locally and internationally, but also those of our current and potential clients and their operations. We are  joining the UHY network at one of the most exciting times in the history of the UAE as Dubai gets ready to host the Expo 2020. We anticipate managing an increased demand for our services as the business environment continues to focus on economic diversification, promoting the UAE as a global trade and tourism hub.”

Dennis Petri, chairman of UHY comments: “We are delighted to welcome James Mathew Chartered Accountants to the UHY network, extending our coverage and capabilities in Dubai and the wider UAE.   The UAE is one of the Middle East’s most important economic centres and the firm is well placed to serve our international clients who have business interests in this country and the wider region.”

 

 

UHY liaison office for UHY James Chartered Accountants

Contact: James Mathew, Managing Partner +971 4 2770606 james.mathew@uhy-ae.com W: uhy-ae.com

Notes for Editors

UHY global press contact: Leigh Lyons, marketing & business development manager, on +44 20 7767 2624, l.lyons@uhy.com W: www.uhy.com

 

Inheritance Tax rates in G7 and EU countries ten times higher than emerging economies...

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The average inheritance tax rates in G7 and EU countries are more than ten times higher than those in emerging economies*, according to a new study by UHY, the international accountancy network.

 

Individuals in G7 countries pay an average of 16.8% (503,321 USD) and those in EU countries pay an average of 10.9% (325,775 USD) in Inheritance Tax (IHT) when passing on 3million USD in cash to their beneficiaries**. In comparison, individuals in emerging economies pay an average of 0.9% (28,429 USD) when passing on 3million USD in cash.

 

The disparity is also reflected in lower value bands. EU individuals pay on average 3.8% (13,320 USD) in IHT on 350,000 USD in cash versus an average of 0.7% (2,326 USD) in emerging economies. Similarly, average IHT rates in the EU on 750,000 USD are 5.0% (37,358 USD), compared to 0.7% (5,604 USD) in emerging economies.

 

UHY says IHT has been labelled an unfair ‘death tax’ and some commentators have called for it to be abolished. Families in economies with high IHT rates can be hit with considerable tax bills at a time when they may be dealing with a bereavement.

 

IHT is also said to disincentivise entrepreneurs from building their wealth on the basis that having faced high-income tax bills throughout their careers, their dependents then face high IHT charges on any residual wealth.

 

Dennis Petri, Chairman of UHY International and Partner at UHY Advisors, MI, US: “There is a stark difference in IHT between slower growth economies and faster growth economies. The question is how much taxes on inheritance really discourage wealth creation.”

 

Some Governments of EU countries have faced pressure to reduce IHT rates to ease the burden on taxpayers. For example, IHT rates paid in Denmark and Belgium are consistently high across all the wealth bands covered in the study (see tables below).

 

Denmark is renowned for having a broad welfare system which is funded in part by revenue generated from high tax levels, including income tax, property tax and IHT. However, criticism of high IHT rates in Denmark has grown in recent years.

 

High IHT rates in Belgium have pushed some high earners to use loopholes in the country’s tax system to avoid paying steep IHT bills. Whilst the Belgian Government introduced reforms in 2018 to help simplify the IHT system and to try to close loopholes, it has not reduced the tax rate.

 

The UK has also been criticised for making no substantial changes to the IHT system since the 1980s and for freezing the IHT threshold at 418,541 USD over a decade. This has served to increase the number of people being caught by the tax as incomes rise – HMRC collected a record 6.7 billion USD from IHT receipts in 2018/19***.

 

However, UHY adds that IHT has been used in some countries to help tackle wealth inequality. A recent study suggests**** that countries may need to go further than taxing incomes to help redistribute wealth to younger generations.

 

No inheritance tax in some emerging economies

Emerging economies that do not impose IHT include China, India and Russia. This compares to individuals in Japan who pay 38.5% (1.2million USD) in IHT when passing on 3 million USD of cash – the highest level in the study.

 

Dennis Petri adds: “Many emerging economies are especially keen to encourage wealth creation – levying very low or no IHT is seen as an important way to help achieve that.”

 

“Entrepreneurs may be incentivised to earn more in these countries as they can pass on their wealth to the next generation without the taxman interfering.”

 

“In emerging economies, inheritance tax can play a vital role in helping fund the early stages of new businesses, especially in countries where there are less traditional forms of finance available.”

 

Individuals in France pay the second highest rate of IHT at 34.3% (1million USD), with individuals in the UK paying the third highest rate at 29% (869,674 USD).

 

Dennis Petri adds: “This study sheds light on the heavy tax burden that is shouldered by wealthy individuals living in some economies. There is the risk that an overbearing IHT regime could drive wealthy, mobile individuals to move to countries with more lenient regimes.”

 

“Despite many calling for ‘death taxes’ to be radically reformed or abolished altogether, Governments are often reliant on the substantial income streams generated by IHT receipts. This could suggest that IHT looks set to stay for the foreseeable future.”

 

Emerging economies resist introducing IHT to attract investment

Many emerging economies have resisted introducing IHT in an effort to attract investment. These countries include Croatia, Malaysia, Uruguay and Mexico.

 

Wealthy individuals may be attracted to set up businesses in countries with no IHT. This could support job creation, business investment and provide a source of vital economic growth.

 

*Emerging economies include: Argentina, Brazil, India, Malaysia, Mexico, Poland, Russia, China, Croatia, Romania, Uruguay.

**Source: UHY studies tax data in 28 countries across its international network. The study compared the ‘inheritance tax’ paid on 3 million USD of cash. The calculations are based on the deceased having two heirs receiving an equal share – both adult, non-dependent children. Both the deceased and heir are tax residents in the country

***Source: HMRC

****Source: OECD

***** US charges no Federal Inheritance Tax on these sums. In those few states that do charge Inheritance Tax that tax does not apply if the individual relocates to one of the larger number of states that charge no tax eg Arizona, California, Florida, Texas etc.

 

All 28 countries ranked by the amount and the percentage of IHT individuals pay on handing down 350,000 USD of cash – G7 and EU countries impose highest IHT rates on cash

 

All 28 countries ranked by the amount and the percentage of IHT individuals pay on handing down 750,000 USD of cash – G7 and EU countries impose highest IHT rates on cash

 

All 28 countries ranked by the amount and the percentage of IHT individuals pay on handing down 3,000,000 USD of cash – G7 and EU countries impose highest IHT rates on cash

 

Notes for Editors

UHY press contact: Leigh Lyons on +44 20 7767 2624

Email: l.lyons@uhy.com

Nick Mattison or Alex Williams

Mattison Public Relations

+44 20 7645 3636

+44 779 320 7325

Email: alex.williams@mattison.co.uk

 

About UHY

Established in 1986 and based in London, UK, UHY is a leading network of independent audit, accounting, tax and consulting firms with offices in over 300 major business centres across 100 countries.

Our staff members, over 8,200 strong, are proud to be part of the 16th largest international accounting and consultancy network. Each member of UHY is a legally separate and independent firm. For further information on UHY please go to www.uhy.com.

UHY is a member of the Forum of Firms, an association of international networks of accounting firms. For additional information on the Forum of Firms, visit www.forumoffirms.org

As of January 3 2020, this press release has been revised to amend an incorrect figure for the European Union.

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