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New research reveals UK as one of the cheapest countries to invest in rental property


UK has third lowest total tax rate on residential rental investments at 9.35 per cent

Research conducted by Taxand has shown that the UK is one of the cheapest countries for investors involved in residential and commercial property rental, when considering the total tax take.

The UK has a total tax rate of 9.35 per cent on residential rental investments, the third lowest and only beaten by Poland and Romania which have an overall rate of 9.28 per cent and 7.61 per cent respectively. The UK stands in stark contrast to those countries at the other end of the table, such as Greece, which has a total tax take of 30.71 per cent or South Africa with 24.17 per cent on residential rent.

Furthermore the UK’s overall tax rate for commercial rental investments is second lowest in the table at 7.18 per cent making the UK significantly more attractive when compared to South Africa, which has the highest rate in this category of 19.58 per cent.

The T3 research analysed the tax take for real estate investors across two asset classes: residential for rent; and commercial for rent, across 23 countries around the world. The highest tax take jurisdictions are: Greece (30.71 per cent – residential); and South Africa (19.58 per cent – commercial). The lowest are: Romania (7.61 per cent – residential); and Indonesia (3.15 per cent – commercial).

More generally, some European countries appear to offer some of the most attractive total tax rates for real estate investment, with Sweden, Romania  and Poland amongst the cheapest across the two segments analysed in the research. 

The research also found that: Greece (30.71 per cent) has the highest tax take for rental investments. This is because Greece has a material transfer tax at 3.09 per cent as well as VAT on acquisition of property; no Corporate Income Tax on the sale of commercial rental property was crucial for the UK to become the second lowest country for T3 in respect to the commercial scenario at a rate of 7.18 per cent; and Romania and Poland’s low income tax rates, mean that they are the most attractive locations for residential and commercial development and rent.
Charles Beer, Head of Real Estate at Taxand UK, says: “The research highlights the fact that the UK continues to be an attractive destination for property developers and investors, primarily because of its low corporate tax rate – currently just 20 per cent. Generally the market remains attractive, but the threat of higher transfer taxes on residential property is causing some uncertainty at the top end of the London market where there has been some price adjustment.

“The attractiveness of the UK market and tax regime has led to a huge inflow of investment from round the world, particularly into London, from institutional and private investors although there is some worry this is inflating prices in London and could lead to a bubble. Outside London, other premier UK cities such as Manchester and Birmingham are also beginning to attract international investment.”

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