Corporation Tax

Overseas property businesses for companies

Produced by Tolley
  • 05 Apr 2022 08:43

The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Overseas property businesses for companies
  • Overview
  • Basis of taxation of foreign property income
  • Double taxation relief
  • Overseas tax issues
  • Overseas property income for individuals

Overseas property businesses for companies

Overview

Real estate income is generally taxed where the property is located; the UK tax treaties generally allow the jurisdiction where the land is located to tax income from the land.

Therefore, a UK company with overseas property may be subject to tax in the local jurisdiction as well as in the UK, as UK tax rules subject a UK company to UK corporation tax on profits on land and property outside the UK. Relief for overseas tax on property income will available by treaty relief, unilateral relief or deduction relief, depending on the circumstances.

Basis of taxation of foreign property income

Where the business of the UK company is such that the income from property is taxed as trading income, rather than gains (eg where the company is a property developer or trades in property), then the UK tax treaties, where applicable, may provide relief from overseas taxes under the business profits article. Where the UK company does not have a permanent establishment in the treaty country, the UK will generally have taxing rights over business profits over the UK company, including the profits of a property business (this should always be confirmed with the specific treaty).

Where the UK company is a property developer, it should be noted that an overseas building or construction site can amount to a permanent establishment for treaty purposes, where the site is in place for longer than a specified period. The period will depend on the specific treaty but is usually

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