Overseas property businesses

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

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

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.

CTA 2009, Part 4
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 between 6 and 12 months. See the Permanent establishment guidance note.

The method of computation of taxable profits for an overseas property business follows all the same principles as for a UK property business. See the Property business income, Accruals Basis, Allowable expenses and Wear and tear allowances and capital allowances guidance

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