Should I buy property abroad personally or through a company?
The choice changes four things at once, and they usually point in different directions. Personal ownership is simple, and the rent and the eventual gain are taxed in the country where the property sits and again where you live, with credit relief. A company can change the rate on the rent, but it adds a layer that has to be taxed again when the money comes out, and some countries treat company-held residential property less favourably than personal ownership. A trust changes who is treated as owning it. Decide what you are optimising for before comparing, because the structure that suits the annual position is often not the one that suits the position on a sale or on death.
Do I pay tax twice on rent from a property abroad?
You are taxed twice and relieved once, which is not the same as being taxed once. The country where the property sits taxes the income at source, because that is where the asset is, and your home country taxes the same income because that is where you are resident. A credit for the foreign tax is then given against the home liability, usually limited to the home tax on that income. The relief works when the two countries measure the income the same way and in the same year. Where they do not, through different depreciation rules or different year ends, the mismatch is real and has to be managed rather than assumed away.
What happens to my foreign property when I die?
The country where the property sits generally has the first and strongest claim, whatever your will says and whichever country you are resident in. Some jurisdictions apply a death or inheritance charge on assets located there, some restrict who may inherit land, and most require a local process before title can be transferred. Your home country may tax the same event on a different basis entirely. This is the consideration that most often decides the structure, because the annual difference between two ways of holding a property is modest beside an estate exposure that arrives once and has to be funded in cash by people who did not choose the structure.
Is a trust a sensible way to hold overseas property?
Sometimes, and for succession reasons more often than for rate reasons. A trust can govern who takes the property and avoid a local transfer process, which is a real benefit where the alternative is a slow procedure in a language the family does not read. Against that, several countries do not recognise trusts over land at all, some tax them punitively, and the trust brings reporting obligations for the settlor, the trustees and each beneficiary in their own countries. Test whether the jurisdiction where the property sits gives the trust any effect before designing around it, because a trust the local law ignores adds cost without adding protection.
Will the country where the property sits tax my sale?
Almost certainly. Gains on land and buildings are taxed where the land is, as a matter of domestic law in most countries and as a matter of treaty allocation as well, so a source claim here is much harder to displace than it would be for portfolio income. Many countries also require the buyer or a notary to withhold from the price and account for it, which produces an over-withholding you have to reclaim rather than a liability you settle by return. Your home country then taxes the same gain with credit for what was paid. Plan for the cash timing, not only for the final figure.
Do I have to report a property abroad that makes no profit?
Usually yes, because reporting and taxing are separate obligations. The country where you live generally wants to know what you hold abroad and what it produced, whether or not the result was a profit and whether or not any tax is owed on it. A loss year is still a year to be reported, and reporting it is often what preserves the ability to use the loss against a later gain. Penalties on these disclosures are commonly charged for the failure to file itself rather than measured by tax owed, which is why the property that has never made money is the one people leave out and the one that costs them.
How do I report the sale of a foreign property?
On your residence-country return, as a disposition, with proceeds and cost base converted at the rates for their own dates. Separately, the country where the property sits may require its own return and may hold back tax at closing until a clearance or certificate is issued — Canada does this for a non-resident vendor, and the United States withholds on a foreign seller of US real property. Those steps have their own deadlines, often before closing. See clearance certificates on a property sale.
Are foreign trusts taxable in Canada?
They can be. Canada's deemed-resident-trust rules can pull a non-resident trust into the Canadian tax system where there is a resident contributor or, in some cases, a resident beneficiary — taxing it as though it were resident here. Separate reporting applies to transfers or loans to a non-resident trust and to distributions and debts from one. The planning point is that contributing to an offshore trust from Canada rarely achieves what the brochure suggests. See non-resident trusts.
