The lowdown for landlords buying in Europe

Landlords in the UK have suffered several blows to their income in the past few months. Changes to both the way rental income is taxed and to stamp duty rates will dent investors’ future profits.

With the euro weak, is now the time to think about buying a rental property overseas?

It’s vital to do your research when considering buying abroad. Different countries charge different property taxes, with these sometimes varying between regions of the same country. Potential landlords will also have to understand local property laws.

Europe is an obvious choice for property investors because of its proximity to the UK.

Spain, France, Italy and Ireland are all popular countries to buy either a buy-to-let property or holiday accommodation.

Read Renting vs buying: which is the most rewarding? and Five rules before joining the buy-to-let market  for related information.


Peter Esders, director at international legal services company Judicare Group, warns that the total cost of buying in Spain is higher than in the UK. “As a rough rule of thumb, you should budget for something in the region of 10% to 11% of the value of the property although the costs vary across the country. This should cover all legal fees, notary fees, taxes and so on,” he says.

How much tax you’ll pay when you buy a property in Spain depends on whether it’s a resale or new-build. On resale properties, the buyer pays transfer tax (impuesto sobre las transmisiones patrimonilaes or ITP) at between 8% and 10% depending on the value and area.

New properties are subject to the Spanish version of VAT, called IVA, which is payable when the developer or builder sells the property to an investor or owner. The rate is 10% for residential properties and 21% for plots of land or commercial premises. Stamp duty at 1.2% is payable, where IVA is paid.

Income tax in Spain varies from region to region, depends on income, how it is earned (that is, whether it is rental income or from a job) and whether the individual is a resident or a non-resident for tax purposes. You’re likely to be considered a resident in Spain if you spend 183 days or more a year there.

The Spanish tax regime is fairly complicated, so buyers should consult a tax specialist to determine their personal situation.


According to Rightmove, France is the second most popular destination for Britons buying property abroad, and six out of 10 foreigners who buy French property are British.

Generally speaking, most properties in France are considerably cheaper than the UK and there are no restrictions on Britons buying property.

On average, you should expect to pay between 7% and 8% of your property’s value in fees and taxes (normally referred to as notary fees). These fees are set by the French government and worked out on a sliding scale, depending on the price of the property.

The fees include property transfer tax, which is similar to stamp duty and ranges from 4% to 5%. Notaire (solicitor) fees can range from 1% to 3% of the property’s value, plus land registration certificates will come to about 0.5% of the purchase price.

VAT is payable on the price of a new-build, usually at 19.6%. On the plus side, property transfer tax is lower on new homes.

If you plan to rent out a property in France to long-term tenants, you can gain tax advantages by registering as a professional landlord. How you’ll be taxed depends on whether the property is furnished or unfurnished and it’s best to consult a tax specialist.

Tenants have strong security of tenure, so make the necessary checks when choosing them.



House prices are falling in Italy, down about 20% from 2008, according to the Global Property Guide (

The site describes gross rental yields on apartments in Rome and Milan as “poor” with gross rental yields on apartments in Rome’s historical centre ranging from about 3% to 4%.

Global Property Guide also compares round-trip transaction costs of different countries. This involves calculating the total cost of buying and then re-selling a residential property, expressed as percentage of the property value. Italy’s transaction costs are 15.79%, compared to 12.25% in Spain and 8.03% in the UK.

Owners in Italy will be charged an annual local property tax (imposta municipal unica, IMU), based on the value of the property, similar to council tax.

Non-residents renting out property in Italy are liable to tax on rental income. This is generally calculated as rental income less a lump-sum deduction of 30% for repair and maintenance expenses.

Judicare Group’s Esders says you’ll need a codice fiscale (Italian tax code) to buy property in Italy and the taxes you pay will depend on whether you are resident there.


Ireland is another country that might be tempting to investors due to its proximity to the UK, a weak euro and no language barrier. It has much lower stamp duty than England and Wales. It is charged at 1% for properties up to €1 million and 2% on properties selling for more than €1 million.

From 1997 to 2007, Ireland experienced a massive house price boom. When the bubble burst in 2008, it was arguably the world’s biggest property crash and brought the Irish government to the brink of bankruptcy.

Prices are now accelerating again and were up 9.4% year on year in September. But while it might seem like a great time to invest, there are fears the bubble might burst once again.

The recovery in house prices is also limited to certain areas. Prices are rising rapidly in Dublin but have barely moved in parts of Leinster, Munster, Connaught and Ulster, according to the Global Property Guide.

Meanwhile, Daft – Ireland’s largest property website – says the average rent in Dublin is now €1,409 a month, a rise of nearly 9% in the past year. In Cork, the cost of renting has gone up 13.5% in a year and now stands at an average of €950 a month.

“Investors should make sure they do their research and due diligence before committing to Dublin’s buy-to-let market,” says Hamish Pound, investment manager at IP Global. “The city still offers excellent value, with prices 40% below peak and slowly rising. Lending has been slowed by the Central Bank to rebuild confidence in the property market, but investors should look for signs that offer long-term security before committing.”

One issue landlords should be aware of is that the Irish government has reacted to rent increases by introducing rent controls in some areas.

Financing your investment

Some investors may be in a position to remortgage property in the UK to raise the funds to buy abroad as a cash buyer. Alternatively, you could borrow money from a UK bank or arrange a mortgage with an international lender by using a specialist broker.

But while the buy-to-let mortgage sector is very developed in the UK, this is not the case elsewhere.

Miranda John, international manager at mortgage broker SPF Private Clients, says: “Currently, we do not have any lenders who can offer a mortgage for a non-resident buying in Ireland, while Italy is also virtually impossible to work in. In Spain, lending is done on a case-by-case basis, so a strong applicant might be able to fix at 2.79% for up to 20 years but variable rates can be as high as 3.5%.”

Avoid double taxation

Any income you receive from property abroad will need to be declared to both the tax authorities in the country where the property is located and HMRC in the UK.

“Double taxation agreements are in place with other EU countries to ensure your income tax liability won’t double up. In practice, this means that when you complete your UK self-assessment tax return, you can deduct any overseas tax you have paid from your UK tax liability,” explains Tim Walford-Fitzgerald, tax principal at chartered accountant HW Fisher & Company.

“If your income tax liability is lower in the overseas country than it would be in the UK, you may have to pay additional income tax to the British taxman. But if your foreign income tax liability is higher than your UK one, don’t expect a refund from HMRC for the difference.”

It’s a similar picture with capital gains tax (CGT). If you sell your property for more than you paid for it, you may have to pay tax on the profit to the authorities in the foreign country first. You could be liable for UK CGT too, but any foreign CGT paid will be deducted from your British tax liability.

Louise Reynolds, director of overseas property agency Property Venture, warns that inheritance laws are different abroad. “The latest European regulations, which came into force on 17 August 2015, stipulate that descendants (children or grandchildren) and ascendants (parents or grandparents) will inherit property with priority over a surviving spouse,” she says, “So a Brit needs to ensure that their latest will reflects their wishes to either follow European Law or the Laws of England and Wales or Scotland.”

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