SEARCH, INDEX, UPDATES, CONTENTS, IDEAS, OVERSEAS ASSETS
A decision to invest in assets outside the UK should take into account all the future implications of such an investment. Direct ownership of foreign assets can present disadvantages and other means should be considered.
Tax implications
In respect of any assets held directly, a UK resident and domiciled person will be liable to UK income tax on any income arising from the assets (net of certain expenses), to UK capital gains tax on any gains realised and UK inheritance tax on any gift of the assets during their lifetime or on death. They may also be subject to similar taxes in the country where the assets are located. There will normally be some relief for double taxation, but the taxable income will need to be calculated and reported.
Indirect ownership of the same assets through a nominee, a company or a trust, would change the calculation of the UK tax liabilities and might introduce new ones - some countries impose an annual tax charge on any land held by a foreign company.
The rate of tax on death varies in some countries according to the beneficiaries relationship to the deceased, a lower rate being charged on a gift to a surviving spouse than on that to an unrelated individual.
Other matters
In respect of any assets held directly, local administrative procedures and succession laws may apply, and it is important to consider these at an early stage. As well as a UK Will, it may be appropriate to prepare a Will in the foreign country in the local language and with local executors. Local advice is normally essential.
Where there is a conflict of laws, succession to immovable property (e.g. land and buildings) is governed by the law of the country in which that land is situated, not by the law of the country in which the owner was domiciled.
In some foreign countries a fixed proportion of an individuals estate devolves to a surviving spouse and / or children. An attempt to displace these rules by a provision in the will may be unsuccessful.
Where there is a conflict of laws, succession to movable property (e.g. shares) is usually governed by the law of the country in which the owner was domiciled. That does not mean that the overseas authorities will recognise the role of the personal representative or executor. In France and Spain the concept of a personal representative is alien.
It may be appropriate to make an investment in overseas equities through a unit trust or an investment trust which is administered in the UK.
In respect of property, a time share arrangement administered in the UK might avoid some of the problems outlined above. Ownership in joint names might be considered if the beneficial ownership then passed automatically to the survivor. It may be possible to own property through a private company set up for that purpose.
This is a large and complex subject and the comments above are intended to demonstrate the need to plan early and take advice for an individuals own circumstances.
Finance
You should consider carefully any borrowing to finance an overseas property. If you borrow in the local currency, you will be exposing yourself to currency risks. Borrowings are likely to be long term and therefore while there is potential for exchange rates to move in your favour you will also be exposed to losses. Generally it is advisable to borrow in the same currency as the income which will fund the repayments.
Reminder - disclaimer applies. Please feedback your comments. This page was last modified 9 November 2002.