Taxes on Foreign Property: What Every Buyer Should Know

Taxes are frequently the most underestimated part of a foreign property deal. Buyers focus on the headline price while the tax burden can shift the total cost by 5–15 percent and materially alter rental yields.

Transaction taxes

Transfer of ownership is taxed or levied in almost every country. Turkey charges roughly 4 percent. Spain applies 6 to 10 percent depending on region and unit type (resale versus new build). Cyprus offers reduced rates for primary residential property. Montenegro levies 3 percent of cadastral value. The UAE collects about 4 percent in Dubai.

A house in Montenegro is attractive in part because of relatively low transaction taxes and transparent cadastral registration. Low friction at purchase stage matters more than many buyers realise.

Annual ownership taxes

Most European countries charge an annual property tax (IBI, IMU, and similar), calculated from cadastral value. Typical rates are 0.4 to 1.2 percent per year. The UAE has no direct annual tax, but utilities and municipal fees still apply and should be budgeted.

Rental income taxes

If you rent the unit, the income is taxed in the country where the property is located. Rates vary from 0 percent in the UAE to 20–30 percent in the EU. For non-residents, many jurisdictions apply a simplified regime with a flat rate, which can simplify compliance significantly.

Capital gains tax

On resale, the difference between purchase and sale price is taxed. Several countries offer relief: ownership for more than five years, sale of a single residence, reinvestment into a new property. Planning your exit around these thresholds can save a meaningful portion of the realised profit.

Double taxation agreements

Investors who are tax residents in one country must also consider double taxation treaties. When such a treaty exists, tax paid in the property country is typically credited against tax in the country of residence. Without a treaty, the same income may effectively be taxed twice.

Georgia: the simple system

Georgia is known for low and transparent taxes. An apartment in Georgia is one of the clearest options in the region from a taxation perspective: 1 percent turnover on rental income for small business status, no capital gains tax after two years of ownership.

Conclusion

Before closing a deal, model every tax layer: purchase, annual holding, rental, sale. Engage a local tax advisor — the fee will be a fraction of what they save you through proper structuring and timing of operations.