A home abroad can create tax obligations even if it is never rented, never occupied, and never produces income. In many countries, residential property ownership is taxable on its own, separate from residence status or rental income. The main exposures include annual ownership taxes, possible tax residency issues, wealth tax, capital gains tax, inheritance rules, and reporting penalties.
Taxes on an Empty Home
Spain taxes non-resident owners even when a property earns no income. The mechanism is renta imputada, an imputed rental income assumed by the tax authority simply because the owner holds the property.
The taxable amount is:
- 1.1% of the cadastral value if that value has been revised in the last ten years
- 2% of the cadastral value if it has not been revised
The tax rate is then:
- 19% for residents of the European Union or European Economic Area
- 24% for residents elsewhere
For a non-EU owner with a Spanish home carrying a revised cadastral value of €100,000, the annual charge is roughly €264.
The owner must file Modelo 210, Spain’s non-resident income tax return. The tax agency does not send a bill or reminder. Late filing can trigger monthly surcharges.
This charge is separate from Impuesto sobre Bienes Inmuebles (IBI), the municipal property tax charged to owners regardless of residence or use.
Spain also shows how a change in the owner’s status can alter the tax cost. After Brexit, British owners in Spain became non-EU residents. A British landlord moved from paying 19% on net rental income to 24% on gross rent, with no deductions allowed.
Example:
- German landlord: €15,000 gross rent, €5,000 costs, taxed at 19% on €10,000 = €1,900
- British landlord in the same position: taxed at 24% on full €15,000 = €3,600
Portugal also taxes ownership through Adicional ao Imposto Municipal sobre Imóveis (AIMI). Individual owners pay 0.7% per year on the portion of residential property taxable value above €600,000, in addition to ordinary property tax.
The key question before buying is what a country charges an owner who earns nothing and lives elsewhere.
When a Home Can Affect Tax Residency
Property ownership can influence which country has the right to tax worldwide income.
Where two countries both claim someone as tax resident, a tax treaty often applies. Many treaties follow the sequence in the OECD model convention. The first test is where the person has a permanent home available.
A dwelling that is continuously available, whether owned or rented, can be enough to support a country’s claim. If a person has a permanent home in only one of the two countries, that country may win the treaty tie-breaker.
A vacation home does not automatically override a main home elsewhere. If permanent homes exist in both countries, the next test is the center of vital interests, meaning where family, work, and finances are located.
Example: a Munich family with a year-round apartment in Marbella has permanent homes in both Germany and Spain. If work, schooling, and finances remain in Munich, those facts point to Germany.
Some countries also treat available accommodation as a residence trigger under domestic law. The United Kingdom’s Statutory Residence Test can make someone automatically UK resident if their only home is in the UK and they spend enough time there. Spain can look beyond day-counting to whether a person’s main economic interests are in Spain.
The practical risk is sequence. Buying first and relocating later can accidentally cross a tax-residency threshold before the move has been planned. That can expose worldwide income, not just local rent, to taxation.
Wealth Taxes on Property Value
Some countries tax the value of property itself, even when it produces no income.
Only four OECD members run a broad annual net wealth tax: Norway, Spain, Switzerland, and Colombia. Other countries, including France, tax specific asset categories, especially real estate.
France taxes real estate wealth through the Impôt sur la Fortune Immobilière (IFI). It applies once net property value exceeds €1.3 million on January 1.
- French residents owe IFI on real estate worldwide.
- Non-residents owe it only on French property.
- Rates run from 0.5% to 1.5%.
- Mortgage debt is deductible from the tax base.
A non-resident living in London who owns a €1.5 million home on the Côte d’Azur can still owe French wealth tax.
Spain has two overlapping wealth taxes.
The regional Impuesto sobre el Patrimonio applies to net assets above €700,000, with non-residents taxed only on Spanish assets.
The national Solidarity Tax on Large Fortunes, introduced in 2022 and now permanent, applies to net wealth above €3 million and overrides regional relief.
Madrid and Andalusia waive the regional wealth tax in full, but that does not necessarily eliminate Spanish wealth tax. A non-resident now receives the same €700,000 allowance as a resident, extended at the end of 2023 and backdated to 2022. As a result, the solidarity tax generally starts above roughly €3.7 million.
A non-resident holding prime Spanish property worth €5 million can still face the solidarity tax, even in a region with full regional relief. The rate starts at 1.7% and rises to 3.5% for the largest fortunes.
Late in 2025, Spain’s Supreme Court extended the wealth-tax fiscal shield to non-residents, and Spain’s central tax tribunal applied similar logic to the solidarity tax in December. The shield caps combined income and wealth tax at 60% of taxable income, although a minimum floor preserves part of the charge.
Switzerland taxes wealth at cantonal level. In Zurich, the tax starts at around CHF 80,000 of net wealth, and property contributes to that base each year it is owned.
Capital Gains Tax on Sale
Selling a foreign home can trigger tax in both the property country and the owner’s country of residence. Under many treaties, the country where the property is located has the first right to tax the gain. The residence country may also tax it, with credits or exemptions intended to reduce double taxation.
Domestic exemptions may not fully protect the owner abroad. A US owner can apply the principal residence exclusion to a qualifying foreign home, up to:
- $250,000 of gain for a single filer
- $500,000 for a couple
But the country where the property is located can still tax the same gain under its own rules.
France taxes a non-resident’s gain at 19% plus social charges. The social-charge rate depends on where the seller is covered for social security:
- EU, EEA, Switzerland, or UK system: 7.5% solidarity levy
- Other systems: 17.2% full social charges
Long ownership reduces the French charge. Full relief from the income-tax portion comes after 22 years, and full relief from social charges after 30 years.
Mexico taxes a non-resident seller through the notary at closing. The tax is either:
- 25% of the gross sale price, or
- 35% of the net gain
The choice made at closing is usually final.
Currency movements can create another issue for US owners. Paying off a foreign-currency mortgage can produce a taxable gain measured in US dollars, even if the property barely changed in value. That gain is taxed as ordinary income, while a matching loss is not deductible.
Spain also applies a withholding system. The buyer withholds 3% of the sale price at closing and pays it to the tax office against the seller’s gain. The seller then files Modelo 210 within roughly four months to settle the balance.
Inheritance and Forced Heirship
A foreign home can be taxed when the owner dies, regardless of where the owner lived. France charges inheritance tax on French property even when both the deceased person and the heir are non-residents. Spain and Italy apply a similar location-based principle.
Civil-law countries can also determine who inherits. France, Italy, and Spain have forced-heirship rules reserving fixed shares for children and spouses. These reserved shares can override a will.
In practice, children may claim their reserved shares even where a will leaves everything to a surviving partner.
The European Union Succession Regulation, in force since August 17, 2015 and known as Brussels IV, allows a person to elect the law of their nationality to govern the estate instead of the law of habitual residence. This can avoid forced heirship in some cases.
The regulation applies across the EU except Denmark and Ireland, and it can still affect British nationals who own property in participating states.
There are limits:
- Brussels IV governs succession, not tax. France can still levy French inheritance tax on French property.
- France amended its civil code in 2021 to allow children who are EU nationals or residents to claim a compensating share.
- Germany’s Federal Court refused an English-law election in 2022 where it disinherited a son, citing public policy.
A practical risk is conflicting wills. A separate will for the foreign property can accidentally cancel the main will if it contains a broad clause revoking all previous wills. The documents need to be coordinated, or a single will should cover both estates.
Filing and Disclosure Risks
A foreign home can create two sets of paperwork:
- filings required by the country where the property is located
- disclosures required by the owner’s home country
Spain’s Modelo 210 is a common example of a silent filing obligation. Non-resident owners must self-assess and file for imputed income on an empty home. The tax agency sends no reminder, and surcharges can accumulate for late filing.
Spain also requires tax residents to report foreign assets worth more than €50,000 on Modelo 720.
Spain’s old Modelo 720 penalty regime included:
- a fine of 150% of the tax calculated on undeclared assets
- flat fines for each missing item
- treatment of assets as unexplained income with no time limit
The penalties could exceed the value of the assets. One retiree reached a €442,000 bill on €340,000 of foreign savings. The Court of Justice of the European Union struck down the regime in January 2022.
Spain rebuilt the regime in 2022, with fixed penalties starting at €20 per item and a four-year limit, but the filing duty remains.
Italy goes beyond disclosure and directly taxes foreign real estate owned by residents. The tax is Imposta sul Valore degli Immobili all’Estero (IVIE), charged at 1.06% per year on the value of real estate owned abroad.
For United States owners, the main foreign-asset forms do not capture a home held directly in the owner’s own name. But they can capture related accounts, mortgages, companies, or partnerships, including through:
- FBAR
- Form 8938
- Form 5471
- Form 8865
Each has its own penalties for missed filings.
Under the Common Reporting Standard (CRS), tax authorities in more than 100 countries automatically exchange financial-account information every year. This allows the country someone left and the country where they bought property to compare information without asking first.
Planning Before Purchase
The tax cost of a home abroad continues long after closing. Ownership can create recurring obligations, possible tax-residency exposure, wealth tax, sale tax, inheritance tax, and filing duties.
Some jurisdictions charge foreign owners very little. The United Arab Emirates and territorial-tax countries that do not tax foreign income sit at the lighter end. The bigger risks are concentrated in high-tax civil-law European countries, where many second homes are purchased.
Before buying, the key questions are:
- What does the property country charge an owner who earns nothing and lives elsewhere?
- Can the property or a later move support a claim to tax worldwide income?
- Does the country tax property value through a wealth tax?
- What happens when the property is sold?
- What inheritance tax and forced-heirship rules apply?
- What must be disclosed in both the property country and the owner’s home country?
Where a country taxes ownership itself, a foreign home is not just a passive asset. It is a recurring liability that should be understood before purchase.
Source article: www.imidaily.com
