UK property tax not so bad compared to Europe, claims...

An international accountancy consultancy says mainland Europe levies some of the highest property purchase taxes in the world - and that in comparison, the UK has what appears to be a relatively low-tax buying process.

The consultancy, UHY, uses an analysis based on a property costing US$1m - so equivalent to roughly £765,000. It therefore does not include the higher priced UK properties which attract significantly higher levels of stamp duty.

UHY says across western Europe purchase taxes average at approaching four per cent, so on its US$1m baseline that would be an average tax of US$38,356.

It also points out that in the Netherlands the government reduced its Real Estate Transfer Tax in 2011 from six per cent to its current two per cent to help stimulate the housing sector for buyers. The lower rate is only applicable to residential property, with the higher six per cent remaining for non-residential property.

Many individual countries are very high in tax-terms - Belgium for example, levies 11.3 per cent purchase tax on a US$1m property, while Spain levies 8.0 per cent and France 5.1 per cent. Some non-European countries also impose high tax levels on this priced purchase - Pakistan 6.0 per cent, India 5.0 per cent and Australia 4.8 per cent for example.

The UK, by contrast, comes in below the European average at 3.5 per cent.

The lowest tax levels on a US$1m buy would be New Zealand - no purchased tax levied at all - and Russia, with a tiny 0.35 per cent.

The global average is 3.3 per cent.

UHY studied tax data for individuals purchasing in 26 countries across its international network, including all members of the G7, as well as key emerging economies.

“European economies continue to see property purchase taxes as a rich seam and a good way to bolster public finances which remain under intense strain. However, governments should be careful not to over-exploit it” says Bernard Fay, UHY chairman.

“Higher property purchase taxes can also put a strain on domestic buyers, who may not actually be particularly wealthy, given house price inflation in some locations over the last decade or two” he says.