Wealthy Americans considering giving up their citizenship to avoid higher taxes might want to hold on to their U.S. passports. Living aboard could result in bigger tax bills for Americans, especially if they want to buy an expensive abode.
While U.S. states collect, on average, just 0.8% on the purchase of property worth $3.5 million or more, the governments of deficit-plagued countries like Spain and the United Kingdom have raised rates to a whopping 7%. Earlier this year, Hong Kong doubled its stamp duty (a tax on a transaction's paperwork) on properties of more than $257,800, to 8.5%. That's according to a new study of 25 countries, including the Group of Seven, by Urbach Hacker Young, or UHY, a London-based network of independent accounting and consulting firms.
In the wake of the financial crisis, governments "have been desperate" to plus deficits, says Ladislav Hornan, chairman of UHY. When the U.K. raised its top stamp tax in March 2012, it was, he notes, partly a response to the demands for what was dubbed a "mansion tax" from left-of-center politicians. Ireland also doubles its stamps tax on the portion of a home purchase that exceeds 1 million euros. In ritzy areas of Spain such as the Andalusian coast, tax rates for more substantial real estate or dwellings tend to be an even steeper 8% to 10%, the UHY study found.
"With the property problems they've got in Spain, I'm amazed they're achieving this additional tax," Roy Maugham, a tax partner at UHY's office in London, told Barron's. The cheapest places? Russia, which charges a nominal fee to register purchases, and Slovakia, which abolished all real-estate transfer taxes in 2005.
This article was written by Robin Goldwyn Blumenthal and allowed for republish by Barron's.