Brits moving to DR - capital gains tax query

C

Cosmo

Guest
We are Simon and Nicky - Husband an wife from East Sussex England.

Property prices in the UK have gone through the roof in the past few years and this will enable us to sell up and move out. We will expect around $225000 dollars to spend on our new home. Once out of the UK we will be able to sell our other properties which should realise a further profit of around $200000 dollars. We know that DR is not a tax haven (our original search was for such a place) but we have come to understand that property is much more affordable. Here then is our question:

In the UK you do not have to pay capital gains tax (40%) on the sale of your home. Any other property sales are liable for capital gains taxation. If we sell the properties while living abroad and do not return to ther UK for 5 years we will not have to pay CGT however, we will be liable to CGT in the country where we are living. Does anyone know about CGT rules in the DR?

Secondly, we are considering buying a property in Florida with the other $200000 dollars. Is there a problem here? It will be our intention to live on the rental income it provides.

Thirdly, assuming that we will own our property in the DR outright, how much will it cost us (monthly) to live comfortably in the DR?

Finally, are we mad?

Best regards

Simon & Nicky
 

Peter & Alex

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May 3, 2003
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Why worry?

Why worry about any CGT in the UK? Surely you're not going to tell the tax office any of your overseas business?
Locally there is a transfer tax when you sell your house in the DR on but this can easily be overcome.
As far as us Brits are concerned this is a tax free haven!!
No, you are not mad - come on down and see the place first and then you'll realise how easy it all is, despite the hiccups!!
Living costs? You can easily survive on RD$25,000 per month - depends on what lifestyle you're looking for.
Do your searches in this forum and then ask for any specific info you can't find.
Peter & Alex
 

dawnwil

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Aug 27, 2003
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re: 25,000 per month

P & A..

In research of many threads, I've noticed this amount mentioned... just wish to verify that you are referring to costs not including rent or mortgage.

Also, I have pulled up some good info from previous years... 2001 comes to mind... whereby costs were discussed thoroughly. Is it safe to assume that costs noted then in RD pesos have doubled now approx?

And... to whom am I speaking: P or A? hee.
 

Peter & Alex

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May 3, 2003
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We are referring to living costs - does not include rent. But if you rent then you should not have all those costs of electricity and water etc., depends on what deal you do and how much rent for what services you get?
We own our property and those costs are per month for all our outgoings.
Costs are very much higher now than in 2001.
You'll have to guess which one of us is the keyboard operator??
Have to go urgently, supper's ready!!
 

Bolt

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Jun 12, 2002
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When you "dispose" of your house in the UK you only get tax relief on your main residence of which you must have lived in for at least the last 6 months.

Other properties that you own (to rent out i presume) once sold will be subject to capital gains tax at 40% as you say. Regarding the 5 year rule i believe that has been overturned now and the tax is due on the sale in essence although it is collected via submission of your UK tax return and they will post one to you if you want:)

I suggest you speak to a tax advisor prior to doing anything in the UK as it may be prudent to leave before April next year and sell after April 5th when your out the country to minimise tax as then some of the 40% can be deducted as regular income for the following tax year.

You don't even need to go back to the UK for selling up as you can instruct a solicitor to have Power of Attorney to sign deeds and contracts on your behalf before you leave. Everything else can be done by fax and phone when your are here.

As many of us have suggested please come down and have fun but dont be too hasty in buying property. Rent for a while first and you will save money in the long run by finding the ideal home at a good price.
 
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C

Cosmo

Guest
Thanks people for your help.. I guess the point regarding CGT is this... Pay attention if you own property in the UK! This is what the Tax man says:

CGT is payable in the UK by:
Individuals who are resident in the UK or UK ordinarily resident.
UK resident trusts
Non-resident persons trading in the UK through a branch or agency.

CGT is considered a "voluntary" tax in the UK - That is that you need to confess to the Tax man on your tax return (if you file one). There are things called "taper relief" "annual exemptions" etc. but the bare-bones of this is that you are going to get stung by up to 40%!

Now, by moving out of the country (and timing is indeed critical) you can leave the UK in March and start selling property in the UK in April. This is considered a new tax year and consequently the sale is deemed to be outside the scope of your last return and therefore not taxable IN THE UK. BUT - If you have not moved to a tax haven you will be liable to CGT in the country where you now reside. It does indeed appear that I need to speak with a Tax Accountant in the DR. Anyone know any? Or is it really best to just do nothing? - The "head in the sand" technique tends to sometimes yield good results but can also lead to sleepless nights.

There are a number of useful guides to offshore tax planning available to download at taxcafe.co.uk - but believe me problems lurk around every corner! For example you should sell your home in the UK before permanently leaving the country - otherwise you will (in theory) be liable to CGT from the UK. How many people do that? - It's like burning all your bridges - no going back! Watch out if you didn't do this and plan to return to the UK in less than 6 years. You may well get hit by a 40% bill on the profit from selling your house! If it is rented then you are liable to income tax and NIC contributions on the proceeds.

I'm sure you're all aware of these things but just in case...

By the way - you can't put us off we're coming!
 

dawnwil

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Aug 27, 2003
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Cosmo, on the DR side..

the 'Legal' link on this website says:

"A resident is subject to income tax on worldwide income from investments abroad after the third year of residency in the country. However, this applies only to income from financial investments, not to income from other sources such as personal work. Of course, the resident will also pay income tax on Dominican income." ... check under 'advantages of residency'.

Most countries kick in with taxation immediately, so in this respect, perhaps not a haven, but a vacation?

Very different laws in Canada, that's for sure! All personal assets here, aside from primary residence, are considered sold by way of a deemed disposition, and liable for capital gains tax. I'm surprised the UK allows property sales to get away so easily.

Glad to hear you're coming, good luck with everything.
----

P & A,

aha!

Have to go urgently, supper's ready!!

Is this a hint? This is a hint, right? It's a hint, I know it's a hint!! Peter is typing... because Alex just called him for dinner, wait... unless... maybe Peter's the head chef in this family, or ... what if Alex prepared a casserole and the buzzer rang as she was typing, or ...

never mind.

PS you realize, of course, you're talking to Dawn & Will. So there.
 

dawnwil

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Aug 27, 2003
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I do!

Oh heck, who am I trying to kid. Was trying to flush out the truth, but to no avail.

Dawn (!) hint, hint