A second home abroad is an appealing idea for many people. Yet buying property abroad raises tax, legal and estate-planning questions whose implications reach far beyond the deed of purchase itself.
Before even considering a structure, several lines of thought need to be explored and clarified. It is the combined analysis of these points that will determine the structure best suited to your situation and objectives.
The purpose of the acquisition
Is it a holiday home for strictly personal use? A rental investment? A first foothold in a country with a view to developing a business there? A property to be resold in the short or medium term? The structure best suited to a holiday home for strictly personal use will not necessarily be the one chosen for a rental investment or a property with a professional purpose.
The location
The country where the property is located determines the entire applicable legal and tax framework: local property law, taxation of property income, capital gains, and whether or not a double tax treaty (DTT) exists with Belgium, for both income and inheritance. A structure perfectly suited to the French framework may prove unsuitable in Spain or the United States, so much do local rules and applicable treaties differ.
Financing
Will private funds be invested, or will the company's cash be used? Will a loan be taken out in Belgium or in the country where the property is located? The guarantees that can be offered to the bank influence the terms obtained. These choices are not neutral. They determine the deductibility of financial charges, the real cost of the transaction and the structures available.
Estate planning
Is there a plan to settle permanently in that country one day? Is there an intention to pass the property on to children or a spouse? These intentions strongly shape the structure to be put in place: a decision taken today without considering this horizon can complicate matters considerably ten or twenty years from now.
Taken together, these considerations will determine the structure best suited to your situation and objectives.
Buying in your own name
Buying privately is often seen as the most straightforward route. Administratively, it is — but it carries several tax consequences that need to be anticipated.
Any property located abroad and held by a Belgian resident must be declared. The applicable tax treatment depends on whether or not a DTT exists between Belgium and the country concerned.
Buying privately means using personal funds, whose cost must be weighed against all the parameters of the project: bank financing terms, guarantees required, and the investment capacity available privately.
On death, inheritance tax is often due in the country where the property is located. If there is no inheritance tax treaty between Belgium and that country, your heirs may face double taxation, and the cost can be significant.
Holding the property through a foreign company
Holding a property abroad through your Belgian company has clear appeal: the structure is direct, and the company has borrowing capacity and bargaining power with banks that may exceed those of a private buyer. This structure also offers greater flexibility in organising estate planning.
This apparent simplicity should not, however, obscure the legal and tax issues inherent in this choice of structure. Where the company director personally occupies the property, the free use of it gives rise to a taxable benefit in kind in their hands. For properties located abroad, the basis of calculation is the rental value — not a factor to be overlooked for properties of a certain value.
As foreign property income is generally taxable in the state where the property is located, the DTT in force will need to be checked to determine the applicable tax regime in Belgium. Costs relating to the property are in principle borne by the Belgian company, but their actual tax deductibility remains subject to the rules on foreign losses: a Belgian company can only deduct losses incurred abroad if they are final, i.e. where there is no longer any possibility of recovering them in the country concerned.
In some cases, it may therefore be advisable to interpose a foreign company between the property and the Belgian company. The legal form of that entity must be chosen case by case, taking into account in particular how financial flows are repatriated and how they are taxed in Belgium and abroad, including the possible application of the dividends received deduction (DRD) regime. The applicable DTT plays a decisive role here, for both rental income and capital gains on resale. Such an interposed structure entails costs and constraints that should not be underestimated: set-up and running costs, local accounting obligations, and the need for careful thought about the form of company to choose.
The best way to acquire a property is not determined by a general principle. Everything depends on your specific situation: your objectives, your financing, the target country and your long-term plans. It is these parameters, taken together, that make it possible to identify the most appropriate solution from both a tax and a legal standpoint.
This is precisely where our Real Estate department comes in, providing tailored analysis and expertise covering all the countries in which we support our clients.
For acquisition projects in Miami in particular, our team has in-depth knowledge of the local market and a network of established partners on the ground — lawyers, US tax advisers, estate agents — as well as a thorough command of the legal and tax issues specific to European investors looking to enter the US market.
We support you from the initial analysis to the completion of the purchase, coordinating all the parties involved on both sides of the Atlantic.
Considering buying a property abroad?
Our team is at your disposal to support you.