Foreign Holiday Let Laws and Regulations
This is intended only to give an indication of the type of questions which should be asked before settling on a plan to buy a holiday home or business in another country. Although several countries are mentioned with several different legal systems this is only a thumbnail sketch but it should give you a good starting point to seek out key information before spending more in time and effort. This page is in its infancy, but you will already see a hint of the variation of requirements from country to country and area to area.
Disclaimer: All information provided on this page about Foreign holiday let laws and regulations should be checked carefully, where necessary, by qualified and experience professional individuals before acting. We are not professional advisors in the fields of Law, Accountancy and any other relevant fields. Please take care and we hope that, despite this necessary warning, you will benefit from our efforts. This page is in development. 29 August 2013
Basic rules for buyers. They may seem obvious but it is surprisingly easy to miss out one of these once things get moving so it is worth reading them carefully:
Use legal advice and qualified lawyers who are fully up to speed with local law and, of course, the language
Do not sign anything before it has been put in front of a UK lawyer or a competent English speaking legal professional in the area where you are buying.
Make absolutely certain that the person selling the property owns it. Check to see if there is any joint ownership. (French inheritance laws tend to increase the frequency of jointly owned properties under Code Napoleon). Make sure all the vendor parties are in agreement and all aware of the progress of the sale.
Try to find someone who has bought before you and learn from them any local details and possible competent and useful advisors etc:.
Never agree to any major transaction on the promise of a special discount if you agree there and then. Always go away and do the necessary research, thinking and waiting before any committment. Before signing anything be clear that you have prepared and that you have minimised as much risk and the intervention of unforeseen affairs as you can.
In cases where you may be buying ‘off plan’ be very certain that the plan is going to happen. Do not be lulled by people selling dreams. Sometimes that is all that they really offer.
In some countries developers are required to provide bank guarantees before selling off plan. Always ask if there is such a guarantee.
Ensure appropriate legal provisions and documents to protect you and that everyone else involved are tied to one another so there can be no ‘weak link in the chain’ which could let everyone else down.
Check that the whole planned development will be completed including all the promised amenities such as pools, shops, restaurants, golf, marinas etc:.
Check to see if proper arrangements have been made for a management company for the development and onward management.
The information below must be checked with qualified and experienced professionals. It is still in the early days of collection and formation. Even now it serves to help sharpen awareness of the type of questions which are necessary to successfully set up a holiday home abroad. We plan to offer indications of the difference between holiday let arrangements and residential or other forms of tenancy for each country. So far, the information is quite restricted on this very important matter.
Settling disuptes varies from country to country. The law can be quite complex however, before launching out on a holiday let venture make sure to check how this sort of thing works locally to your planned venture. In the UK things like The Small Claims Court are relevant and across Europe a similar provision exists under EU Protection of Consumers
Provinces can vary rules and regulations. It is important to check with specialist lawyers and accountants. Nonresidents are those who live for less than six months in a year in Canada. Bank accounts and property purchase are still okay but more than 6 months, then you will have to apply as an immigrant.
Some provinces have restrictions on ownership of property or real estate with limits on the amount that can be bought by nonresidents.. Some relate to the amount of land or even to the length of shore frontage. In other places restrictions are put on farmland ownership. Non residents cannot own more than ten acres (about 4.05 hectares) in Saskatchewan. There are other peculiarities.
Local by laws indicate that renting out for less than 30 days is considered ‘short-term’. Different rules apply. However, many city zones do not permit holiday letting. Hotel Tax is likely to be applicable and this should be indicated in advance on advertising and booking systems but short term rentals are not subject to BC Tennacy regulations. However, any dispute about this can be very expensive to settle..
Other rules and regulations to keep an eye on include The Health Act and Regulations, Hotel Keepers Act and The Hotel Guest Registration Act. You also need to read up on the GST, Residential Tenancy Act, Strata Property and The Provincial Sales Tax Act.
We are seeking more information about the requirements for a vacation rental in Canada and shall include some more information later. The information on the USA below is equally limited.
As with virtually all countries, taxes vary and you need to be very aware of local requirements and practices.
Categories to consider:
Stamp duty. This usually applies if you use a mortgage to buy. It is called a ‘State Documentary Fee’.
Sales Tax: Most states do not charge this on property buying. But in many a Real Estate transfer tax can reach anywhere between 1% and 5% of an assessed value
Inheritance Tax: transfer taxes apply alive or dead and these vary significantly from state to state. Get qualified advice.
Rent tax: All rent is taxable at 30% to be paid locally. Double taxation can be an issue in certain states.. However there are excellent allowances in many cases which can even include the costs of flights to go and inspect holiday lets as well as relief on mortgage costs and other items. Get good advice.
The aim is to control how land is used and the areas are defined by local government decisions. Plans are intended to ensure healthy development and communities are split into zones for specific activites such as industrial commercial agricultural and residential use..
Furthermore parts of most zones have added restrictions. For instance certain types of short rental might be forbidden in some residential areas or zones.. Other restrictions might be for single family homes. The aim is often to benefit or reinforce communities. Local zoning arrangements can counter larger zone regulations.
Regulations can stipulate if you can rent a vaction rental or holiday let and the maximum length of any let. Sometimes a maximum of 30 days is set. There can be quite severe action for any delinquent of these regulations.
Zoning varies from place to place. It is important to check with the local government what rules apply.
Public hearings are used in any process wherer changes are requested by property owners. All changes must be for the better for the community or area / zone. ‘Spot zoning’ and ‘special use permits’ are worth investigating.
For Holiday letting refer to ‘Resort Dwelling Licensing’…. involving trainsient public lodging.
A Single License could be for one family or town house. It could include an appartment or a group of appartments in a building
A Group License is for all rooms, units in a building or a cluster of buildings in one complex
A Collective License is limited to 75 is restricted to individual counties in a district.. It covers a group of units in different locations in a district.
Operators of companies are licensed by owners to rent on a transient basis as determined by The Division of Real Estate. Licenses must be prominently displayed at the relevant locations.
There are requirments to keep units clean, safe and in good physical condition along with quite detailed matters including the provision of soap, thorough washing of dished between guests, the prevention of vermin and more. In addition local building codes apply along with: fire safety, occupany limits, emergency lighting, fire safety and exit regulations, extinguishers, smoke detection, and other requirements.
Hearing impaired smoke detectors are also a key issue. Extension cords are forbidde and the NFPA 101 Life Safety Code applies. In some cases fire sprinklers are required.
Check this information with The State of Florida
A thumb nail sketch of buying a holiday let in France
A buyer makes an offer and int his process they and the vendor must sign a Compromis de Vente which is legally binding and sets out all the terms.
Before signing the Compromis, buyers need to sort out the finance because the source of funds has to be set out in the Compromis
After this the buyer has a seven day cooling off period before a 10% deposit is paid and a notaire makes physical checks on the property. The vendor does not benefit from any cooling off period.
Before the final signing all purchase funds must be in the account of the notaire. Not doing this to schedule could end up with the loss of all the funds paid to date and the property.
Someone representing the buyer must be present and visit the property if the buyer cannot to check everything. Contracts clearly state that acceptance of the property is as per its condition on the sale day.
The whole thing is completed with an Acte de vente which is signed and witnessed by the Notary.
These include: The notaire’s charges which can be 8% to include stamp duty varying for new builds at .6% up to 6% for properties five years and older. Agents can charge between 4%% and an astonishing 15%. VAT or IVA applies on most chares and taxes and this can be close to 20%. CGT can be above 33% if you buy and sell within two years. You will need to check the rate for Transfer tax which varies significantly but for older properties tends to be about 7%.
It is worth knowing about The Raffarin Law which covers safety for outdoor swimming pools. This law can make safety barriers, pool alarms, pool covers and pool shelters necessary and many countries elsewhere do not have equivalent regulations.
The law on taking deposits for holiday let rents differs from some other countries with a distinction between an advance and a deposit. The exact definitions and practices are not covered, here, but you should be aware of this.
Social charges for holiday lets now apply to holiday lets in France and could have a significant impact on their sale. Capital gains already applies. Income generated by holiday lets in France is subject to income tax plus a further social charge of 15.5% or the going rate at the time.
The level of taxation will vary depending on whether you are resident or nonresident in France.
Tax de sejour is a small tax levied locally per person per night. It varies depending on other things, your star rating, the number of people, adults, children, pensioners, handicapped, but .5 Euro per person per night is one rate. It is quiet an odd tax for those uninitated.
Tax laws can be quite surprising. It is worth learning about the possible need to attend to ‘Classement meuble de tourism’ and other wrinkles.
The taxation rules to look for are those that apply to ‘furnished holiday lets’. The main criteria apply: That the holiday lets is available for 140 days a year for guests and that it is rented out to guests at market rates for at least 70 days a year.
If you are in the UK but run a holiday let in France, there is a double taxation agreement and you will need to declare income to the UK authorities to avoid being double taxed on the same income. Not all countries have these mutual agreements. However, if you are in the UK and UK arrangements could end up with you paying more tax (say, if it is related to your income and you are in a higher bracket for tax purposes) then that is what will happen.
Capital gains tax will apply on the sale of UK holiday lets but it might be deferable under a scheme call ed The Business Asset Roll Over Relief. Different rates of CGT might also apply under schemes such as Entrepreneurs’ Relief. You should check with an up to date accountant for the latest position on UK CGT. Although it does not apply on the selling of residential primary residences in the UK, which is odd, elsewhere it can be very significant.
The UK has had and may still have capital gains tax allowances on ‘integral features’ of properties. It is worth checking if this could apply to your circumstances.
The difference between an Assured Short Term Tenancy (AST) and the necessary qualifications for a Furnished Holiday Let for the UK are important. To qualify as a Furnished Holiday let, every guest must have a primary residence elsewhere. Owners should retain the right to enter the property with reasonable notice. It is important to be certain who the party leader is. If guests do not have a primary residence elsewhere, it is possible for an owner to have entered into an AST unawares. Assured short term tenancies carry rights to occupation of six months and significant extra duties on the part of the owner. It is very rare for confusion to cause this situation, but care should be taken, for example, when renting out to guests who are in between properties having sold one and waiting to complete the purchase of their new home.
Among other things, a full list of guests, ages and names along with clear identification of the party leader plus addresses and contact details are necessary on booking.
The call for a primary residence was necessary to give adequate distinction between the two types of agreement so that holiday letting was not used as a backdoor method to circumvent the responsibilities of good landlords under Assured Short Term Tenancy legislation.
An annual property tax applies ot owners of second homes in Ireland however they are used.
Since 2008 all holiday home owners who let to paying guests should licensed either as a Empreendimento Turistico (a Tourist establishment) otherwise as an Estabelecimento de Alojamento Local (A local lodging establishment).
Anyone planning holiday letting business in Portugal should check the legal implications of these requirements.
Taxes are payable on homes in Italy and will apply regardless of were owners live. Mortgages tend to be for 15 years and not 25 and are nearly always on a repayment basis. Interest only mortgages are very uncommon. To buy a property you need a ‘codice fiscale’ or an Italian tax code.
Annual taxes include Imposa Municipale Unica which is demanded in midsummer and midwinter. It is an annual local council tax but is related to the nature of the property, its quality and size. There is a refuse tax to pay which is not onerous. The usual service charges apply.
It is worth noting that if a tenancy is considered not to be a holiday let, the law is tilted towards tenants with 4 year contracts and restrictions on advance rental payments and other controls. Two types of contract apply: Standard and Special. Both are restrictive with Special being more so but accompanied by tax benefits for landlords. All contracts have to be written and registered to be considered legally enforceable.
There are many other aspects which need to be considered carefully. Suffice it to say, it is very important to clearly distinguish the nature of a tenancy or occupation. In the unfortunate need to evict the process can be very lengthy.
For holiday letting there is the provision of ‘Occasionale’ or non commercial arrangements.
To do this a ‘imprenditoriale’, or non commercial landlord must:
you have to inform the local ‘comune’ or council giving the exact address you wish to rent. The form is available at the Regional Assessorate of Tourism. Numbers of bedrooms, sleep numbers and bathrooms must be listed.
The declaration must be copied and provided to the local APT in 30 days.
Any changes to the holiday let must be reported to the commune
Ceasing holiday letting but if you wish to still use the house for family and friends the council must know in 48 hours about their arrival. Information about non Italian visitors can be done with a ‘Comunicazione de cessione di fabbricanto a cittadino straniero’. It is not always considered vital to do this but it is advisable to ensure that notification of transfer of a property to a non Italian is carried out.
Cleaning once a week
Fresh linen and when requested by guests
Gas, heating and electric to be supplied
Due repair and replacement of any furniture and fittings.
Meet guests on arrival
Your holiday let(s) will be graded out of four and the grade must be openly displayed for all to see. Before finalising things it is well worth talking to the local APT to be sure of all the necessary and required paperwork. To be certified you must:
Get a form from the local APT. Supply full details including yours and any local representative. The dates you plan to run your holiday let; confirm the business activity; precise location of the let and address; describe the contents including all fittings, furnishings etc: the type of building and the prices guests are to pay including any local or national taxes.
You will also need a professional plan showing every room, proof that the accommodation is really available and land registry records to prove the status of your holiday let(s).
Community fees (similar to ‘service charges’ in the UK)
One key aspect to taxation is whether you are officially resident or nonresident. There are specific taxes for nonresidents.
Taxes vary but include:
Impuesto Sobre Bienes Inmuebles- IBI This is a property ownership tax
It has and most likely will be subject to change so it is worth checking the current situation.
Licences for holiday homes (Casas vacacionales) are commonly required.
You should check for detailed information from the town hall or ayuntamiento. The situation is fluid at the time of writing (12 September 2013) but there are two variants Tourist Accommodation (Alojamiento turistico) and Holiday Homes (Casas Vacacionales).
Tourist accommodation is for all in tourist businesses including services and food etc:.
Holiday Homes is for those who simply offer homes for holiday lets over relatively short periods with no other tourist related services.
Impuesto sobre la Renta de No Residentes – IRNR This relates to personal income tax
Property owning non residents must pay annual income tax depending on whether the property generates rental income or not. If it is no rented out and you have no other Spanish income the current rate is .5% of the Valor Catastral of the property.
This can come to a significant sum. Say the property is worth 500,000 Euros. Then the tax will come in at 2500 Euros.
If rental income is received then additional taxation may apply taking into account any double taxation treaties applicable. As ever, check with a local accountant or a specialist accountant in your home country.
Local Capital Gains taxation applies in Spain. It is related to the land on which things are built and is charged when properties change hands. The rate to pay will depend on how long the property has been owned. Unlike in some other countries, the longer the ownership, the higher the charge. It does not taper downwards in relation to the time a property is owned. The vendor is responsible for paying this tax but some sellers will try to move the responsibility on to buyers. The practice varies depending on area. In some places it is quite common, in others, it is not done at all.
There are, as in other countries, peculiarities.
Nonresidents / non Swiss families are restricted to one property which can only be 200 sq m (2150 sq ft) and no more of internal domestically useable floor area. In some cases, for chalets for example, the plot size is restricted to 1000 sq m (about 10764 sq ft).
Some Cantons control the time before any resale can happen. The times differ. Sometimes, a minimum of as much as five years applies. After that, selling to a nonresident is possible. Reference to what is called the Lex Knoller law is recommended.
Nonresidents can live in a property up to half a year in any one year but cannot say for more than a continuous period of three months.
The good news is that the property can be rented out for up to 11 months one week per year.
These restrictions do not apply to EU citizens benefiting from permit B residence status and all other foreigners with residence permit Cs are also free of these restrictions.
Holiday lets or vacation rentals are also subject to taxes to about 1.3% of the original buying price each year. These are, among others, taxes on tourism, wealth, and land. Estimated potential or actual rent revenue is taxed even if owners have not had any bookings. Tax receiving authorities are Communes, Cantons and the National Government of Switzerland.