Hi,
Can anyone give me a rough idea of the expected taxes one would expect to incur on selling an apartment in Poland and bringing the money back to the UK?

I seem to recall the Polish capital gains tax is less than the UK rate so you will basically end up just paying UK rates in total, but there is also the 19% rate payable if you sell before 5 years...does nayone know if this takes the total Polish rate over the UK rates?

Thanks

Hi Faz,

As I understand it you can sell before completion and incur personal income tax, or after and incur CGT. I think the 19% you're talking about is the CGT figure. This is all you should pay if you sell after completion as I understand it.

In any case it seems that selling before completion incurs personal income tax and you will be required to make up the shortfall from 32% to 40% when you bring the funds home.

I had another post recently titled 'Flipping in Poland', here's an extract from PS's Maria Jose on tax which is useful:

FYI...from the strategy report:

Clients can sell prior to the signing of the Final Purchase Contract (FPC) by obtaining consent from the developer. The issue with this strategy is that the tax applicable to the profit is classed as personal income tax and escalates up a scale to the 40% level.

Following the 2009 tax changes this would reduce to the 32% rating. Selling after completion attracts the flat 19% capital gains tax but has complexities relating to the acquiring of your land ownership documents from the land registry.

Hi Neil,
thanks for the info. I completed nearly a year ago so basically I'm trying to weigh up whetther waiting the 5 years is really worth while (when the 19% Polish CGT disappears).

I purchased the apt in joint names with my wife and expect to make ~45K profit so I'm guessing the tax due will be:

Poland: 45k*19%=8,550

UK: 45000-(9600*2)=25,800*40%(I'm @ higher tax rate)=10,320. So basically an extra 10,320-8,550=1,770 will be due in the UK.

Does this seem about right?

You say you completed nearly a year ago...this would mean you completed sometime around end of 2007...yes? If you signed the final agreement AFTER 1 Jan 2007 then you go with the new CGT rule which is 19% tax on profit, the five year rule is for buyers that completed BEFORE 1 Jan 2007. So forget about the 5 years, if you sell now you pay 19% tax on profit.
For buyers that completed prior to 1 Jan 2007, they pay no CGT tax (in Poland anyway, still pay in UK) if they sell after 5 years, if they sell before 5 years they pay 10% of the SALE price (not the profit but the sale price).

Secondly, the tax you calculated for Poland is correct, i.e. 19% on the profit made (make sure to deduct all expenses incurred in buying and selling it).

However, you seem to be calculating your UK tax at income tax rates...why. The tax you will pay in the UK is the UK CGT tax not UK income tax. I don't know the UK rates as I'm Irish but just to give you an example I will show you the Irish way...might help you understand it.

45k profit @ 23% CGT tax rate = 10,350
Minus what I have already paid in Poland 10,350 - 8,550 = 1800 due.
It would actually be a little less if I took into account the €1350 or so exemption limit.


Hope this helps.

Faz,

I agree with sid in that you should be also eligible for CGT in the UK, not income tax.

Current rate is an 18% flat rate in the UK I believe? If this is right you won't have any more to pay.

Please check with an accountant or similar as I'm not 100% sure the above is correct.

thanks Sid & Neil.

Hello,

I seem to recall that CGT applies if the Flat had been rented, otherwise it's income tax. Does this sound correct - again i'm not sure !

Regards

If you sell after 5 years of ownership I beleive the gains tax rate is zero

But it's topped up in the UK, even if it was zero in Poland you would be liable to UK tax on the gain.