Expat Investing: The best investments from a expat taxation standpoint

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One way to invest well, from a taxation standpoint, and often from an investment perspective too is in property.

I’m not 100% certain why property always is taxed quite so lightly as an investment, but generally it is. As a rule, if the property was your main residence, there is no tax to pay at sale. This means that in rising housing markets, investors that buy their own home can benefit greatly.

Second homes can and often will be, very profitable investments too. They will generally be taxed more heavily than a private residence, but they can still bring home the bacon.

I have a theory as to why property is taxed so generously in many countries. Whether or not I am right, I really cannot say, but for what it’s worth, here it is.

It is my belief that property ownership is treated well in most county’s tax codes because of the nature of the work of a politician. Most politicians will own a property in their national capital, to enable them to stay near to the Parliament building without being in a hotel. All politicians will also need to own a property in the constituency which they represent. Plus, most politicians are not actually from their constituency, which means they will probably have a ‘family home’ in some other part of the country. So if most politicians have the majority of their assets tied up in property, it stands to reason that property is and will continue to be taxed very favourably.

As if that were not enough, some countries (the House of Lords in the UK, for example) have a second chamber of government. This second part of government is filled with other political types (former politicians etc) who also own several properties. In the specific example of the UK, there are also many hereditary peers, people that have inherited their titles. These families initially came from the ‘landed gentry’ and if ever there were a class of people in favour of land and property ownership, it is these.

If I am correct, then it is very unlikely that there will be the political will to alter the tax status of property for a very long time. It might mean that property can be a useful investment for you.

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