Buying real estate in a country where you do not live triggers two parallel reporting systems: the country where the asset sits (local taxes) and the country where you are tax-resident (foreign asset reporting and rental income). Most international buyers focus on the first and underestimate the second — which is where the IRS, HMRC, and EU revenue services collect the bulk of post-acquisition penalties.
This guide is general background. None of it replaces a licensed cross-border tax advisor. We will refer you to one before you sign anything.
US persons buying abroad
If you are a US citizen, green card holder, or US tax resident, the IRS taxes your worldwide income. Foreign real estate adds three obligations:
FBAR (FinCEN 114): Required if you ever hold more than USD 10,000 aggregate in foreign financial accounts during the year. Foreign mortgage escrow accounts, rental income accounts, fideicomiso bank accounts (Mexico) — all reportable. Penalty for willful non-filing: up to 50% of the account balance per year.
FATCA (Form 8938): Required if you hold “specified foreign financial assets” above thresholds (USD 50,000 single / USD 100,000 joint at year end; higher for expats). Foreign real estate held in your personal name is not reportable on 8938. Foreign real estate held inside a foreign trust, foreign corporation, or foreign partnership is reportable.
Rental income: Reported on Schedule E, in USD, converted at the IRS yearly average rate. You can claim depreciation (40-year straight line for foreign residential), local property taxes, mortgage interest, and management fees. Foreign tax credit (Form 1116) eliminates double taxation on rental income up to your US tax rate.
Sale gain: Capital gain on foreign real estate is US-taxable. Section 121 exclusion (USD 250K/500K on primary residence) does apply to foreign properties if you actually lived there 2 of the last 5 years.
UK residents buying abroad
UK domiciled and resident taxpayers also report worldwide. The key forms:
Self Assessment SA106 (Foreign pages): Annual disclosure of foreign income including rental income, dividends, and capital gains. HMRC’s Worldwide Disclosure Facility settles old non-reporting at penalties of 15–200% depending on cooperation.
CGT on sale: Foreign real estate gains are taxed at UK CGT rates (10/18% basic, 20/28% higher rate for residential). Annual exemption (GBP 3,000 in 2026) applies. Foreign Tax Credit Relief offsets local tax paid.
Inheritance tax (IHT): UK-domiciled individuals owe 40% IHT on worldwide estate above the nil-rate band (GBP 325,000 + residence nil-rate band). Holding foreign real estate inside an offshore structure used to mitigate this; the 2025 IHT reforms now look at the economic ownership for non-UK-domiciled long-term residents. Plan early.
EU residents (general framework)
Most EU countries follow the OECD Common Reporting Standard (CRS), which means foreign banks automatically report your account balances to your home country’s revenue service. The era of holding offshore accounts quietly is over for EU residents in CRS-participating jurisdictions (over 110 countries).
Country-specific double taxation treaties (DTAs) typically grant the situs country (where the property sits) primary taxing rights on real estate income and gains, with the residence country providing a credit. Mexico has DTAs with 60+ countries including all EU members.
Key trap: many EU jurisdictions tax deemed rental income on foreign real estate even when the property is empty (Spain Modelo 720 + IRNR, France IFI on global net wealth above EUR 1.3M, Belgium revenu cadastral). The fact that you did not rent does not exempt you from reporting.
Japan, Singapore, Hong Kong residents
Japan taxes worldwide income for long-term residents (more than 5 of last 10 years in Japan). Property gains abroad are taxed in Japan as miscellaneous income; foreign tax credit available. Property held over 5 years gets a reduced 20% rate; under 5 years is 39%.
Singapore and Hong Kong are territorial — no tax on foreign rental income or foreign capital gains as long as the income is not “received in” the country. That is the long-standing rule but enforcement around what counts as “received” has tightened post-2024 with the IIA/IRD updates.
Practical structures we have seen work
- US buyer, USD 300K beach house in Mexico: Fideicomiso in personal name. No 8938, no entity, simple Schedule E reporting. Clean.
- UK buyer, USD 800K apartment in Lisbon: Personal name. SA106 rental, CGT planning for eventual sale. UK-Portugal DTA covers double taxation.
- US LLC owner, 4 rentals in Costa Rica: Costa Rica S.A. holds the four titles. US partnership return (Form 1065). Each US partner’s K-1 carries the foreign rental income net of Costa Rica tax already paid, with FTC on Form 1116.
- Multi-jurisdiction family office, USD 5M+ portfolio: Local entity per country (compliance reasons), upstream owner is a low-tax holding (typically Luxembourg or Singapore depending on residency mix), with controlled foreign corporation (CFC) attribution rules mapped country by country.
What to do before signing
- Pull your home-country tax residency rules and confirm whether worldwide reporting applies to you. (Hint: if you are US, UK, or French citizen-resident, the answer is yes.)
- Build a 10-year cashflow model that includes both local property tax + local rental income tax and home-country tax on the same income, net of any treaty credit.
- Decide ownership structure (personal name / local company / foreign holding) before the offer, not after closing. Restructuring later usually triggers transfer taxes.
- Identify a cross-border tax advisor with experience in both countries. They are rarer and more expensive than domestic CPAs but they save multiples of their fee in the first year.
How we help
We are not tax advisors. We work buyer-side on the real estate transaction. But we have built a roster of cross-border tax professionals in the US, UK, EU, Japan, Singapore, and Mexico that have signed off on hundreds of our clients’ purchases. The introduction is part of the service — we want the deal to be tax-efficient, not just signed.