Double taxation on Polish property development, CGT related

[klim]

I could do with a little bit of help regarding taxation on Polish property development. I’m a UK resident and I’m going to be buying and selling land and property in Poland. I understand that double taxation treaties are in place to prevent taxes being paid twice. However, I’m looking to go into this as a partnership – HMRC states that if entering into this type of business (foreign property investment) as either a sole trader or a partnership then it is Income Tax that we will pay, not Capital Gains Tax.

So if I pay Capital Gains Tax in Poland at a rate of 19% as I am liable to do, can I claim this as double taxation if I am not liable for the same type of tax in the UK?

Also, following on from this (and assuming the above issue is resolved)– if double taxation is taken into account on a partnership tax return, how does this then lead onto the individual self assessment form?

So for example:
The partnership makes profit (in Foreign currency) of £50000
In Poland there is Capital Gains Tax of £9500 due (19%)
This leave £40,500, so £20,250 per partner - of which CGT has been paid
Surely this figure needs to appear on the Self Assessment somewhere, but where, if tax has already been paid in Poland?

I’ve got my head a little bit mixed up with this so could really do with some assistance please. Thanks very much.

[Peter D]

That activity attracts Income Tax not CGT, you are trading in land and property. Regards Peter

[Tax Champion]

Several points here - if you are

going to be buying and selling land and property

, wherever situated, it is likely to be considered a trade, hence subject to income tax (and Class 4 national insurance) rather than CGT. Have you checked which tax you would actually be subject to in Poland?

Double taxation treaties allow relief for tax paid abroad on income or gains taxable in the UK, but if you paid CGT in Poland rather than income tax you would probably not be able to offset one against the other. CGT is calculated on gains, which are generally calculated in a different way from profit.

If you are operating as a partnership, the profit is declared on a partnership tax return, but there is no tax calculation on the partnership return - each partner's tax is calculated separately, and any double tax relief due would be claimed on the individual's tax return, on the Foreign pages.

[klim]

Thank you both very much for your help. The worrying point at the moment is that as Tax Champion pointed out - I would probably not be able to offset CGT in Poland against Income Tax in the UK.

Basically, when selling land or property in Poland, all sellers are liable for 19% CGT on their profits. I would be running this as a trade in the UK so any profits of this trade would be liable for Income Tax not CGT in the UK. Will need a little but more thinking - there must be a way...