Property Tax Law: Capital Gain Tax Avoidance and Jurisdictions

This report provides an overview of property tax law, with a specific focus on capital gains tax and strategies for its avoidance. It begins with an introduction to property tax, its definition, and the various authorities that levy it, including national governments, states, and municipalities. The report then delves into capital gains tax, explaining its application to the sale of property and other assets, and highlights how it varies across different jurisdictions. The report examines property tax laws in countries like Australia, Canada, Chile, Greece, Hong Kong, India, Ireland, Luxembourg, Netherlands, and the United Kingdom, detailing their specific tax rates, assessment rules, and valuation methods. The report concludes by discussing various methods to avoid capital gains tax liability, such as utilizing annual allowances and realizing losses to offset gains, and other exemption methods.

Property tax law
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Table of Contents
INTRODUCTION................................................................................................................................3
Capital gain easily avoidable tax.....................................................................................................3
CONCLUSION....................................................................................................................................9
REFERENCES...................................................................................................................................10
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INTRODUCTION
A property tax is also known as mileage tax law which is generally levy on land that the
owner is required to pay in order to fulfil his obligations. Tax is levied by the governing authority of
country in which property is located. The tax may be paid to different authorities such as national
government, federated state, country, geographical region or municipality. The tax is divided for
various kinds of property such as land and its improvements, buildings, personal movable asset and
intangible property. Real asset means the combination of land and several improvements on that
land and buildings. There are several sections constituted by the central government of country but
its imposition vary according to various states and their jurisdiction.
Capital gain easily avoidable tax
A capital gain tax is imposed on the capital gain generated from selling the property. It is a
profit that is realized on the sale of immovable assets that were purchased at the cost amount that
was lower than the amount realized on the sale (Emmerson 2016). The most common capital gain
can be realised from the sale of several assets such as sale of stocks, bonds and precious metals
which includes jewellery and ornaments and most importantly property. It is that tax which is
implemented rarely in some countries with differential rates of taxation for individuals and
corporations. Taxes are charged by the state over transactions, dividends and capital gains on stock
market. These financial and fiscal obligations may vary from various jurisdictions of one country to
another. There are different kinds of property and land tax which involves Ad valorem tax and self-
assessment tax.
The Ad valorem relies on the market value of the asset. on the contrary, Ad valorem is based on the
special feature which is popularly known as advantages of special jurisdiction The property tax rate
is often given as a percentage form (Ozanne 2015). It may also be expressed as per the amount of
tax per thousand currency units of property value which is recognised by the other name of mill age
rate or mill. For calculating this rate of tax, competent authority will multiply the assessed value of
property and other qualified asset by the mill rate and then divide by 1000.
For example: Assessed value = $50,000, mill rate = 20 mills, property tax amount of
$10,000 per year
Property tax= Assessed value*mill rate/1000 = $50,000*20/1000
Property tax =$1000
Following are the different jurisdictions of property tax law which may vary according to different
countries in the world in terms of tax rates, assessment rules and its valuations:
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Australia
This country has property taxes which is also known as land rates and frequency payment
which is determined by the local councils (Travers 2015). These councils has land values who
value the worth of land. It only taken into consideration the value of land and but not included
existing dwellings on property. Assessed value of land determines the total charges of rates.
Australian property owner also pays water rates with the amount of tax on the land. It also has
stamp duty which is applied at the time of selling that property and forms prima facie legal
evidence. The stamp duty rates are applied on a sliding scale of 1% to 6.75% which is based on the
value of property and the state of Australia.
Canada
Different provinces in Canada levy property tax on real estate which is based on the current
use and value of asset. This generates major source of revenue for most municipal governments in
Canada. This country follows the standard trend of using market value for valuation purposes in
most of the provinces with differential revaluation cycles. It follows different methods for
individual property taxes:
Municipal corporation tax= Municipal tax* Phased in assessment for year
Regional portion of tax=Regional/country tax rate*phased assessment for particular taxation year
Chile
The land property tax here is also known as territorial tax or contributions which is an
annual amount paid quarterly by the property owner (Chadha 2016). It is determined as a
percentage of fiscal value of the property. Internal revenue service will calculated tax on the
property which is based on land and building area as well as the value of material used in
construction. The annual tax rate varies between 1 to 2% of this value depending on the property
use such as residential, agricultural and commercial use.
Greece
It has municipal and a government property tax system to monitor the overall tax payment
from several property Greece owners. The municipal property tax is included in electricity bills and
incorporates along with charges for street cleaning and lighting. It is a combination of tax imposed
on the individual based on floor area and progressive real estate and wealth tax.
Hong Kong
There is a kind of levy name as property tax but it is not a type of ad valorem levy and
actually classified as an income taxation (Begg, 2016). As per HK Inland Revenue Ordinance, all
property owners are not related to this tax with respect to receive consideration in terms of rental
income for the year of assessment. The property tax shall be computed on net assessable value at
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standard rate.
Net assessable value (Formula)
Net assessable value = 80% of Assessable value
HK property tax payable = Net assessment value*property tax rate
Assessable value = Rental income + premium + (Rental bad debt recovered-irrecoverable rent) -
Rates paid by the owner
India
In this country, it is popularly known as house tax which is a local tax on buildings
attached with a land by the possessor. It resembles the US type wealth levy with various different
tax rates. The tax is based on annual rental value or area based ranting. It gives relief to all
properties held by central government in its own control (Jenkins 2016). The tax is usually
accompanied by a number of service taxes for water, drainage, conservancy as well as lighting with
the same tax rates. Rate structure is designed by the higher authority in order to facilitate the tax
payer by providing flexibility in the structure. The tax structure is designed in order to facilitate the
rural people as compared to the urban people by increasing their tax amount. It has been observed
that there is 80% assessments falling in the first two slab rates.
Ireland
The local property tax will came into existence in Republic of Ireland on 12 July 2013.
The tax on various properties held by person will be collected by the revenue commissioners. This
tax will be imposed on residential properties. The revenue raised will be used to fund the provision
of services by local authorities. These services currently include public parks, libraries, fire and
emergency services, open spaces and leisure amenities, planning and development, maintenance
and cleaning of streets and street lighting (Morgan 2016). The tax will be based on the market value
of the property which is taxed via a pre-defined system of market bands. The initial national central
rate of the tax will be 0.18% of a property's value up to 1 million Euro. The value of the property
below the limit of 1 million no banding will apply and only 0.185% will be charged on the first 1
million and rest 0.25% on the balance amount. The government estimates that 85% to 90% of all
properties will fall within the first five taxation bands.
Luxembourg
Property tax in this country is an impersonal tax which is calculated on the basis of the
property's unitary value determined by the taxation authorities of the respective country (Bauer and
Kourouxous, 2016). The annual property tax is the result of the following formula which clearly
explains the calculation of property tax are:
Unitary value of property*assessment rate*communal rate
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The assessment rate is determined by the legislator which generally ranges from 0.7% to 1% rate.
The communal rate is set by the communal head and it varies from 120% to 900% depending on the
nature of the municipality (Prahalathan 2012). Luxembourg has minimal property taxes
comparatively less as to its neighbouring countries just like Benelux or European Union. It amounts
to more or less 150 Euro for a 500,000 Euro apartment in Luxembourg City. This changes in the tax
rate is mostly depends on the living standard of the country. It can be stated that higher the living
standard higher will be its taxes.
Netherlands
Property tax is levied on the property on a municipal basis. The owners of the
residential property and people who rent their commercial space are taxed under this category.
People who assign their commercial place to other person on rent do not pay property tax since
2006. Municipalities combine their property taxes with a tax for a garbage collection and other
sewer system (Wallace 2015). The owners and users of the property and land also pays taxes based
on the value of property to the water board’s authority. These payment to water board authorities for
protection against floods and cleaning surface of water and sewers. All property related taxes are
based on the value of the house estimated by the municipality of the country.
United Kingdom
In UK the property tax is not based on the ownership of the property held by the person.
The council tax is based almost exclusively on residence and only in case of unoccupied property
the aspect of ownership is taken into consideration. The component of council tax is one of the sub
part of the main head Scotland and Wales property tax (Begg -2016). This country constitutes a
special department in order to govern the inflow and outflow of taxation is HMRC for customs and
revenue. It states various guidelines to facilitate the tax payers by providing wide range of services
and assistance in paying the tax. It also defines wide number of reliefs to the tax payer:
 It is tax imposed on the property by council of tax authority which allows several deductions
and exemptions in order to facilitate in paying taxable amount.
 The tax combines both property elements especially wealth and personal element.
 The valuation tribunal service has cleared up many previous doubts regarding the exact
nature of the council tax department.
The capital gain tax cannot easily be avoided as people take it in a simple way. Most of
the people won't need to consider avoiding capital gain tax as they are not aware about its
exemptions from paying the capital gain tax (Andrienko and Rees 2016). In United Kingdom Home
and car are exempt from the taxable point of view. The personal belongings worth less 6000 Pound
on sale of property and the average person has few other assets outside of cash, pensions and ISA
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are exempt from the tax. Following are the different ways to avoid the capital gain tax liability
imposed on the person for selling of the property are:
Annual CGT allowance- It helps to aware the tax payer its amount of annual capital gain tax
allowance in advance which needs to be consider while making capital gain on the asset in future.
While estimating Allowance in advance the owner will get prepared for the uncertainty. The year of
selling the asset is important rather than the asset which an owner sells is not at all important.
Realise losses to offset gains- It is an instrument which helps in determining the actual loss
incurred by the business by deducting all losses from the capital gain made by the owner on sale of
the asset or property (Faccio 2015). This means that a person can intentionally reduce its external
obligations by reducing its overall gains by deducting losses. This exclusion of number of losses
from the total amount of the capital gain help business in order to reduce its taxation liabilities. It is
that instrument which helps the strategic objective of every business is that to achieve its basic goals
and objectives. It includes strategic planning done by the company by selling their shares to earn
higher income. The rate of capital gain tax can be as low as 18% and its only charged on the amount
over the annual allowance provided as a benefit to several number of tax payers.
Exploit Annual ISA allowance and pension- It is regarded most beneficial option provided by the
authorities to avoid the tax liability. The tax liability can be avoided by investing within ISA scheme
and pension scheme (Chadha 2016). The amount of gain and losses on investment inside ISA
scheme is outside the tax purview of capital gain tax by getting rid of the whole problems. It is that
which helps in reducing the overall risks associated with each and every business transactions
which can affect the slop of tax liability.
Transfer assets to spouse- It is common method of avoiding the tax liability by transferring
different assets in the name spouse. It can be transferred on the name husband or it can be on the
name of wife. It is one of the traditional practice adopted by an individual or HUF in order to reduce
its tax burden (Morgan 2016). This means that a person can transfer to his or her spouse to utilise
the benefit of allowances designed especially for the tax payers. The transfer of property to his or
her spouse will provide several number of benefits to the transferor on completion some conditions.
The conditions states that the spouse is not separated at the time of transferring the asset, property is
fully used for commercial purpose and not used for any kind of residential purpose. It also mention
in the act that any person who pass its ownership of property to another's hand and after transfer the
asset will be sold than the benefit will not be given and other penalty imposed by the government.
Bed and spousing - It is also known as bond washing transactions in which shares are sold on
which expected gains are analysed by the company to use the CGT allowances and on next day
buy-back the same shares (Jenkins 2015). It is also known as temporary transfer of asset in order to
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take advantage of allowances stipulated by the company. The pre-defined period of buy-back shares
is only 30 days to crystallise a capital gain.
Carry forward capital losses- It is that step which allows an individual in case of heavy loss
suffered by them to report to the higher authority like Self-assessment tax return. It is an option
which is given to every individual for personally assessed its tax on its income and wealth. Capital
losses that a person can declare and carry forward as it will reduce the amount of capital gain. It is
that type of instrument or technique which facilitates a person in order to minimize its future
liability imposed by the external environment. The loss word reflects the negative and unfavourable
conditions which can occur in the life of the business (Jenkins 2016). These tough and complex
taxation situation are the challenges imposed by the external environment on the business. An
individual can avoid its taxable liabilities which involves three main aspects of the overall external
business environment. This is also regarded as Bottom line on avoiding Capital gain tax burden are
the following:
Preparation- ISA and pension schemes helps an individual to protect its interest against the gains
in the external market. These two scheme help in preventing the gains becoming taxable. Generally
these schemes play a significant role in minimizing the burden on the different tax payers whether it
can be a single individual, group of persons and corporate or company (Emmerson 2016). ISA and
pension scheme is to promote the saving capability of the government by influencing tax payers to
invest in these schemes and get relief in return from paying tax.
Alertness- It helps to aware people about its prospective gains or losses from the respective
property held by the persons. People will aware about their table over a specified year will enable
them to decide that its better decision to realise other gains or losses. These may get vary by
analysing different key considerations which can affect the decision-making process. An individual
will forecast its future uncertainty by using various tools and techniques in order to measure the
external force. The main aim of a person is to select appropriate decision which will generate high
amount of return with less amount of tax burden (Ozanne 2015). It also involves various tax reliefs
from the government to get additional benefit which couples with high amount of perks and
facilities used by an individual.
Defusing- It is that which includes selling of the asset in advance before the value of that asset
increases and increase the tax burden. It is an instrument which helps to monitor the external
environment's each and every action by judging its performance in terms of its future productivity.
The main of the person is to reduce its tax burden by minimizing the amount of the gains that can be
arise in near future. The external future changes are predicted by observing different trends in the
market (Travers 2015). These trends may help in identification of potential risks and hazards that
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can be takes place in normal course of the business. It may be worth for a person in realising some
of the capital gains which is generated from the property held by a person by selling them and
potentially re-purchasing them after 30 days.
CONCLUSION
From the above study it can be concluded that the capital gain tax can avoided easily. This
easiness in avoiding the tax liability is only due to several benefits and reliefs provided by the
competent and higher authorities for tax payers. It has been observed that the capital gain tax is not
imposed on each and every asset or property held by a person. The imposition tax liability on
various properties with separation of different categories which facilitate an individual in order to
recognise its obligations. The government play an important role in determining the liability of a
person.
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REFERENCES
Books and Journals
Andrienko, Y., Apps, P. and Rees, R., 2016. Optimal taxation and top incomes. International Tax
and Public Finance. 15(7). pp.1-23.
Bauer, T. and Kourouxous, T., 2016. Capital Charge Rates, Investment Incentives and Taxation.
European Accounting Review. 12(6). pp.1-22.
Begg, I., 2016. The EU Budget and UK Contribution. National Institute Economic Review. 236(1).
pp.39-47.
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University Press.
Emmerson, C., 2016. TAXATION OF PRIVATE PENSIONS IN THE UK^ sup 1^. DICE Report.
14(1). pp.10-26.
Faccio, M. and Xu, J., 2015. Taxes and capital structure. Journal of Financial and Quantitative
Analysis, 50(03), pp.277-300.
Hail, L., Sikes, S. and Wang, C., 2015. Cross-country evidence on the relation between capital gains
taxes, risk, and expected returns. Journal of Public Economics. 14(5). pp.27-36.
Jenkins, S. P., 2016. Pareto distributions, top incomes, and recent trends in UK income inequality. In
invited plenary lecture at Conference on the ‘Dynamics of Inequalities and their Perceptions’,
Aix-Marseilles University, Marseilles. 16(6). pp. 26-27.
Jenkins, S.P., 2016. The Income Distribution in the UK. Social Advantage and Disadvantage. 15(8)
pp.135-148.
Morgan, J., 2016. Corporation tax as a problem of MNC organisational circuits: The case for unitary
taxation. The British Journal of Politics and International Relations. 18(2). pp.463-481.
Ozanne, S., 2015. Recent Developments in the Territorial Scope of UK Employment Law. Business
Law International. 16(3). pp. 105-125.
Sanz-Sanz, J.F., Castañer-Carrasco, J.M. and Romero-Jordán, D., 2016. Consumption tax revenue
and personal income tax: analytical elasticities under non-standard tax structures. Applied
Economics. 17(8). pp.1-9.
Travers, T., 2015. Devolving funding and taxation in the UK: a unique challenge. National Institute
Economic Review. 233(1). pp.R5-R13.
Wallace, S., 2015. Property Taxation in a Global Economy: Is a Capital Gains Tax on Real Property
a Good Idea. In Prepared for the Lincoln Institute of Land Policy-Land Policy Institute of
Taiwan, Conference on ‘Toward A. 23(7). pp.24-25.
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