A new way to avoid taxes abroad: real estate abroad

Economics. Tax evasion. Just 10% of real estate in Paris, London or Dubai is owned by foreigners. Since 2017, more of these properties have been used for money laundering or tax evasion, according to the European Tax Observatory.

In their report on global tax evasion, published on Monday, October 23, economists at the European Tax Observatory draw alarming conclusions about the development of "offshore real estate," that is, owning a house or apartment in a country other than one's own. "Of course, there are many legitimate reasons to own real estate abroad," the authors explain. However, most lawmakers require owners to declare these properties in their country of residence and pay taxes if there are rental payments or property taxes, if any - such as the real estate tax in France. "But these properties can also be used for money laundering, evading international sanctions or taxes," emphasizes Gabriel Zucman, director of the watchdog.

This is particularly because real estate is not covered by the automatic exchange of banking information adopted in 2017 by about a hundred countries. Since then, a quarter of assets previously held in light-tax countries may have been converted into real estate, the report notes. The problem is that identifying the real owners is not an easy task, as shares are sometimes owned by companies that make it difficult to determine. For example, 15% of properties owned by foreign companies in the UK are actually owned by... Britons.

Despite these challenges, various data and studies compiled by the watchdog - and presented in an interactive online atlas - show that properties valued at a total of $500 billion are owned by foreigners in six cities and regions around the world: London, Paris, Singapore, Dubai, the French Riviera and Oslo. And this represents 10% of the total value of local real estate.

The report specifically mentions Dubai, where real estate owned by foreigners was valued at $136 billion in 2020, accounting for 27% of the local market value. The emirate has been particularly attractive to investors in recent years, including thanks to tax incentives: there is no income tax, the corporate tax rate is only 9%, and large investors can get a "golden visa". Indians now own about 20% of foreignreal estate in the emirate, which is not surprising given that 41% of immigrants in the workplace are Indian.

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