Capital Gains Tax on Overseas Property: 2026 Comparison for International Investors

Published on: April 28, 2026

Quick answer: Exit tax is the most-overlooked cost in cross-border property, and leaving it out can overstate after-tax returns by 5 to 25 percentage points over a typical hold. Two countries can tax the same gain, but double tax treaties usually give primary taxing rights to the country where the property sits, with the residence country granting a credit. US and UK investors can face an extra currency-gain effect: gains are generally computed in the home currency, so a stronger local currency may create a taxable gain even without a local-currency profit. The impact depends on your facts. Holding periods matter enormously: as of 2026, Italy can reach 0% after a 5-year hold, Germany after 10 years, France's taper can reach full exemption around year 30, and the UAE currently levies no personal CGT. These outcomes are conditional and can change. The decisive principle is that the tax bill is largely set when you buy, not when you sell.

Most cross-border investment models stop at gross yield. Some go as far as net yield after operating costs. Very few include exit tax, and that omission can overstate true after-tax returns by 5 to 25 percentage points over a typical holding period.

This guide is a working reference for the capital gains tax (CGT) treatment of property in 15 major investment markets in 2026, with particular attention to the points that catch international investors off guard: the two-jurisdiction problem, the currency-gain trap, and the exemption rules that can take your effective rate to zero if you plan correctly.

The Two-Jurisdiction Problem

When you sell property abroad, two countries can tax the gain:

1. The country where the property is located (source country)
2. The country where you are tax-resident at the time of sale (residence country)

Almost all double tax treaties give primary taxing rights to the source country for immovable property gains. The residence country can also tax the same gain, but typically grants a credit for the foreign tax paid.

This means:

• If your residence country's effective rate on the gain is higher than the source country's, you pay the difference at home.
• If it's lower (or zero), the source country tax is your final cost.

A British investor selling French property generally pays French CGT (around 36-38% with social charges as of 2026) and can usually credit it against UK CGT (24% on residential). In many cases the foreign credit absorbs the UK charge, so the effective cost approximates the higher French rate, but outcomes vary.

A UAE-resident individual selling Spanish property would typically owe Spanish CGT only (generally 19% as of 2026), as the UAE currently levies no personal income tax.

A US citizen selling French property pays French CGT, then US federal CGT (15-20%) plus state tax plus 3.8% Net Investment Income Tax, and credits the French tax against the federal US tax only. State and NIIT exposure is unrelieved by treaty in most cases.

Always model both jurisdictions before estimating exit cost.

The Currency-Gain Trap (US and UK Investors Especially)

This is the single most underappreciated tax cost in cross-border real estate.

The US Internal Revenue Code requires US persons to compute capital gains in US dollars using the exchange rate at acquisition and disposal. Even if a property's local-currency value is unchanged, a strengthening of the local currency against USD creates a taxable USD gain.

Worked example:

• 2018: US investor buys a Madrid apartment for €500,000 when EUR/USD is 1.10 → USD cost basis $550,000
• 2026: Sells for €500,000 (no local-currency gain) when EUR/USD is 1.20 → USD proceeds $600,000
• Reportable USD gain: $50,000 despite zero economic gain in EUR terms

Mortgage repayment in foreign currency creates a separate IRC §988 gain or loss, treated as ordinary income, not capital gain.

The UK applies similar rules, gains and losses on foreign property must be computed in GBP. The currency component is part of the chargeable gain and cannot be separately netted.

EU residents in most countries do not face this issue for euro-denominated property held by euro-functional individuals.

Country-by-Country Reference: 2026

The table below shows top-line CGT exposure for a non-resident individual disposing of directly-held residential property. Rates are simplified for comparison, actual liability depends on residency, holding structure, and reliefs.

A few of these deserve closer examination because they materially change investment strategy.

The Italian Five-Year Rule

Under Article 67 of the Italian Income Tax Code (TUIR), a capital gain on the sale of real estate held by an individual for more than five years is not taxable in Italy.

This applies to non-residents and residents alike for residential property held outside business activity. There is no inflation requirement, no minimum value, and no anti-avoidance trigger, just the calendar.

Practical consequence: if your investment horizon is 5+ years (which it should be for any cross-border purchase given transaction costs), Italy moves from a high-tax jurisdiction (26%) to a zero-tax jurisdiction at exit. This is one of the most underappreciated facts in European real estate investing.

The German Ten-Year Rule

Germany applies the same logic with a longer fuse. Under §23 of the EStG, gains on property held by individuals (not in a business) for more than ten years are completely exempt from income tax.

For a German investor, or any non-resident German-source seller, this turns Germany from a punitive jurisdiction (up to 45% marginal rate) into a tax haven for buy-and-hold investors with a decade-plus horizon.

The clock starts at the notarized purchase date and runs to the notarized sale date.

The French Taper Relief

France imposes a headline 19% CGT plus 17.2% social charges on real estate gains for non-residents, 36.2% combined. This looks brutal compared to neighbors.

But France applies progressive taper relief that erodes the tax over time:

• Years 1-5: full rate
• Years 6-21: 6% per year reduction in income-tax base
• Year 22: 4% reduction → income tax fully exempt
• Social charges follow a separate slower taper, fully exempt at year 30

A French property held for 22 years pays only the 17.2% social charges. Held for 30 years, the gain is fully exempt.

This makes French property a very different investment for a 25-year holder than for a 10-year holder.

The Greek Suspension

Greece formally has a 15% CGT on property, but the application of this tax has been suspended every year since around 2013-2014, most recently extended through end of 2026. Reliable enough that the market prices it in as zero, but technically a political decision that could reverse.

The UAE Zero

The UAE has no personal income tax, no capital gains tax on individuals, and no inheritance tax. The new federal corporate tax (9% above AED 375,000 profit) applies to businesses but generally not to passive individual property gains.

A common confusion: corporate property held by UAE-incorporated companies may face the 9% corporate tax on disposal gains. Personal direct ownership remains untaxed.

The Maltese Quirk

Malta offers two CGT regimes for property:

1. Property Transfer Tax: 8% on the transfer value (selling price), regardless of gain or loss, paid as a final tax
2. Capital Gains Method: 35% on the gain (with deductions), where applicable

Most non-resident sellers use the 8% transfer-value method, which means even a loss-making sale incurs tax. This is unusual globally and worth modeling explicitly.

US-Specific: FIRPTA Withholding

The Foreign Investment in Real Property Tax Act (FIRPTA) requires the buyer of US property from a foreign seller to withhold 15% of the gross sales price (not the gain, the price) and remit it to the IRS at closing.

The seller files a US tax return to compute actual liability and claim a refund of any over-withholding. In practice, this means:

• Foreign sellers face a meaningful cash-flow hit at closing
• Refund processing can take 6-18 months
• Required documentation includes ITIN, FIRPTA affidavit, and detailed cost-basis substantiation

A withholding certificate (Form 8288-B) filed in advance can reduce the withholding to actual estimated tax, but must be filed well before closing.

UK-Specific: Non-Resident CGT and the 60-Day Rule

Since 6 April 2020 (extended in 2021), non-UK residents who dispose of UK residential property must:

• File a CGT on UK property return within 60 days of completion
• Pay any CGT due within the same 60-day window

This is a separate filing from the annual self-assessment and applies even where no tax is due (e.g., loss disposals). Penalties for late filing apply quickly.

The 24% rate on residential property gains was reduced from 28% in April 2024, a meaningful change that improved UK exit economics for non-residents.

Strategies to Reduce Exit Tax (Legitimately)

1. Hold for the Statutory Exemption Period

Italy (5 years), Germany (10 years), Croatia (2 years), and France (22-30 years for taper) all have explicit holding-period exemptions. Aligning your exit with these statutory holding periods may reduce CGT, in some cases to zero, where all conditions are met and the law is unchanged.

2. Time Residency Changes Carefully

Changing tax residence before a sale may, in some cases, reduce or remove residence-country tax, but anti-avoidance and exit-tax rules frequently apply and this is high-risk. Source-country tax remains. Some countries (UK, US, Australia) impose exit taxes to prevent this.

3. Use Principal Residence Relief Where Available

Most countries fully exempt the sale of a primary residence. Establishing actual residence (not just nominal) for the required period before sale can move a transaction into this regime. Spain (3 years), UK (lifetime occupation prorated), France (no minimum but actual residence required).

4. Step-Up at Inheritance

In jurisdictions that grant heirs a stepped-up basis at death (US, UK CGT-only assets), transferring at death rather than selling during life may reduce or remove accumulated capital gains; inheritance tax and local rules can change the result. Seek professional estate-planning advice. Inheritance tax is a separate question (and was covered in our earlier article).

5. Index Cost Basis Where Allowed

Cyprus, Turkey, Portugal (for non-residents until 2023), and several Latin American countries allow inflation indexing of cost basis. In high-inflation periods this materially reduces the taxable gain.

6. Reinvestment Reliefs

Spain offers full exemption to residents over 65 if proceeds fund a life annuity. Several US states have reinvestment provisions for state-level CGT. Portugal's residents historically had reinvestment relief into another EU primary residence.

7. Currency Hedging (US/UK)

For US/UK investors with euro-denominated property, FX exposure on the cost basis and on the mortgage create separate gain/loss streams. Forward contracts or natural hedging via euro-denominated debt can eliminate the FX component of the taxable gain.

A Worked Example: Three Scenarios on the Same €500k Property

A €500,000 Madrid apartment held for 8 years, sold for €700,000 (€200,000 gross gain). Acquisition costs €40,000, sale costs €30,000. Net economic gain: €130,000.

Scenario A: UAE-resident individual buyer

• Spain CGT: 19% × €130,000 = €24,700
• UAE: zero
• Total exit tax: €24,700 (12.4% of gain)

Scenario B: UK-resident individual buyer

• Spain CGT: 19% × €130,000 = €24,700
• UK CGT: 24% × £113,000 (≈€130,000) = £27,120 minus £4,000 (≈€4,600 for €1≈£0.87) Spain credit at FX rate
• Net additional UK liability: ~£2,400 (≈€2,800)
• Total exit tax: ~€27,500 (13.7% of economic gain, but more if FX moved)

Scenario C: US-resident individual buyer (assume EUR strengthened 8% over period)

• Spain CGT: 19% × €130,000 = €24,700
• US federal: 15% × USD-equivalent gain (inflated by FX), say