Importance of Property tax and its implications

                                                                                         

Tax is a financial charge enforced on citizens (individuals, businesses, legal entities) by the state. It is one of the largest sources of Government revenues. Property tax is one of these taxes and is charged from the owners of some real estate properties like land, houses, commercial plazas or any other type of realty (Note that tax levied upon vehicles, bonds or stocks is also called property tax). Property tax is normally calculated as a percentage of the total value of property and property valuation is carried out by appraisers representing taxing authorities. Different countries have different set of rules in accordance with their own needs and objectives, UAE for instance charge no property tax (buyers and sellers have to pay a tax at the time of property transfer though).

Real estate taxes are often enforced on its owners, but property tax can also be imposed on property transfers or income coming from possession of some property. All types of real properties and property ownerships like agriculture, grazing, farm houses, industrial, tenancy, shops, homes and shops have different implications/exemptions jotted down specifically for them. Also, there are tax exemptions for special cases like old citizens or widows in many countries. The ownership tax is normally payable after one year time. Apart from generating revenues, governments may use these property taxes to curb speculative investments in real estate market. However these taxes can have some negative effects as well, for example increasing urban spread out (known as sprawl).

Land Value Tax:
Unlike Property tax that is levied upon the real estate, land value tax is a direct tax on the value of land. At present, it is imposed in Australia, Hong Kong, Denmark, etc. Lots of economists are of the opinion that Land value tax is a better option than property tax, first because it is easy to calculate and second because it can take care of some loopholes in the economic setup (e.g. discouraging land owners to hold the land for no reasons). However, it is hard to implement in countries where it is difficult to ascertain real land owner.

When talking about saving on property taxes, you can’t have a general advice as rules and regulations differ in different countries. However, by reading and understanding your local laws (especially the valuation method) you can save a considerable amount. Many taxpayers often avoid going in details or getting in dispute with taxing authorities, but you’ve got every right to know exactly what are you paying for?

About the author:
William King is the director of UAE Dubai Property & Dubai Real Estate Properties Portal, Pakistan Real Estate & Pakistan Property Portal, Dubai Property Rentals & Dubai Rents and UK Wholesale Suppliers, Distributors, Dropshippers & Manufacturers . He has 18 years of experience in the marketing and trading industries and has been helping retailers and startups with their product sourcing, promotion, marketing and supply chain requirements.

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