Recognition personal income tax / CGT China residential property sale

I plan to sell my flat in China - I am a British national. I have looked at the DTA for China where it mentions personal income tax not CGT. This Chinese personal income tax tax is charged on the gain in value at sale, so although called personal income tax seems equivalent to CGT. So, I have two questions : a) is the personal income tax charged in China recognised by HMRC as equivalent to CGT in the UK and therefore allowed to be partially offset in my tax return ? (the UK rate is higher) b) If the answer to a) is yes and I remit the funds (after paying all Chinese and UK taxes) to the UK, is it clear that tax has been paid and the remittance will not be regarded as income subject to UK income tax ?

Hi
Not enough information has been provided.
If  you are UK resident, you need to report the sale of the property in the UK.
Relief can be claimed for the foreign tax paid on the same source.
If UK resident and domicile, the remittance basis is not applicable as you are liable on your worldwide income and the gain is taxable in the UK.

Thanks and sorry not enough info / unclear. Yes, UK resident and yes, will report. If relief can be claimed, good. Therefore, when proceeds of sale are taxed in China on gain made (Chinese call this "personal income tax" not "capital gains tax") and remaining funds are sent to the UK, and form SA106 and SA108 are completed, I want to confirm the tax paid in China is subject to relief and that calculation of difference to be paid to HMRC should be using UK capital gains tax rates as it is a sale of a property. Is that right ?

Hello, I would also like to ask the same question, I am a UK national and UK tax resident. I have a property in China to sell. My understanding, similar to DXM, is that in China capital gains on sale of residential property are included in China tax as a separate line item under the general classification of "Personal Income Tax". Personal Income Tax includes a grouping of income items called Comprehensive Income including employment income, dividends, interest, etc with sliding scale tax bands like the UK, but then also has a few separate line items like Capital Gains which do not use a sliding scale but a flat rate of 20% on the gain. Therefore can you please confirm that this is the amount I could claim UK relief on.

Hi DXM,

Yes, the tax paid in China, is subject to tax relief in the UK. On SA106, you can claim a foreign tax credit of up to 100 percent of the tax paid in China.

Thank you.

 

Thanks - that's very clear on the relief. Can I just confirm that, having paid the Chinese tax in China and paid any difference to HMRC (due to CGT rates being higher here than in China), the remaining funds are not taxable as part of worldwide income (whether kept in China or brought to the UK) because CGT and Chinese taxes have already been paid ? Thank you.

Although headline CGT in UK is higher at 28%, there is also a relief available for if you used property as main residence, e.g. if you lived there as your sole main residence for 10 out of 20 years then 50% of the gain would not be taxable, so you would be left with only 14% CGT in UK. China does not have such a relief. Dear HMRC, can you please confirm that the residential relief is available on overseas property if it was the sole residence?

Hi Graham Matthews,

Yes, this is the amount you would claim as Foreign Tax Credit Relief.

Thank you.

Hi, sorry I do not understand the reply from HMRC Admin 19. The question was, is Private Residence Relief available on gains made on the sale of overseas property. For example, I was an expat in China for 20 years before returning to UK in 2013, I did not have a house in UK whilst I lived in China and my China house bought in 2003 was my sole residential property. Since 2013 I returned to UK, bought a house, and rented out the China house. Please confirm if Private Redidential Relief is available on the gain on the sale of the China house for the period it was my sole private family home.

Hi DXM
That is correct.
The capital will be tax free but any interest or dividends that this then generates will need to be declared.

Hi Graham Matthews,

Capital gains tax is worked out differently.  The lower capital gain rate of 18% and the higher rate of 28% remain unchanged.  
Private residence relief is set againt the amount subject to capital gains, thus reducing the amount taxed at 18% and or 28%.  
There is a calculator at Tax when you sell your home which would help you calculate the gain.  
You may also be able to claim a foreign tax credit for any overseas capital gains tax paid.

Thank you.

 

Would it be possible to reply yes or not, if Private Residence Relief is available when calculating UK capital gains tax due on the sale of an overseas property? Thanks.

Hi,

Yes, you can claim this for the period you lived in it. You can see guidance here:

HS283 Private Residence Relief (2023)

Thank you.

Hi,

Yes. Provided the property was your main residence, during a period of ownership, you would be able to claim private residence relief for that period of ownership.

Thank you.