Buying Property as a Foreigner: Country Restrictions

Introduction

US citizens can own real estate in most countries, but many impose restrictions. These range from outright prohibitions on foreign land ownership to requirements that purchases go through local entities.

Understanding these restrictions before you fall in love with a property saves time and potential legal complications.

Countries with Few Restrictions

Full Foreign Ownership Allowed

• No restrictions on foreign buyers
• Same rights as Portuguese citizens
• Popular for Golden Visa (€500,000+ fund investment)
• Can buy residential, commercial, land

• No restrictions on foreign buyers
• NIE (tax ID) required
• Golden Visa available (€500,000+ real estate)
• Strong property rights

• No restrictions on foreign buyers
• Notaire system provides protection
• Transaction costs high (7-10% of price)
• Complex inheritance laws (forced heirship)

• No restrictions on foreign buyers
• No residency requirement
• Grundbuch (land registry) system
• Purchase costs 10-15% of price

• Foreigners can own property directly
• Same rights as citizens
• Beach/border zone restrictions (lease only)
• Title insurance recommended

Minimal Restrictions

• Foreigners cannot own directly within 50km of coast or 100km of border (Restricted Zone)
• Fideicomiso (bank trust) allows ownership in restricted zones
• 50-year renewable trust
• Interior Mexico: Direct ownership allowed

• Direct ownership allowed for most property
• Beach/island restrictions (some areas)
• Titled vs. ROP land (verify type)
• No property tax on primary residence under $120,000

Countries with Significant Restrictions

Thailand

**Foreigners Cannot Own Land**

• Condominium: Up to 49% of building can be foreign-owned
• Leasehold: 30-year lease (renewable, but not guaranteed)
• Thai company: Risky; nominees technically illegal
• Marriage: Thai spouse can own land

• Buy condo (most secure)
• Long-term lease for houses
• Due diligence critical

Indonesia (Bali)

**No Foreign Land Ownership**

• Hak Pakai (Right to Use): 30+20+30 year lease
• Hak Sewa (Rental): Shorter-term lease
• PMA company: Foreign company can hold Hak Guna Bangunan
• Marriage to Indonesian (complex)

• Nominee arrangements common but risky
• Enforcement has increased
• Consult Indonesian attorney

Philippines

**Foreigners Cannot Own Land**

• Condominium: Up to 40% of building foreign-owned
• Leasehold: 50-year lease possible
• Filipino spouse ownership
• Philippine corporation (60% Filipino-owned required)

• Can inherit land through intestate succession
• Cannot directly purchase

Vietnam

**Limited Foreign Ownership**

• Apartment/condo: 50-year leasehold
• Maximum 30% of apartments in a building
• House leasehold possible through marriage to Vietnamese
• Commercial through local company

New Zealand

**Restrictions on Residential**

• Non-residents generally cannot buy existing homes
• Can buy new construction
• Can buy apartments in large developments
• Residency exception

Purchase Process Abroad

General Steps

1. **Due Diligence**

1. **Legal Representation**

1. **Contract**

1. **Closing**

Costs to Budget

Beyond purchase price:

| Cost | Typical Range | |------|--------------| | Transfer tax | 0-10% of price | | Notary fees | 0.5-2% | | Legal fees | 1-2% | | Agent commission | 2-6% | | Registration | 0.5-1% |

**Total transaction costs: 5-15% of purchase price**

US Tax Implications

Reporting Requirements

• If you have foreign bank account for property (mortgage, rental income)
• Threshold: $10,000 aggregate

• Foreign real estate held through foreign entity reportable
• Direct ownership: Not reportable on 8938
• Income reportable on 1040

Rental Income

• Report worldwide rental income to IRS
• Not eligible for FEIE (passive income)
• Depreciate over 30 years (vs. 27.5 for US property)
• Foreign taxes may be creditable

Sale/Gain

• Report capital gains to IRS
• Determine cost basis (including improvements)
• Foreign tax credit for taxes paid abroad
• 1031 exchange doesn't work for foreign property

Key Takeaways

• Portugal, Spain, France, Germany allow unrestricted foreign ownership
• Mexico allows foreigners to buy through fideicomiso trust in coastal/border zones
• Thailand, Indonesia, Philippines restrict land ownership; condos available
• Always use local attorney independent from seller
• Budget 5-15% of purchase price for transaction costs
• Report rental income to IRS; not eligible for FEIE

Next Steps

1. Research ownership restrictions in target country
2. Identify local attorney with foreign buyer experience
3. Understand transaction costs and timeline
4. Consider rental income tax implications (both countries)
5. Don't buy sight-unseen; visit multiple times