USA – TEXAS Law and Practice Contributed by: Taylor Cooksey, Philip Kinkaid, Serena Kramer and David Brooks, Cokinos | Young
8.3 Municipal Taxes There are no specific statewide “municipal tax - es” in Texas that are considered taxes on the occupation of business premises, such as an occupancy tax tied directly to leasing or using commercial property. However, annual property taxes are payable with respect to real estate in Texas, except where certain exemptions may apply. These taxes are typically paid by the property owner but can be passed on to ten - ants through lease agreements. 8.4 Income Tax Withholding for Foreign Investors Texas does not have a state income tax, so there is no state-level income tax withholding for foreign investors (or anyone else) on income derived from real property or other sources with - in the state. However, foreign investors in Texas are subject to federal income tax rules under US law, including those that apply to income earned in Texas, such as rental income or gains from the sale of real property, because federal tax obliga - tions extend nationwide. 8.5 Tax Benefits Owning real estate in Texas offers several tax benefits, primarily due to the state’s lack of a state income tax and federal tax provisions that apply nationwide. The lack of a state tax ampli - fies the impact of federal tax benefits, including by increasing the after-tax return on real estate investments compared to states with income taxes. In Texas, real estate owners can benefit from certain property tax deductions and exemptions. For homeowners, this includes the homestead, over-65 and disabled exemptions, which can reduce the taxable value of the primary resi - dence; for landowners, it includes the agricul - tural special appraisal valuation. Local govern -
waivers, a bonding off procedure, lawsuits or summary motions. 7.7 Requirements Before Use or Inhabitation Some counties have no certificate of occupancy requirements and certain non-residential farm buildings may be exempt from such certificates. However, certificates of occupancy are required in most cities before a project may be used for its intended purpose. The certificates ensure fire, health and environmental safety and code com - pliance for specific uses. There are inspection requirements prior to issuance, and penalties for non-compliance. No VAT or equivalent tax is payable in Texas on the purchase or sale of commercial real estate. Real estate in Texas is subject to annual property taxes that are assessed by local taxing jurisdic - tions and vary from location to location. Taxes are assessed annually based on the property’s appraised value. Commercial real estate is not subject to Texas state sales and use tax. 8.2 Mitigation of Tax Liability 8. Tax 8.1 VAT and Sales Tax There are no transfer, stamp or similar tax lia - bilities in Texas on acquisitions or sales of real estate, including large real estate portfolios. Standard tax mitigation strategies apply with respect to the acquisition and disposition of real estate, including, when available or appropriate, utilising Section 103 “like-kind” exchanges to defer capital gains tax, structuring acquisitions as equity rather than asset transactions, instal - ment sale financing, and the use of REITs.
1347 CHAMBERS.COM
Powered by FlippingBook