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Foreigner, resident in Ireland, with foreign property

  • 15-07-2018 1:41pm
    #1
    Closed Accounts Posts: 19


    I'm new to the forum, so first of all, HI!

    I wanted to help a colleague at work to understand her position with Revenue.

    She is from Italy and working and leaving here in Ireland since 2016. She has the bare ownership of the house where her parents live (they have the usufruct). She never paid taxes in Italy for that nor she rents it, actually she can't do anything with it because who has the usufruct have the rights to rent it.

    Recently she got scared reading an article online about not disclosing assets abroad. I told her to contact the Revenue and ask directly but she is too scared to get fined.

    Personally I think that even if she was the owner she didn't have to disclose it because, first of all, she is a foreigner who moved to Ireland, but assuming she had to disclose it, being the bare owner she doesn't have any income from that property, so still not a problem with taxes.

    What do you think?

    Thanks,

    Aoife


Comments

  • Registered Users, Registered Users 2 Posts: 26,295 ✭✭✭✭Mrs OBumble


    If she has np profit from it, then there is no tax to pay.

    The only time she had to declare it is if she claims welfare.


  • Closed Accounts Posts: 19 Aoife_82


    Hi Mrs Obumble,

    thanks, that's what I told her, maybe now that she reads this she'll believe me. She thought that in any case she had to report it and I didn't know what to tell her, but from your reply I'd say she doesn't have to do anything.

    Actually one thing that I told her and she was shocked about is the CGT. My believe is that when her parents die she'll get the full ownership and if she is going to sell the house she'll have to pay the CGT.

    She couldn't believe that practically she'll have to pay 33% of the entire amount (she paid just a small symbolic amount for the bare ownership) and I also think it's pretty sad considering her parents bought that house with their money and their work in another Country before she moved here!

    I hope you can tell me I'm wrong and make her happy :)

    Thanks,

    Aoife


  • Registered Users, Registered Users 2 Posts: 59,703 ✭✭✭✭namenotavailablE


    When she inherits the house, the market value at that date is used for calculating any gain made on a later disposal- the price she originally paid is ignored.

    One other thing to check up (I can't remember the exact rules)- there is a possibility that a later disposal would be exempt if she can prove that 'dependent relative relief' applies. In outline terms, a gain on the disposal of a house owned by the seller but which was provided free of rent to the seller's 'dependent relatives' to occupy also qualifies for exemption from CGT. However, I don't have the precise qualifying conditions to hand so this relief may not apply, especially as the property is located outside of Ireland.


  • Registered Users, Registered Users 2 Posts: 10,633 ✭✭✭✭Marcusm


    Aoife_82 wrote: »
    Hi Mrs Obumble,

    thanks, that's what I told her, maybe now that she reads this she'll believe me. She thought that in any case she had to report it and I didn't know what to tell her, but from your reply I'd say she doesn't have to do anything.

    Actually one thing that I told her and she was shocked about is the CGT. My believe is that when her parents die she'll get the full ownership and if she is going to sell the house she'll have to pay the CGT.

    She couldn't believe that practically she'll have to pay 33% of the entire amount (she paid just a small symbolic amount for the bare ownership) and I also think it's pretty sad considering her parents bought that house with their money and their work in another Country before she moved here!

    I hope you can tell me I'm wrong and make her happy :)

    Thanks,

    Aoife

    To understand the Irish taxation treatment would require a full understanding of the true legal position in Italy. It is outside the competence of this forum. I suspect that your friend has ownership of the peoprtty subject to her parent's life interest, i.e. while they are alive they can use the property or rent it out. hen they die she does not acquire anything but rather their interest ceases.

    CGT is s tax on gains and while your friend is likely to be Irish tax resident and in due course likely to become ordinarily Irish resident, she is likely to be able to manage any tax arising providing she does not become domiciled in Ireland. By manage, I mean that, if she feels the property, she can leave the proceeds outside of Ireland and then she would not have to pay Irish CGT on it. A non domiciled individual is only within the charge to Irish CGT on gains remitted (sent ) to Ireland.


  • Closed Accounts Posts: 19 Aoife_82


    I think she wants to be resident in Ireland, infact she also wants to buy her family home here. The bare ownership/usufruct is something she was explaining me, practically she will really own the property if their parents give up the usufruct (practically they are the real owners at the moment for Italian taxes) or they die.

    It's still incredible that she will have to pay 33% of the value!

    Thanks,

    Aoife


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  • Closed Accounts Posts: 19 Aoife_82


    When she inherits the house, the market value at that date is used for calculating any gain made on a later disposal- the price she originally paid is ignored.

    One other thing to check up (I can't remember the exact rules)- there is a possibility that a later disposal would be exempt if she can prove that 'dependent relative relief' applies. In outline terms, a gain on the disposal of a house owned by the seller but which was provided free of rent to the seller's 'dependent relatives' to occupy also qualifies for exemption from CGT. However, I don't have the precise qualifying conditions to hand so this relief may not apply, especially as the property is located outside of Ireland.

    this is really important to understand! Are you saying that, if when she becomes the full owner the market value is 100k, and she sell it for 120k she will have to pay the CGT only on the 20k?

    Thanks,

    Aoife


  • Registered Users, Registered Users 2 Posts: 311 ✭✭MrSkinny


    Aoife_82 wrote: »
    I think she wants to be resident in Ireland, infact she also wants to buy her family home here.

    That is fine but becoming resident, or even buying a property here, does not necessarily imply that she loses her domicile of origin (Italy). That will only change if she intends to live in Ireland permanently:

    https://www.revenue.ie/en/jobs-and-pensions/tax-residence/what-is-domicile.aspx

    Domicile is as key as residency in terms of establishing her tax liability. If she remains domiciled in Italy, her Irish CGT liability on the disposal of the foreign property would be limited to the proceeds she brings into Ireland:

    https://www.revenue.ie/en/property/foreign-property/disposing-of-a-foreign-property.aspx

    Italian CGT may still apply but that is another matter.

    If she were to become domiciled in Ireland the she would have an Irish CGT liability in addition to the Italian CGT liability and she would really need to look into the detail to see if any deductions are applicable, double taxation agreements, etc. (Point 8 on the page linked above touches upon this.)
    The bare ownership/usufruct is something she was explaining me, practically she will really own the property if their parents give up the usufruct (practically they are the real owners at the moment for Italian taxes) or they die.
    In order to understand her Italian CGT liability she really needs specialist advice from a professional with detailed knowledge of Italian tax law. They would be able to advise on how exactly CGT would be calculated in her case, the property values that would apply, any reliefs, deductions, etc.


  • Closed Accounts Posts: 19 Aoife_82


    Thanks a lot for all the explanations!


  • Closed Accounts Posts: 19 Aoife_82


    If she has np profit from it, then there is no tax to pay.

    The only time she had to declare it is if she claims welfare.

    Hi Mrs OBumble, I wanted to understand this better for my own knowledge: a foreign property needs to be declared to Revenue only if it gives a profit?

    I know that for sure one has to pay the taxes on the property in the foreign Country but I'm not sure if the same property needs to be disclosed to the Revenue if there is no profit.

    Thanks


  • Registered Users, Registered Users 2 Posts: 4,685 ✭✭✭barneystinson


    Aoife_82 wrote: »
    Hi Mrs OBumble, I wanted to understand this better for my own knowledge: a foreign property needs to be declared to Revenue only if it gives a profit?

    I know that for sure one has to pay the taxes on the property in the foreign Country but I'm not sure if the same property needs to be disclosed to the Revenue if there is no profit.

    Thanks

    The things you declare to Revenue are the things prescribed in a tax return.*

    A tax return doesn't require a declaration of assets, it requires a declaration of income sources and amounts.

    It also requires details of the acquisition/disposal of assets, but assuming your friend acquired her interest in the property prior to coming here, thats not relevant.

    *Unless Revenue specifically request a statement of your assets and liabilities, which generally only happens in the course of an audit, or where a person owes a substantial amount is negotiating payment terms...


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  • Closed Accounts Posts: 19 Aoife_82


    Super clear, thanks a lot!


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