Acquiring a Foreign Property
- Funds used to purchase the property
- Interest relief on loan used to purchase property
- VAT
- Inheriting or receiving a gift of a foreign property
- Stamp duty
- Purchase of property through a company
Funds Used to Purchase the Property
Are there any tax implications when I buy a foreign property?
You are not required to notify Revenue if you buy a foreign property. However, in most cases you will have to open a bank account in the country where you purchase the property, and you must notify Revenue of this on a tax return in the year the account is opened (see miscellaneous issues). You must ensure that the money used to purchase the property has been or will be fully declared for tax purposes and that all due taxes have been paid whatever the source of the money. If you have borrowed money to buy the property, the money used to repay this loan must also be declared.
You must comply with your normal tax obligations. Using monies to buy a foreign property does not remove these obligations. Revenue will be interested in confirming that funds used have been declared for tax purposes or are not liable to tax.
Interest Relief on Loan Used to Purchase Property
Can I claim mortgage interest relief on the loan used to purchase my foreign property? The loan is secured against my Irish property.
Mortgage interest relief usually refers to the relief given for interest paid on a loan to purchase, improve, repair or develop a person’s sole or main residence. It is deducted by the mortgage lender under a system called 'Tax Relief at Source' (TRS). You can only claim mortgage interest relief on your sole or main residence. If your home is located within the State you can claim relief through the TRS system. If your home is located in Northern Ireland or Great Britain, relief is also available but cannot be claimed through TRS. The residence can also be the sole or main residence of your former or separated spouse or a dependent relative who occupies the residence rent-free. Mortgage interest relief cannot be claimed for interest on a loan used to buy a holiday home, an investment property, loan/debt consolidation or for any other purpose which does not qualify for the relief. If you make a false or incorrect claim for mortgage interest relief, you will be liable to pay back the relief wrongly claimed, as well as interest and penalties.
Can I claim any relief for the interest paid on the loan used to purchase my foreign property?
Where borrowed money is used to purchase, improve or repair a rental property, the interest payments can (subject to certain conditions) be claimed as a deduction against the rental income from that property. However, for interest accruing on or after 7 April 2009, the deduction in the case of residential investment property is restricted to 75% of the interest otherwise allowable. The borrowed money must be used to directly purchase, improve or repair the property (see purchase of property through a company).
VAT
The price I paid for my foreign property included VAT. Can I claim a VAT repayment in Ireland for the VAT paid abroad?
No. As you did not pay any VAT in Ireland, you cannot reclaim any VAT in Ireland.
Can I reclaim VAT in the country where the VAT was paid?
While there is no entitlement to a VAT repayment where a property is for private use, there may be an entitlement to a repayment where the property is used for lettings that are chargeable to foreign VAT. You should contact the relevant foreign tax authority about this.
Inheriting or Receiving a Gift of a Foreign Property
I have inherited or received a gift of a foreign property. Are there any Irish tax implications?
If you are resident or ordinarily resident in Ireland, or if the person from whom you inherited or who gave you the foreign property is resident or ordinarily resident in Ireland, the inheritance will be subject to Irish capital acquisitions tax (CAT). The amount payable will depend on your relationship to the person from whom you inherited the property or the person who gave you the property and any previous gifts or inheritances you have received.
More information on the terms 'resident' and 'ordinarily resident' is provided in foreign rental income - Irish tax obligations. If you require more detailed information on residence please consult Revenue leaflet RES1, Coming to Live in Ireland .
More information about CAT on gifts and inheritances.
I have paid gift tax or inheritance tax (or an equivalent tax) in another country on my gift or inheritance of foreign property. Do I still have to pay CAT in Ireland on this gift or inheritance?
If, at the time of the gift or inheritance, either you were, or the person from whom you received the property was, Irish resident or ordinarily resident, the gift or inheritance is subject to CAT.
The only Irish double taxation agreements that cover CAT are those with the UK and the USA. If your gift or inheritance has already been subject to the equivalent of CAT in those countries, you can claim a credit for the tax paid in those jurisdictions up to the amount of your Irish tax liability. Please note that the double taxation agreement with the USA only covers federal equivalents of CAT rather than similar taxes imposed by individual states. If your gift or inheritance was subject to the equivalent of CAT in a jurisdiction other than the UK or the USA, where a double taxation treaty covering gift tax or inheritance tax is not in force, you can still claim a credit for the tax paid in that foreign jurisdiction, up to the amount of your Irish CAT liability and Revenue will allow the credit for the foreign tax paid on a unilateral basis.
Stamp Duty
Will I incur a liability to stamp duty if I purchase a house abroad?
You will be liable to stamp duty if the instrument of transfer of the foreign property is executed in Ireland. However, such a liability would not normally occur, because in most instances the transfer document in relation to the purchase of the foreign property would be executed abroad.
Can I qualify as a first time buyer for stamp duty purposes if I have previously purchased a property abroad but not in Ireland?
No. A person who has previously purchased a property, either in Ireland or abroad, is not entitled to claim first time buyer relief. If you make a false or incorrect claim for the relief, you will be liable to pay the stamp duty underpaid, as well as interest and penalties.
Purchase of Property Through a Company
What happens if I purchase a foreign property through a company?
If you purchase a foreign rental property through a company that either owns or acquires the property, you will not be entitled to interest relief if you have borrowed to fund the purchase. This is because you are purchasing an interest in the company rather than the property itself. Interest relief is only available where the borrowed money is used to directly purchase a rental property (see also disposal of foreign property - Irish tax obligations and miscellaneous issues - purchase of property through a company).
