Disposal of Foreign Property

The information in this section covers the Irish capital gains tax (CGT) implications for Irish resident and ordinarily resident individuals who dispose of foreign property. Disposal means a transfer of ownership in an asset whether by means of sale, gift or otherwise. For more information on CGT please see Revenue leaflet pdfCGT1, Guide to Capital Gains Tax (PDF, 1.74MB)

Irish Tax Obligations

I am selling a foreign property. Will I have to pay CGT?

If you are resident or ordinarily resident in Ireland the sale of the property will, in most cases, be subject to Irish CGT (but see next question if you are not Irish domiciled). You will have to provide details of any gain by filing a return of income by 31 October following the year in which you sold the property.

Are there any circumstances in which a disposal of a foreign property by an Irish resident or ordinarily resident individual does not give rise to a CGT liability?

A gain on the disposal of a property located in a country other than Ireland by an Irish resident or ordinarily resident individual who is not domiciled in Ireland is subject to Irish CGT only to the extent that the gain is remitted to Ireland. A gain on the disposal of a property located in the UK was fully chargeable to Irish CGT regardless of domicile or whether the gain is remitted to Ireland, on disposals before 20th November 2008. For more information on the concepts of residence and domicile please see (foreign rental income - Irish tax obligations).

If I own a foreign property through a foreign company, and the company sells the property, will I have to pay Irish CGT?

  • If you are a "participator" in the company – that is, if you are entitled to a share or interest in the capital or income of the company – and
  • if the foreign company would be regarded as a "close company" – that is, a company controlled by five or fewer participators – if it were an Irish resident company,

- then any gain realised by the foreign company when selling the foreign property may be attributed to you (in proportion to your share of the company) and you may have to pay Irish CGT, even if the proceeds of sale are not distributed to you at the time of the sale. You will get credit for CGT paid in respect of the property sale against any Irish CGT due if the sale proceeds are distributed to you within two years of the date when the foreign company realised the gain.

If you own the property through a shareholding in a non-close company, you will be liable to Irish CGT on the disposal of your share in the company.

If I buy a foreign property "off the plans" and sell it for a profit before building has finished, do I have to pay tax?

This process is known as ‘flipping’ and any increase in the value of the property sold is subject to Irish CGT. However, if you are carrying on the business of trading in properties, the profit may be treated as income and subject to income tax rather than CGT.

If I make a full or partial gift of a foreign property to another person, could I be liable to pay CGT?

You will be deemed to have disposed of the property at full market value and will be liable to pay CGT on that basis. The person to whom you made the gift may be liable for Capital Acquisitions Tax (CAT). If this is the case, Irish CGT paid by you may be credited against her/his Irish CAT liability.

When do I have to pay CGT?

If you dispose of your property between 1st January and 30th November, you must pay any CGT by 15th December of that year. If you dispose of your property between 1st December and 31st December, you must pay any CGT by 31st January in the following year.

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Calculating the Capital Gain

How do I compute my CGT liability?

You deduct the cost of the asset from the sale proceeds. Certain expenses of disposal and purchase, as well as enhancement expenditure, may be allowed as a deduction. Inflation relief may be allowable on expenditure incurred on or before 31st December 2002. You can also deduct a single annual exemption amount of €1,270 in respect of all gains arising in a year. However, any expenditure allowable in computing income, profits, gains or losses for income tax purposes is excluded in computing CGT.

What tax rate applies to capital gains?

Capital gains on the disposal of both Irish and foreign property are taxed at 25%. Disposals made between 15th October 2008 and 7th April 2009 are taxed at 22%. Disposals before this date were taxable at 20%.

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Losses

What happens if I make a capital loss on the disposal of my foreign property?

If you are Irish resident or ordinarily resident and Irish domiciled you can set the loss against other capital gains, other than gains made on the disposal of Irish development land. If you have no capital gains in the year of disposal, you can carry the loss forward against future gains. You cannot set your capital loss against income such as employment, rental or investment income.

If you are not Irish domiciled, your non-Irish capital gains are only taxable if remitted to Ireland, and you cannot claim such losses against current or future gains.

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Foreign Capital Gains Tax

When I sold my foreign property I paid CGT (or an equivalent tax) in the country where it was located. Do I still have to pay Irish CGT?

Depending on your residence/domicile status the sale of the property may still be chargeable to Irish CGT (see foreign rental income - Irish tax obligations for details). However, you may be able to reduce your Irish tax liability to take account of some, or all, of the foreign tax paid on the same income. The amount by which you can reduce your Irish tax liability depends on whether Ireland has a Double Taxation Agreement with the country in which your property is situated. This is illustrated below. Refer to this list of "Tax Agreement" countries.

Example 1 - "Tax Agreement " Country

A foreign property is bought in 2003 for €100,000 and sold in 2009 for €201,270. The foreign CGT is €15,000. There were no other chargeable gains or losses in the tax year.

Where Ireland has a Double Taxation Agreement with the country in which your property is situated and the agreement covers CGT you are entitled to a credit for the foreign CGT paid on your foreign income against the amount of Irish CGT you have to pay on the same income and up to the amount of the Irish tax payable on that income. How this works is illustrated below.

Calculation of Irish CGT payable

Sale proceeds                                   €201,270 
Less purchase cost                             (€100,000) 
Less annual exemption                          (€  1,270)
Chargeable gain                                 €100,000 

Irish CGT due @ 25%                              €25,000 
Less foreign CGT paid                           (€15,000)
Irish CGT payable after deducting foreign credit €10,000

While it is usually necessary to ensure that CGT is covered in the Double Taxation Agreement, credit for foreign CGT paid may also be given in cases where previous agreements pre-dated the introduction of CGT. For years of assessment from 2007 onwards, if the property disposed of was located in Belgium, Cyprus, France, Germany, Italy, Japan, Luxembourg, the Netherlands, Pakistan, Zambia, this credit will apply.

Example 2 - "Non Tax Agreement" Country

A foreign property is bought in 2003 for €100,000 and sold in 2009 for €201,270. The foreign CGT is €15,000. There were no other chargeable gains or losses in the tax year.

Where Ireland does not have a double taxation agreement with the country in which your property is situated and, for 2006 and prior years of assessment the property is located in Belgium, Cyprus, France, Germany, Italy, Japan, Luxembourg, the Netherlands, Pakistan or Zambia, you are entitled to a deduction for the foreign CGT paid on the disposal of the property. How this works is illustrated below.

Calculation of Irish CGT payable

Sales proceeds           €201,270 
Less purchase cost      (€100,000)
Less foreign CGT paid   (€ 15,000)
Less annual exemption   (€  1,270
Chargeable gain          € 85,000 
Irish CGT @ 25%          € 21,250

In this example there is an Irish CGT liability of €21,250. This is higher than the Irish tax liability of €10,000 due in the "credit" system example.

Can I claim a refund in Ireland if the foreign CGT I have paid is greater than my Irish CGT?

No, you can only get double tax relief up to the amount of Irish CGT payable. If the foreign CGT liability on the disposal of your foreign property is higher than your Irish tax liability, you are not entitled to a refund from Revenue in Ireland.

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