Miscellaneous Issues of Foreign Property Ownership

Trading in Property

If I am buying and selling foreign property on a regular basis, how are my profits taxed?

Normally if a property is sold any profit is subject to capital gains tax. However, if you are essentially trading in properties, the profits may be treated as income and subject to income tax.

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Buying Property 'Off The Plans'

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 normally 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.

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Foreign bank account

I have opened a foreign bank account to make and receive payments relating to my foreign property. Does this give rise to any tax obligations?

In any year in which you open a foreign bank account you are a 'chargeable person'. This means that you are required to file a tax return in which you must declare, among other things, the name and address of the financial institution where the account is located, the date on which the account was opened, the lodgement made to open the account and details of any intermediary (individual or company) in Ireland who assisted you in opening the account.

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PRSI and the Health Contribution

Do I have to pay PRSI on foreign rental income?

If you are a self-employed taxpayer you are liable to pay PRSI on foreign rental income. If you are a PAYE taxpayer you do not have to pay PRSI on foreign rental income. If you are aged over 66 you do not have to pay PRSI.

Do I have to pay the health contribution and Income Levy or the Universal Social Charge on foreign rental income?

If you are in receipt of rental income, including foreign rental income, you are liable to income levy and the health levy (for 2010 and prior years) and to the universal social charge (USC) (for 2011 and subsequent years) subject to the general rules applying to those charges.

The USC, which came into effect on 1 January 2011, is a tax payable on gross income, including notional pay, after any relief for certain capital allowances, but before pension contributions. It replaced the health levy and the income levy, which were abolished from that date.

Additional information is available at the following: Universal Social Charge, Income Levy

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Purchase of Property Through a Company

I have purchased a foreign property through a company. How does this affect my Irish tax position?

Depending on the nature of the company and the arrangements you have with the company, the money received by you in connection with the foreign property may be treated in different ways for Irish tax purposes. For example, you may be treated as receiving distributions from the company rather than rental income from the tenants of the property.

Another possible consequence of purchasing a property through a company is that if you occupy the property rent-free or at a rent that is below market value, you may be treated as receiving a benefit-in-kind from the company. This benefit-in-kind may be subject to Irish income tax. For further information on benefit-in-kind please see the Employer's Guide to Benefit in Kind.

(Please see also Acquiring a foreign property - purchase of property through a company in connection with interest relief and Disposal of foreign property - Irish tax obligations in respect of the sale of the property.)

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