# Undeclared Foreign Property - The new Bogus Non Resident a/c?



## 3littlefish (28 Feb 2007)

Foreign Property - The new Bogus Non Resident a/c?

Ireland is still awash with money at the moment. A massive amount of Irish residents are still flocking to buy land & property abroad.


In the years to come, are we likely to see a property version of the Bogus Non Resident Off Shore accounts scandal?


----------



## ClubMan (28 Feb 2007)

*Re: Foreign Property - The new Bogus Non Resident a/c?*



3littlefish said:


> If property or land was purchased abroad without the knowledge of the Revenue does it always have to stay that way?


Who knows. More cooperation between the tax authorities across the _EU_/euro zone in the future might not be that unlikely and then such evasion could come to light. _Revenue _have all the time in the world to catch up with past indiscretions...


----------



## Newby (28 Feb 2007)

*Re: Foreign Property - The new Bogus Non Resident a/c?*



3littlefish said:


> In the years to come, are we likely to see a property version of the Bogus Non Resident Off Shore accounts scandal?


Without doubt, if people are purchasing them by means of undeclared funds...


----------



## ClubMan (28 Feb 2007)

*Re: Foreign Property - The new Bogus Non Resident a/c?*

Or not declaring rental income or capital gains?


----------



## KalEl (28 Feb 2007)

*Re: Foreign Property - The new Bogus Non Resident a/c?*



Newby said:


> Without doubt, if people are purchasing them by means of undeclared funds...


 
I doubt people (excluding drug money etc) are buying property overseas with undeclared funds.
But I'm sure quite a few have bought property and are not declaring rental income. Crazy really because in most cases it's small amounts which become rather large when you add interest and penalties...


----------



## 3littlefish (28 Feb 2007)

*Re: Foreign Property - The new Bogus Non Resident a/c?*

I suspect that it may be more to do with CGT evasion.


----------



## Newby (28 Feb 2007)

*Re: Foreign Property - The new Bogus Non Resident a/c?*



KalEl said:


> I doubt people (excluding drug money etc) are buying property overseas with undeclared funds.


I wouldn't be surprised if there are a lot of individuals who have undeclared funds. Undeclared funds not only include proceeds from crime but might be undeclared inheritances of overseas properties from family members, bogus non-resident accounts that were used to purchase overseas property...


----------



## Newby (28 Feb 2007)

*Re: Foreign Property - The new Bogus Non Resident a/c?*



ClubMan said:


> Or not declaring rental income or capital gains?


Yup, probably a more common reason alright... though the undeclared funds type of investigation might yield more cash to the Revenue.


----------



## 3littlefish (28 Feb 2007)

*Re: Foreign Property - The new Bogus Non Resident a/c?*



Newby said:


> I wouldn't be surprised if there are a lot of individuals who have undeclared funds. Undeclared funds not only include proceeds from crime but might be undeclared inheritances of overseas properties from family members, bogus non-resident accounts that were used to purchase overseas property...


 

I would have thought that this could be easily tracked within the EU


----------



## KalEl (28 Feb 2007)

*Re: Foreign Property - The new Bogus Non Resident a/c?*



Newby said:


> I wouldn't be surprised if there are a lot of individuals who have undeclared funds. Undeclared funds not only include proceeds from crime but might be undeclared inheritances of overseas properties from family members, bogus non-resident accounts that were used to purchase overseas property...


 
Could be, but less likely since CGT was halved.
Let's face it, 20% is a fair share...40% is not.


----------



## Newby (28 Feb 2007)

*Re: Foreign Property - The new Bogus Non Resident a/c?*



KalEl said:


> Could be, but less likely since CGT was halved.
> Let's face it, 20% is a fair share...40% is not.


So if i don't think that 41% is a fair share to be paying the governement i shouldn't declare my income? 
In any event declaring a gain now that was liable to a rate of 40% in the past is liable to a gain at 40% (as that was the rate that applied at the time).


----------



## KalEl (28 Feb 2007)

*Re: Foreign Property - The new Bogus Non Resident a/c?*



Newby said:


> So if i don't think that 41% is a fair share to be paying the governement i shouldn't declare my income?
> In any event declaring a gain now that was liable to a rate of 40% in the past is liable to a gain at 40% (as that was the rate that applied at the time).


 
That's not what I said.
The high taxation regime of the 70's and 80's contributed to the corruption and tax evasion of the period. Having a CGT rate of 40% or a PAYE rate of 70% practically encourages people to fiddle their taxes and not declare assets.
My point was that a CGT rate of 20% is fair and hardly worth dodging before you even consider your moral/social responsibilities.


----------



## ClubMan (28 Feb 2007)

*Re: Foreign Property - The new Bogus Non Resident a/c?*



KalEl said:


> The high taxation regime of the 70's and 80's contributed to the corruption and tax evasion of the period.


And vice versa I would say! A bit of chicken and egg involved.


----------



## slave1 (28 Feb 2007)

Well the easiest route to avoid the Revenue finding out on a foreign property is to purchase in a country where we do not have a double tax agreement with.
Now if you do purchase in such a country, its a killer to actually declear because you would most likely be subject to double taxation on income and gains which can be a lot to bear, don't forget you could be making taxable profits but not positive cashflow so having to pay tax twice is a bit bitter when you don't have the readies


----------



## ClubMan (28 Feb 2007)

slave1 said:


> Well the easiest route to avoid the Revenue finding out on a foreign property is to purchase in a country where we do not have a double tax agreement with.


But surely any future _DTA _could have an impact?


> don't forget you could be making taxable profits but not positive cashflow so having to pay tax twice is a bit bitter when you don't have the readies


That applies even buying in Ireland in spite of seemingly many people assuming that the following formula applies: mortgage repayments > rental income = no tax!


----------



## KalEl (28 Feb 2007)

*Re: Foreign Property - The new Bogus Non Resident a/c?*



ClubMan said:


> And vice versa I would say! A bit of chicken and egg involved.


 
Fair point...though I could imagine at least listening to somebody justifying dodging a 70% rate of tax. Dodging a rate of 20% futile amongst other things.


----------



## 3littlefish (28 Feb 2007)

Does DTA also = lets keep each other informed about ownership of property by non residents??????


----------



## KalEl (28 Feb 2007)

3littlefish said:


> Does DTA also = lets keep each other informed about ownership of property by non residents??????


 
Not yet but it's in the pipeline


----------



## ClubMan (28 Feb 2007)

*Re: Foreign Property - The new Bogus Non Resident a/c?*



KalEl said:


> Fair point...though I could imagine at least listening to somebody justifying dodging a 70% rate of tax..


A 70% top rate of tax does not necessarily mean that you actually pay that amount on gross income. Just as a 42% (2006) top rate does not mean that you actually pay that amount on gross income!

What was your effective tax/PRSI take in 2006?


----------



## KalEl (28 Feb 2007)

*Re: Foreign Property - The new Bogus Non Resident a/c?*



ClubMan said:


> A 70% top rate of tax does not necessarily mean that you actually pay that amount on gross income. Just as a 42% (2006) top rate does not mean that you actually pay that amount on gross income!
> 
> What was your effective tax/PRSI take in 2006?


 
Agreed but in the 80's people on middle incomes were paying 70% on a large proportion of their income. I'm just saying very high rates of tax encourage tax evasion...so obviously the converse is true.


----------



## thewatcher (28 Feb 2007)

*Re: Foreign Property - The new Bogus Non Resident a/c?*

Let's face it,when the revenue come knocking the irish banks will drop every account holder they have with a second mortgage in it,regardless of where the "investment" property happens to be !


----------



## 3littlefish (28 Feb 2007)

*Re: Foreign Property - The new Bogus Non Resident a/c?*



thewatcher said:


> Let's face it,when the revenue come knocking the irish banks will drop every account holder they have with a second mortgage in it,regardless of where the "investment" property happens to be !


 

Yes maybe but that won't uncover property which is not mortgaged


----------



## Abbeykiller (1 Mar 2007)

Or property that is mortgaged overseas ......
I didn't think that actually owning an overseas property was something that needed to be declared to the revenue e.g. If I buy a holiday home abroad and don't rent it out so not making any income from it, I would only need to inform the revenue when I sell it and pay CGT


----------



## KalEl (1 Mar 2007)

Abbeykiller said:


> Or property that is mortgaged overseas ......
> I didn't think that actually owning an overseas property was something that needed to be declared to the revenue e.g. If I buy a holiday home abroad and don't rent it out so not making any income from it, I would only need to inform the revenue when I sell it and pay CGT


 
Correct me if I'm wrong but I think you're obliged to inform the revenue when you acquire an asset.


----------



## 3littlefish (1 Mar 2007)

If you acquired the land/property through a means other than paying full market price for it, i.e. inheritance or gift, you would owe CAT on it immediately.


----------



## KalEl (1 Mar 2007)

3littlefish said:


> If you acquired the land/property through a means other than paying full market price for it, i.e. inheritance or gift, you would owe CAT on it immediately.



There could be widespread abuse of the fact you need a separate will in the overseas location. I don't know how the Revenue chase people for CAT on inheritance...do they check the probate office?
If people are inheriting overseas property from a will drawn up overseas and there's no mention of it in the Irish will this is probably open to massive abuse.


----------



## Creditlimit (2 Mar 2007)

Abbeykiller said:


> Or property that is mortgaged overseas ......
> I didn't think that actually owning an overseas property was something that needed to be declared to the revenue e.g. If I buy a holiday home abroad and don't rent it out so not making any income from it, I would only need to inform the revenue when I sell it and pay CGT


 
The above is true in all countries with the exception of Spain as non-resident property owners in Spain are obliged to file a Rental/ Deemed rental income return. Regardless if your property is being rented out or Not you are still required to file this return 

Example: your apartment/ villa is not being rented out and you and your family only use it for less than 6 weeks a year. The local town hall will put a value on your property (generally less than the market value) and will deem what rental the property would yeild on a value of that amount. The taxable deemed rental income is estimated @ 2% and the property is liable to pay 25% of this amount.

This prectice seems crazy to most but it is an unavoibable truth and one that should be taken very seriously. We were nearly hit with a very hefty bill as the taxes are applicable to the property and not the individual so when you go to sell your property it is inevitible that the tax bill will have to be cleared and this could be quite substantial when all interest and penalties have been included L


----------



## 3littlefish (2 Mar 2007)

That doesn't sound very fair. It sounds as if the local officials in Spain deem a vacant property in their locale as an opportunity cost in terms of it's financial contribution to the local economy. If there is nobody renting it out of living in it, there is nobody spending money in the local economy. Your property is taking up space that could house people that contribute.


----------



## Creditlimit (2 Mar 2007)

3littlefish said:


> That doesn't sound very fair. It sounds as if the local officials in Spain deem a vacant property in their locale as an opportunity cost in terms of it's financial contribution to the local economy. If there is nobody renting it out of living in it, there is nobody spending money in the local economy. Your property is taking up space that could house people that contribute.




I think it was in response to all the dodgy dealings in property that resulted in lost billions in undeclared taxes but whatever the reason it is very unfair to tax anyone on income that never was actually received


----------



## sulo (2 Mar 2007)

Question: Relative of mine is purchasing abroad, and would like me to be a co-owner on the property - as I will inherit it. 

After reading the topic above, Im wondering if there are implications - I have not signed as of yet!  

I will also not be putting any money forward.


----------



## 3littlefish (2 Mar 2007)

I'm no tax expert, but on the surface, if I was being given a share of an asset for no consideration or for a very very very discounted amount of money I would presume that I would liable to CAT or gift tax in this instance here.


----------



## Creditlimit (2 Mar 2007)

Inheritance tax also has to be considered in the foreign juristicition as rates can vary greatly from country to country. The CGT as noted by 3littlefish will apply in Ireland but their will be a liability in the overseas country. You should therefore seek independent legal and tax advice before you proceed as not knowing the fullimplications before you buy can greatly effect the final tax liability in both Ireland and abroad.


----------



## 3littlefish (2 Mar 2007)

Creditlimit said:


> Inheritance tax also has to be considered in the foreign juristicition as rates can vary greatly from country to country. The CGT as noted by 3littlefish will apply in Ireland but their will be a liability in the overseas country. You should therefore seek independent legal and tax advice before you proceed as not knowing the fullimplications before you buy can greatly effect the final tax liability in both Ireland and abroad.


 
Is that not the idea of a DTA, to avoid being taxed twice for the same thing in 2 different jurisductions?


----------



## ClubMan (2 Mar 2007)

Depends on the _DTA_. If the tax rates in _Ireland _and the foreign country differed then you may just get a credit and still be liable for the shortfall.


----------



## Creditlimit (2 Mar 2007)

Just because there is a DTA in place it does not automatically mean that all taxes are applicable. CGT is not covered in the DTA between France and Irl.
Inheritance tax rates will vary from country to country and in some cases could be as high as 60% 70% if the pre documentation constructed correctly


----------



## 3littlefish (2 Mar 2007)

ClubMan said:


> Depends on the _DTA_. If the tax rates in _Ireland _and the foreign country differed then you may just get a credit and still be liable for the shortfall.


Can you flesh this out a bit.


----------



## ClubMan (2 Mar 2007)

(d) - it depends on the details of the specific agreement. See _Creditlimit's _post above also.


----------

