CGT struggles after selling my home abroad

[Bea Nikoly]

I apologize in advance for the long post, but I feel that if I don't describe my situation in detail, I won't get anywhere in learning on how to resolve it.

I recently sold a property in an EU country to invest that money into buying a home here. The previous property was my primary residence, and the new one will serve the same purpose.

All taxes and duties in the country where the property was sold have been settled, so that is not my concern. My struggle is understanding the tax obligations and procedures I need to follow here. I have consulted multiple tax advisors and received conflicting information, some answers are partial, others contradict what I find on the Revenue website, and some advisors even referred me back to tax professionals in the country where the property was sold, which doesn’t make sense since they wouldn't be familiar with Irish tax law. At this point, I feel stuck and don’t know what information to trust anymore.

Key facts:
- The first home was purchased with a mortgage in 2009.
- I had expenses for purchasing, renovating, and selling that property, but I can’t prove all of them as I no longer have all the receipts and it's challenging to chase them. Some of the businesses involved have closed down in the meantime.
- The sale was meant to cover a deposit for a mortgage here, and the amount I have left is relatively small, just enough for the deposit and buying costs.

I understand that I might be exempt from CGT since I sold one primary residence to buy another. However, one of the tax advisors have suggested differently, saying CGT could be based on the 3 years I have lived in Ireland.

My questions:
1. Is this the case, even though the property was never rented and was only used occasionally when I visited home? I can provide proof of this through my ID and utility bills. Additionally, I’ve read that CGT exemptions can apply if the sale is due to employment relocation. I moved to Ireland for work, and it would have been impossible to continue living in my origin country while working here.

2. If I am not exempt for those 3 years, how can I prove the costs related to the property if I don't have all the receipts? The investment was significant, and it feels a bit bitter that I can't claim it due to missing documentation.

3. One idea I considered, though I don’t know if it’s feasible, is gifting the money to my underage child. Since the amount is small, they would be exempt from CGT, but would I still be liable for it? Also, if the money is gifted to a minor, can it be used as a deposit for a mortgage then?

4. Are there any other ways to sort this out?

I would really appreciate any guidance on this matter. Thanks in advance!

 

[Sophrosyne]

Properties

You sold your principal private residence which was situated in an another EU country. That much is clear.

You appear to have had another property situated in Ireland, which you also sold – is that correct?

Residence Position

Could you expand on your residence position?

What nationality are you?

If not Irish, when did you come to Ireland and do you intend to remain here.

During the period that you owned the Irish property how much time did you spend in Ireland each year.

Depending on your responses, further information might be necessary.

 

[T McGibney]

It's very simple.

You need to calculate the Capital Gains Tax position here by reference to Irish CGT rules.

It you paid any CGT or equivalent tax abroad on the disposal, you should be able to claim a credit for that against any liability you have on the disposal

For what it's worth, I expect your liability here will be small at most on the basis your mentioning that the sum you have now left over is rather small and the assumption that you will benefit from at least partial principal private residence exemption.

I'm a bit perplexed by your comment that you "have consulted multiple tax advisors and received conflicting information, some answers are partial, others contradict what (you) find on the Revenue website, and some advisors even referred (you) back to tax professionals in the country where the property was sold".

What was the nature of these consultations? Did you pay for them or were they random informal or off-the-cuff discussions?

Unless there are other issues going on in the background (eg. unless I've missed something, you haven't mentioned your residence or domicile status above), there shouldn't really be much difference between advisors, and no real need to consult more than one advisor in the first instance, assuming of course that you're furnishing them with all the facts in a coherent and reasonably organised manner.

 

[Dr Strangelove]

I apologize in advance for the long post,

I’m still not fully clear after all the length.

Can you give us a clear timeline of when you moved to Ireland and when you sold the house abroad? Ideally to the month.

When you sold the house abroad what taxes did you pay? In particular anything like capital gains tax.

 

[ClubMan]

3. One idea I considered, though I don’t know if it’s feasible, is gifting the money to my underage child. Since the amount is small, they would be exempt from CGT, but would I still be liable for it? Also, if the money is gifted to a minor, can it be used as a deposit for a mortgage then?

For one thing, forget about this - if there are taxes owing on the money (which is not at all clear yet) then this will not serve to avoid it and will probably just complicate matters as the gifted money would then be the child's asset.

 

[Bea Nikoly]

Thank you all, I really appreciate the help, and sorry for the confusion. I hope I can clear things up.

I don’t own any property in Ireland. The only property I owned was in Croatia, which I sold a month ago. I used that property occasionally when visiting family back home, so it wasn't rented out.

I relocated here in April 2021 and have been renting since then. I started working immediately, became an Irish tax resident, and plan is to stay in Ireland for good. That’s why I’d like to buy a home.

Tax regulations in my home country are different, only the buyer is obligated to pay tax, not the seller. As I understand it, this means there are no tax credits I can use in this case, but I could be wrong.

Regarding tax advisors, I didn’t mean to sound offensive, apologies if it came across that way. I was simply describing what happened. I can't say why there was confusion. I tried to be as clear as possible when explaining my situation, but misunderstandings can always happen, especially when you’re new to the system like I am.

 

[Persius]

Did your Croatian employer ask you to move to Ireland to work? Or did you move to Ireland on your own initiative to find new work?

If the first, then Revenue's CGT Relief says that you can consider your Croatian home to be your principle private residence (PPR) for up to 4 years after moving out. I.e. the first bullet point below. In that case, no CGT would be due, as you sold within 4 years of coming to Ireland.

If the second, then it's not clear to me whether the second bullet point below covers it. It seems to be only for people with a PPR here going abroad to work, rather than people with a PPR abroad coming here to work. Other posters may be able to interpret that better than me.

You will be considered to have lived in your property where:

• you could not live in the property because your employer required you to live elsewhere (up to a four-year maximum.)
• you had a job, all the duties of which were performed outside the Republic of Ireland

Assuming you cane to Ireland on your own accord, and the second bullet point doesn't cover it, then you still get a 12 month grace period. So the house in Croatia was your PPR from 2009 until April 2022. I.e. about 13 years. It was not your PPR for about the last 3 years. So, you may be liable to CGT of 33% on 3/16 of the difference between the purchase price and the sale price (minus any "allowable expenses").

I'm not sure whether any renovation costs can be considered to be "allowable expenses".

According to an Irish Times article on allowable expenses:

What you are looking for is section 552 (1) and (2) of TCA 1997.
Essentially there are three areas of allowable deductions from your capital gain. These are:
– the “incidental costs” incurred by you when buying the property;
– expenditure incurred “for the purpose of enhancing the value of the asset”;
– any cost to you of proving or defending your title to the property;
– any “incidental costs” incurred by you in selling the property.

It sounds to me like the second point means that you could offset your renovation costs.

You mention that in Croatia, the buyer pays the tax. That sounds more like the equivalent to stamp duty in Ireland. So I don't think you can offset any Croatian tax against any potential CGT liability.

Note: I am not a professional tax advisor. This post is just my own knowledge. Please verify with someone more qualified than me.