First Time Buyer Status... impact of overseas purchase

C

CGorman

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Hi, I've asked several friends about this... none are sure.

I'm currently a student renting in Dublin. I've never owned property. My question is, if I were to either jointly invest in (e.g. with a relative) or invest on my own in oversees property would this eliminate my status as a first time buyer when I eventually seek to purchase an Irish home.

See, I could very easily afford to invest in a small rental property in Eastern Europe on my own or to invest in a larger property with a relative. My view would be that I could cash this in some years down the line and use the cash towards an Irish house. The property value would be in the 50k-150k region.

Im aware there are vast inherent risks... I'd just like some clarity on the impact on my status. Thanks
 
Re: First Time Buyer Status... imapct of Oversees Purchase

CGorman said:
I'm currently a student renting in Dublin. I've never owned property. My question is, if I were to either jointly invest in (e.g. with a relative) or invest on my own in oversees property would this eliminate my status as a first time buyer when I eventually seek to purchase an Irish home.
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Yes. You would no longer be a FTB in Ireland. I'm sure you will get the usual 'sure if you never tell the Revenue how will they know', but the rules are clear (from the[broken link removed]):

Who is a First Time Buyer?

A first time buyer is a person who has not previously purchased or built a house or apartment anywhere in the world and who is purchasing a house or apartment for use as their principal place of residence.
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Re: First Time Buyer Status... imapct of Oversees Purchase

Also, be aware of the risks of buying overseas. A lot of companies are selling vastly over-priced apartments to the Irish market, which then can't be rented or sold.

Two examples posted in last days:
http://www.askaboutmoney.com/showthread.php?t=56262
http://www.askaboutmoney.com/showthread.php?t=57120
Have a look in Overseas Property Investment section for more info.

If I was in your position, I'd be more conservative. Keep your FTB status (very valuable after post-election change in Stamp Duty) - you'll be glad you did.
 
Re: First Time Buyer Status... imapct of Oversees Purchase

jrewing said:
If I was in your position, I'd be more conservative. Keep your FTB status (very valuable after post-election change in Stamp Duty) - you'll be glad you did.
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Indeed. It is very easy to imagine that any profit enjoyed from your foreign investment venture would be negated by the loss of FTB status.
 
Re: First Time Buyer Status... imapct of Oversees Purchase

CCOVICH said:
Yes. You would no longer be a FTB in Ireland. I'm sure you will get the usual 'sure if you never tell the Revenue how will they know', but the rules are clear (from the[broken link removed]):
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CCOVICH and the other posters are absolutely right no question you will lose FTB status. Also as to how will they know these days the REVENUE have eyes and ears everywhere, bear in mind all those people who thought the revenue would never know in the past e.g non resident account holders,single premium life assurance policy holders and they have all got caught in some cases decades (and massive fines penalties and stress)later. There is only one way to be with the Revenue these days and thats up front and honest. Its only a matter of time before the revenue start talking to all the REVENUES in eastern europe about irish investors anyway.
 
Re: First Time Buyer Status... imapct of Oversees Purchase

Thanks for the prompt reply in clearing up that query.

Just to state, i'm fully aware Revenue have eyes and ears everywhere and that there are huge risks associated with overseas investment... no real need to tell me that.
 
Re: First Time Buyer Status... imapct of Oversees Purchase

Does the same apply if the Irish buyer buys a commercial property to rent out, i.e. a property which is not a 'residence'?
 
Re: First Time Buyer Status... imapct of Oversees Purchase

cgorman : a geared fund investing in property in your country of choice may be a good option (or buy shares in property companies with exposure to this market).

no ftb implications and you will get exposure to a market you probably have confidence in if you are thinking of investing there in the first place.

I'm sure you have considered this already.
 
Re: First Time Buyer Status... imapct of Oversees Purchase

I can think of one way to gain ownership and not lose FTB status. If you inherit or are gifted a property instead of buying, then is it not true your FTB status is preserved ?
If this information is accurate, then this leaves open the possibility of your mother for example purchasing in her name (with your money which you could agree to gift to her)) and then gifting the property to you in which case it is not taxable up to the taxable limit for inheritance tax.
However there is a different threshold for giving money to mom than receiving money from mom and both of you would have to consider the inheritance tax implications of this. You could agree also to give a gift of 3000 a year to grow your stake..

You could also invest with the property buying relative and get him/her to gift you a share in the larger property in return. One problem is if the gifted value is low in relation to the eventual selling price, you may be hit by a large capital gains tax bill upon selling. Another problem is if your eventual inheritance will be over the threshold then you are only delaying a tax bill.



A question :

Do you still lose your FTB status if buying through a company ?

e.g set up a company . call it a property company of which you own shares and then use that to buy ?

It would seem reasonable to me that a civil engineering student for example shouldnt be denied the right to make a living if he or she has the money to develop a property as a business. And this would seem to me to be no different from owing shares in for example Green property or British land except in this case you would own 100%

Is this a way around it or is there no escape from losing FTB status ?
 
Re: First Time Buyer Status... imapct of Oversees Purchase

Before undertaking any kind of transaction that is designed to avoid tax, you would be well advised to seek independent professional advice on the matter. There may very well be ways around losing FTB status by investing abroad, but if they were that easy or obvious, everybody would be doing it.

Getting money out of a company can be difficult to accomplish in a tax efficient manner.
 
Re: First Time Buyer Status... imapct of Oversees Purchase

"then this leaves open the possibility of your mother for example purchasing in her name (with your money which you could agree to gift to her)) and then gifting the property to you in which case it is not taxable up to the taxable limit for inheritance tax. "

The following sisues also need to be considered:
1. Is she a first time buyer? If not, she ends up paying stamp duty anyway.
2. Can't gift money to someone to buy property for you and still retain ftb status. That is very specifically prohibited in Revenue guidlines.
3. In any event, where is the money to gift mom going to come from unless he borrows it? And lender will not go with the scheme.

All in all - ftb stamp duty relief is a seriously limited relief, limited to genuine ftb's and causing untold aggravation for people who try to get around it - the classic one being one name on title and two on mortgage - specifically with the aim of keeping one persons ftb status. What happens when the relationship breaks up? What rights does the non-owner have? You can't cover it in a co-ownership agreement because that is Revenue fraud.

mf
 
And also ... any transaction artificially structured mainly or purely to avoid tax may fall foul of Revenue's anti-avoidance legislation - i.e. otherwise legitimate tax avoidance measures may be deemed illegal in certain circumstances. The old cliché of avoidance being legal and evasion being illegal is not totally accurate.
 
CCOVICH said:
.... There may very well be ways around losing FTB status by investing abroad, but if they were that easy or obvious, everybody would be doing it.

Getting money out of a company can be difficult to accomplish in a tax efficient manner.
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With regard to a few of the countries in eastern europe I think you would have to buy property through a company in any case to comply with local laws. If you could pay the low Irish corporation tax on profits that migt be a good thing however I also think these required companies might have to be incorporated in the country of purchase.


ClubMan said:
And also ... any transaction artificially structured mainly or purely to avoid tax may fall foul of Revenue's anti-avoidance legislation - i.e. otherwise legitimate tax avoidance measures may be deemed illegal in certain circumstances. The old cliché of avoidance being legal and evasion being illegal is not totally accurate.
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Thats a good point.


I personally think it is silly for revenues' rules to exclude someone from making an investment. First time buyer status should be there to support someones purchase of a home. Not to exclude them from investing to create a deposit at a later stage so they can afford a home. The OP could be a billionaire with no property yet get FTB status but buy a plot of land in bulgaria for 4 grand and lose FTB status.

Maybe a qualified tax expert could provide some clarity or perhaps a call or letter asking for clarity from the revenue would be a cheap and easy option?
 
sign said:
I personally think it is silly for revenues' rules to exclude someone from making an investment.
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I don't agree - first time buyer incentives are exactly that - incentives for first time buyers. Somebody who invests in property before buying a PPR is patently not a first time buyer. Of course, some would question the logic of having first time buyer incentives in the first place or extending them to all regardless of means etc. but that is a different discussion/debate.
 
ClubMan said:
I don't agree - first time buyer incentives are exactly that - incentives for first time buyers. Somebody who invests in property before buying a PPR is patently not a first time buyer. Of course, some would question the logic of having first time buyer incentives in the first place or extending them to all regardless of means etc. but that is a different discussion/debate.
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I dont disagree with the legal definition of First Time Buyers ClubMan.

However it is my humble opinion that if someone is buying property in a country where they are not resident and havent been resident then they are not first time buyers of a home and as such the law should be changed because the whole point of FTB is to help people own their own home. Instead it is working to exclude people from investment opportunities which may help them eventually to afford their own home. The original poster wishes to purchase an investment , not a home. He cannot commute to work or college from an apartment in eastern Europe and is not resident there and if he decided it was his home he wouldnt get mortgage relief from the government.
Therefore upon purchasing he would be a FTB legally but morally he would not be the first time buyer of a home in my opinion.

Slightly off thread I know but just my two cents tagged on.
 
sign said:
However it is my opinion that if someone is buying property in a country where they are not resident then they are not first time buyers of a home
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Obviously that (i.e. the use to which the property is put) does not matter as far as the current rules stand. The rules apply to first time buyers not first time PPR buyers.
 
We really need to be careful here-this is basically a question of facts as they stand, not what people think/believe/feel is fair etc.
 
As far as I can see the defintion of somebody entitled to avail of relief on payement of stamp duty on the purchase of a house is laid out in the Finance (NO.2) Act, 2000, which amended the principal act (Stamp Duties Consolidation Act, 1999)

In the Finance Act 2000 it defined a first time purchaser as

"a person....who, at the time of the execution of the instrument to which this section applies, has not, either individually or jointly with any other person or persons, previously purchased or built,...directly or indirectly on his or her own behalf,.... another dwellinghouse or apartment or a part of another dwellinghouse or apartment".

The act makes no reference to home vs investment or to country - it just says "dwellinghouse or apartment" - so if you have purchased a house or apartment you are no longer first time purchaser; no matter where you bought the property
 
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