Inherited property abroad

I'm looking for a little advice and would be grateful for any feedback.

My husband is Spanish. Both of his parents died while we lived in Spain. He, as an only child, inherited their house.

We moved home to Ireland last year and the house lay idle. It has now just become a rented property.

We are hoping to secure a mortgage here in Ireland in the coming months and I thought having this Spanish house would strengthen our application and the extra income would help our case.

We have had much conflicting advice, such as don't disclose the property etc.

Where do we stand in terms of tax?

Thanks in advance.

Re: Inherited propery abroad

Its not clear what you are asking. The only tax involved in buying a property in Ireland is stamp duty.

If you are buying a house here, then , unless you are buying a new house, you will , likely, be liable for stamp duty. If you are considering taking the advice of someone who is encouraging you not to disclose the existence of the Spanish property, think twice. That would be tax evasion. Some people see nothing wrong with it - as a practising lawyer however I see the stark reality of penalties and interest having to be paid in due course.

mf

Re: Inherited propery abroad

Hi, thanks for your answer.

No, I don't want to evade tax. I was wondering how it works. Some people thought my husband wouldn't be liable because he is Spanish and only in the country a few months, but yes, there are those that say not to disclose it. (I won't follow this advice).

He is paying tax in Spain on the property so we weren't sure if he would have to pay it here too.

Is it a one off payment or will the property be continuously taxed? Is there a limit on how much rent he can get that would be tax free? It is rented for €500 a month.

I have a feeling this might relate to tax on rental income in Spain, when the recipient of the income is resident in Ireland.

Is the property in his name or both of your names?

Are you both resident here for tax (more than 183 days in one year, or will be)?

If your husband is the recipient of the rent, and is resident here for tax then yes, the rental income is subject to Irish Income Tax starting in the year in which he bacame resident in Ireland.

However if he is paying tax in Spain on the rental income he is entitled to Double Tax credit for any year in which the tax is payable in both countries, meaning in effect that the net tax paid is the higher of the tax charged either in Spain or Ireland. A quick call to the tax office will set you right.

Thanks for your reply.

To answer your Qs;

The property is only in my husband's name.
We arrived back in August 2008 and are both working and paying tax here.
The house was empty and only became rented last week.

Is it only tax on the rental that he has to pay or does he have to pay tax for owning the property too?

If you were not resident or ordinarily resident in Ireland there were no Irish taxes on the inheritance.
However, if at any time when resident/ordinarily resident here you made a gain on the property you would have some capital Gains Tax exposure.
You would be resident/ord resident and domiciled here. YOu would be taxable on any gain.
Your husband if still Spanish domiciled would be liable only on any gain remitted here.
Also, although not an expert, I think Spanish inheritance tax is not exempt between spouses. To mitigate this, it might be useful if borrowing in the future to secure some on the Spanish property to reduce its value for tax.
As other posters say non-disclosure is not a valid option.

We were both resident in Spain when the inheritance was made. My husbands' mother was very poorly which is why we moved there 3 qnd half years ago. We lived and worked there full time during this period. Sadly, she passed away in August 2007 which is when he inherited the property.
Are we liable for CGT?
We moved home to Ireland in August 2008.

The advice above re your husband being liable to Irish tax on rental income arising from the property if he is resident here is not strictly correct. You mention that your husband is Spanish. Assuming he has retained his Spanish domiciled status then he is liable to Irish income tax on the remittance basis. That means he is liable to Irish income tax on all Irish source income and foreign income only if remitted into Ireland. Therefore if Spanish rents are paid into Spanish bank account and not brought into Ireland, no Irish income tax arises in respect of the rental income.

As John Conlon rightly points out above, the remittance basis will also apply to any gains made by your husband on disposal of the property (again assuming he has retained his Spanish domiciled status). Gains will only be liable to Irish capital gains tax to the extent that they are remitted into the country.

You are right on this. Slip up on my part