property investment in Lanzarot

[Barneyc]

I am considering investing in an apartment in Lanzarote. Getting a spanish morgage. 8% of capital cost is on offer for a lease back arrangment for 2 years. Spanish estate agent tells me that once I pay 25% tax on rental income that I am not liable for any tax in Ireland. Could anyone explain tax treatment of such and investment. Barneyc

 

[ClubMan]

Don't expect comprehensive, authoritative tax advice from somebody with a vested interest in selling you something. Similarly, make sure to check the veracity/dependability of any leasback guarantees that are touted to you. And don't let such offers distract you from objectively assessing the likelyhood of ability to rent, capital appreciation and how easy or otherwise it might be to sell on eventually. In short - crunch the numbers to assess the viability of the investment opportunity and to verify that it meets your needs. There are several existing threads which deal with the taxation of foreign and, in particular, Spanish property. I think that this thread has links to some newspaper articles about this specific issue. If in doubt get independent, professional advice on the investment and tax issues involved.

 

[bacchus]

Spanish estate agent tells me that once I pay 25% tax on rental income that I am not liable for any tax in Ireland. Could anyone explain tax treatment of such and investment.

yes, i think this is correct. Even though I pay my income tax in Ireland, my french rental income is taxed in France at flat rate (from 1st cent - i.e no tax credit as such) b'cos of the dual taxation treaty.
So, i guess this is the same thing with Spain.

 

[asdfg]

My understanding is that you have to make a return in Ireland and pay tax at your marginal rate on the profit. (Rental Income less allowable expenses). You then offset any tax paid to the foreign tax authorities where a double taxation treaty covers this type of tax. You need to talk to tax specialist in ireland also. Stand to be corrected on this.

 

[ClubMan]

Many people seem to assume that a double taxation agreement simply means that tax paid in a foreign country is(a) automatically taken as discharging one's overall tax liability or (b) is always counted as a credit when calculating one's Irish tax liability when, in fact, different tax treaties can deal with things in very different ways and, to be sure, one would probably need independent, professional advice.

 

[DonKing]

The advice I've received in relation to Hungary is as per asdfg's post.

 

[ClubMan]

Yes - but my point is that one can't assume that this is how it works with all double taxation agreements as the specifics may differ from country to country.