I am writing to seek guidance regarding the potential tax implications associated with selling land in my home country. I am a non-EEA resident who relocated to Ireland in October 2021 under the critical skills category (stamp 1).
I am exploring the possibility of purchasing a house or apartment here in Ireland as a first-time buyer. In order to proceed with this, I will need to contribute a 10 per cent down payment towards the total property price. In light of this, I am considering selling land that was purchased by my father 25 years ago. It is estimated to be worth approximately €200,000.
My primary concern is whether or not I would be liable for any taxes if I sell this land and transfer the proceeds to my bank account for the purpose of securing a sufficient down payment for my new property?
Mr M.D.
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Tax rules about foreign property are complicated in Ireland through distinctions on whether one is Irish-domiciled and then whether you are tax-resident or not.
Beyond that, first-time property buyer status is quite strictly defined in Ireland and it may also be something you need to consider.
Starting with the tax status, you are working here in Ireland for close to two years so you will be considered tax-resident here.
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Under Irish law, you become tax-resident if you are present in Ireland for 183 days in a year, or 280 days over two years, and you seem to meet that definition comfortably.
The question then is whether you are domiciled here. Domicile is a tricky thing to tie down.
If you were Irish-domiciled, you would be taxed in Ireland on your worldwide income
If you are born here and remain here, it is straightforward, you are Irish-domiciled. Similarly, if you were born Irish, moved away and returned.
But you can also be seen as Irish-domiciled if you were born abroad and moved here with the intention to settle down, buy property and live here permanently. Ultimately, it can come down to where you feel you belong, which is what makes it tricky.
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And it can be important too. If you were Irish-domiciled, you would be taxed in Ireland on your worldwide income. If you are not domiciled here, but are tax-resident here, then you are taxed only on income arising in Ireland and foreign income that you bring into the State.
My understanding of your position is that you are not Irish-domiciled but you are tax-resident. The reason for this is that, even though you are looking to buy a property here, your current visa status does not guarantee permanent residence. That may change in the future, at which point you might choose whether it is better to retain your current domicile or become Irish-domiciled but, for now, we’ll assume you are not.
On that basis, if you sell the land your father bought in another country, you will not be taxed on the money over here unless you bring that money into Ireland. But, you say, that is the whole purpose of this exercise. True, but do you need to bring all of the €200,000 you expect the land sale to raise into Ireland for the purpose of the 10 per cent home deposit, or only some of it?
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You need to think that through. If you only need some of it for the deposit or house purchase, it might make sense in tax terms to leave the rest abroad in a foreign bank account.
There is no tax issue with leaving your money – or the balance that you do not need for this home purchase – in foreign accounts, as long as it is legitimately held.
If you have previously owned a property, even abroad, then you do not qualify as a first-time buyer
Whatever you bring in will be subject to capital gains tax at 33 per cent on the difference between the value at the time you received it – not your father’s original purchase date – and the time you sell the property.
You may also have local taxes to pay on the sale of the land. If that country has a double taxation agreement with Ireland, it is likely that any tax paid in the country where the land is situated will be offset as a credit against any tax due in Ireland, but you would need to check that any double taxation agreement in place covered capital gains.
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Then we turn to the issue of first-time buyer status. First-time buyers are given preferential status in certain respects in Ireland. Notably, under Central Bank rules, they must find a 10 per cent deposit, where other buyers require 20 per cent. They can also borrow four times their income, where other buyers are limited to 3.5 times.
But if you have previously owned a property, even abroad, then you do not qualify as a first-time buyer. Your letter referred originally to a “land property” which we simplified down to land on the assumption that is what you meant. However, if there was actually a property on the land you owned and you (presumably) owned any such property, you would not qualify for first-time buyer status.
If Revenue discovered that you had secured the benefit of first-time byer status but were not entitled to it, there could be repercussions for you financially, with Revenue looking to claw back benefit you may have received.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice
