Q: Liz, New Zealand
We are a family of five, moving back from New Zealand to Ireland next year. My husband and I are likely to be self-employed on our return, as we plan to start a new business. We own two properties in New Zealand: our home, which we plan to sell before moving, and another property, which will not be sold for a few years.
I understand that I will not have to pay capital gains tax on the first property for Irish tax purposes, as we will be non-resident when we sell.
Will we have to pay capital gains tax on the second property, if we are living and working in Ireland at the time of its sale?
A: Barry Flanagan, senior tax manager at Taxback. com
When looking at your tax obligations, the Irish authorities will take into consideration where you live now and where your consider your home to be.
In general, those who are resident or ordinarily resident in Ireland and also domiciled here are subject to Irish capital gains tax (CGT) on their worldwide gains. (Your domicile is the country where you live with the intention of remaining permanently. Your domicile can be different from your country of residence, or where your passport was issued.)
Non-domiciled Irish residents can be subject to Irish CGT on selling foreign assets like property, if the proceeds are remitted into Ireland.
A non-resident or non-ordinarily resident is subject to Irish CGT only on disposal of specified assets; mainly land and buildings in Ireland.
In your case, as you appear to be non-resident or not ordinarily resident in Ireland, you are correct that there should be no Irish CGT obligations arising on the sale of your home in New Zealand, as it will be outside the scope of Irish CGT. New Zealand taxes may arise, of course.
Even if the sale of your home is delayed until you are back in Ireland, you may still qualify for relief, thanks to principle private residence relief.
This means that full relief is available where the property was used as your main residence while you owned it, or to within 12 months of the date of disposal. The last 12 months of ownership are always treated as a period of occupation.
Second property
The sale of the second property after you return may well be subject to Irish CGT. This will depend on your residence status. If you are deemed to be resident here, you will be have to pay CGT on any worldwide gains.
However, you may be able to reduce your Irish tax liability by taking into account any foreign tax paid on the same gain. In general, this will depend on whether there is a double taxation agreement (DTA) between Ireland and the other country. As there is a DTA between Ireland and New Zealand, and this treaty specifically covers CGT, you should be entitled to take a tax credit for the foreign tax paid on the disposal against the amount of Irish CGT you have to pay.
Barry Flanagan is a senior tax and payroll manager with Immedis, a specialist division of the Taxback Group. immedis.com
