TAX MATTERS:Revenue dropped a request to look at an estate agent's files last week - but is determined to get tax due on foreign property
AN ATTEMPT by the Revenue Commissioners to inspect records in Savills HOK's Dublin offices for the names of people who have bought property abroad since 2002 ended last Friday when Revenue withdrew its request for information. Savills HOK then withdrew its High Court challenge to the proceedings.
A spokesman for the Revenue, who first approached 50 estate agents with a demand to look at their files in May 2003, said yesterday that it is now in discussion with its legal advisors on an alternative approach. "In the meantime we are continuing to access information on Irish resident purchasers of overseas properties through other means," said principal officer Mr Tom Weymes.
Despite the outcome of this case, the Revenue has signalled its determination to target owners of foreign property to make sure they are paying any taxes due. It now seems probable it will seek a change in legislation to get the power to trawl agents' accounts, as it had to get information from banks before its bogus accounts inquiry.
Last summer, Revenue tested one of its "other means" when its offshore assets division sent letters to a small sample of people in a bid to track down tax owed on foreign property
It was a project carried out using information obtained under an EU Savings Directive, effective since July 2005, which enables tax authorities to share information about foreign nationals who have interest-earning bank accounts.
Working on the assumption that anyone with an interest-earning account in another country owned property there, the Revenue contacted people in July 2007 to get more information. "About 96 per cent of them said yes, we do have property," says Tom Weymes, principal officer in the offshore assets section of the Revenue. "And we were happy that about 55 per cent of them hadn't bought it with hot money."
No further EU moves are planned yet to swap tax information, but as tax officials from 21 EU member states prepare to meet in Dublin Castle at the end of May for a seminar on how to combat EU-wide tax evasion,the Revenue is working on ways to make sure foreign property owners are tax compliant.
The offshore assets team of just eight people sees its job "as smoking out" people who are evading tax, and is proud of its successes in the past few years. The new chairman of the Revenue Commissioners, Josephine Feehily, said in an interview with The Irish Timestwo weeks ago that next on the agenda (after winding down successful investigations into bogus accounts and offshore assets) are overseas properties. (And Revenue does mean ordinary buy-to-let investors, not major commercial property buyers.)
It is serious about wanting to get access to agents' files as probably the main source of information. Ms Feehily said: "If we could get access to a large body of information about foreign properties sold here to Irish residents, that might give us the wherewithal for a further investigation."
First and foremost, the Revenue wants to find out if foreign property has been bought with undeclared income. A successful probe into this - yielding tax owed and penalties - could possibly net a substantial amount of money.
A probe into income on rentals from foreign property and into capital gains tax owed following a sale would yield less, Weymes explains, because Irish tax authorities would only get the tax due here less the tax already paid in the country where the property is.
But the offshore assets unit will still look for all tax due. "I don't think rental income will be that significant - but then we were surprised at the billions our earlier investigations yielded."
Getting information on all foreign properties bought will be difficult and looking at the files of Irish agents won't yield information about people who bought properties abroad directly.
A huge number of Irish people have bought one or more properties abroad, either as holiday homes or as part holiday home/part buy-to-let investments, in the past decade. But any figures on how many are guesstimates, because only some are bought through Irish-based agents/developers.
In reply to a recent Dáil question, the Minister for Finance Brian Cowen said that based on personal income tax returns for the tax year 2005, 4,450 individuals returned rental income of ¬56 million from foreign properties.
He added that Revenue's specialist offshore assets unit had identified more than 2,000 owners of foreign properties. "This has been done through the exchange of information with foreign tax administrations; by monitoring advertisements and websites; by registering with foreign land registries; and by looking at returns of foreign bank information under the EU Savings Directive.
"All of these cases are referred for examination to ensure that there is no Irish tax evasion involved either in relation to the source of the purchase money or any income being generated from renting the property," he told the Dáil. And a section of the Finance Act 2008 will force letting agents to include reports on rent on overseas property.
Foreign property owners are paying attention to the need to get their tax in order: Revenue has had 5,000 hits on the foreign property section of its website since it posted a guide to tax on foreign property there last November: it's called Irish Tax Implications of Foreign Property Ownership - see www.revenue.ie and search "foreign property".
