Saturday 26 April 2008

Revenue Probes Overseas Property Purchases

It shouldn't come as a shock to very many people that the Revenue have decided they want to find the owners of property abroad so they can check where the funds to buy the property originated and ensure that full payment of Irish taxes has been made on this capital.

Frances O'Rourke in the Irish Times last week reported that 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 when Revenue withdrew its request for information. Savills HOK then withdrew its High Court challenge to the proceedings. You can see the full piece here.

This week the Revenue has announced that it will take a different tack, looking to the Department of Finance to give it the power to access such client lists. Simon Carswell's full Irish Times piece can be found here.

There are two sides to this argument. On one hand it is difficult to argue against the Revenue having access to details of Irish investors purchasing overseas. The Revenue has a legal right to know the source of funds invested abroad by Irish citizens in case the state is at a loss in its tax take. It also has a right to know what income is being made overseas so that it can access any tax it is owed through this avenue.

On the other hand, Irish agents who are forced to give such lists to the Revenue are at a distinct disadvantage. Once such an initiative is launched, those wishing to hide the source of funds or even those who would rather that the Revenue didn't know about their business for less sinister reasons, will simply go overseas and use foreign agents.

The results of this will be twofold, neither of them particularly good. Firstly Irish agents will lose significant business, quite a few will go bust. Whatever you feel about overseas agents, there are many good, conscientious ones out there. They are perfectly entitled to make a living and this initiative could stop them from doing so. Secondly, those Irish investing overseas using foreign agents will be doing so outside any potential regulatory framework in Ireland making it far more likely that they will run into problems while doing so, and far less likely that they will have any recourse should something go wrong.

It is possible that the newly formed National Property Services Regulatory Authority (NPSRA) could be asked to make it obligatory for all companies selling in Ireland to present details of their clients to the Revenue. Unfortunately this would not make it compulsory for agents with no operations in Ireland to furnish such a list and would still leave Irish agents at a significant disadvantage.

Expect this issue to drag on for some time, it is very unlikely that agents will go down without a fight and the Revenue really wants to get its hands on those records.

For a list of advisory articles on taxation issues relating to investing in property overseas click on this link.

No comments: