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Buying Property Abroad

This can be a very complex area, as you will be dealing with laws and tax regimes of a foreign country.

You may also have unforeseen tax liabilities back in Ireland - even if you don't intend getting rental income from the property.

You need to think through these main tax and legal implications, whether it is going to be your own holiday home or you intend to rent it out or have a timeshare.

Do the sums if the property is going to be rented out:

  • Sellers tend to overstate the rental levels of investment properties in resort areas
  • Assume that any rentals quoted by sales people will be at the very top of the expected range, and halve this and see how it will affect your bottom line
  • If you can afford the property, you may be better off buying two small units rather than one large one. Small properties are easier to let during the off-season. They could also be easier to offload if you decide to sell

Be informed

The single biggest complaint that people have when buying homes abroad is that they have been mis-sold the property in some way.Therefore:

  • Always seek detailed professional advice in order to make an informed decision
  • Don't rely on uninformed guesswork.
  • Never make a snap decision
  • Before buying, always check the quality and reputation of the agent acting on your behalf

Form of ownership

In legal terms, your overseas property might be held in several ways, such as directly by you, or jointly by you and your spouse, or by a company owned or controlled by you.

The decision you make will have an impact on your inheritance and tax. Some Irish people buying an overseas family home will form a company to own the property, as this helps in dealing with the other country's inheritance laws and protecting the rights of the spouse/partner.

Your rights and entitlements are somewhat different if you are in a timeshare arrangement rather than owning a property outright. Timeshares involve buying a fraction or share in a holiday home, and the right to use it at particular times of the year.

Taxes and legal issues

Taxation or legal issues will arise in terms of:

  • Property taxes and other charges
  • Any rental income you make
  • Selling the property or giving it away as a gift

Make sure to find out your legal and financial rights and responsibilities. It is not enough to plead ignorance of the other country's system or blame language barriers.

Some overseas authorities are getting fed up with slow payers from Ireland. For example, it was reported in 2006 that of about 100,000 Irish people who own Spanish properties, three in four may not be fully tax-compliant.

So Spanish authorities began a "name and shame" campaign, and say Irish homeowners will face penalties of up to 300%.

Property taxes and other charges

Many countries have stamp duty payable on new and second-hand properties. Some countries charge VAT on newly-built homes.

Countries outside the EU may have similar taxes - for example Canada has a goods and services tax (GST) on newly built homes. You will also have to allow for registration charges, legal fees and so on.

As well as charges for utilities and waste disposal, you may be liable for local property taxes or rates on an annual basis, even if you only live in your holiday home for a few days a year.

Remember, too, that apartments, timeshare schemes and other properties can involve regular payments of management charges. Some countries also have a specific tax on holiday homes.

Taxes on rental income

If you rent out your property, you will be liable for taxes on the rental income.

You may find the tax on rental income is liable back in Ireland - even if you do not remit the rent to Ireland. Check with your solicitor or accountant.

Selling the property

At some point you may decide to sell your overseas property, and you could be subject to capital gains tax. The rate may differ for you as a non-resident, and may vary depending on how long you have owned the property.

You may be liable in both Ireland and the overseas country, but if Ireland has a double taxation treaty with the country in question you should be able to offset the taxes against each other.

If, instead of selling the home, you give it to a relative after several years, they may in turn be liable to gift tax.

If, on the other hand, you are moving permanently to another country, it may be possible to structure your departure to reduce your capital gains liabilities before you arrive in your new country, while you are not resident (or ordinarily resident) in either country.

Seek advice

It is clear, then that buying and having a holiday home abroad may not be as simple as it sounds.

You need to seek proper legal and financial advice from reputable professionals in both Ireland and the other country.

Learn more

Check out information advice at the European Consumer Centre Dublin on your rights with timeshare properties elsewhere in the EU. This agency also assists consumers with cross-border disputes.