I have a couple of questions about inheritance from a non-EU country. I am an expat in Ireland. I come from Asia. My wife is a non-Irish EU citizen. We have decided to put down our roots in Ireland. We recently bought a house in Dublin. My three questions are as follows:
My mom, who lives in my home country, has divided her home equally between me and my brother upon her demise. The value of my share is little over €100,000 based on today's exchange rate. I know that in Ireland there is no capital gains tax (CGT) if the inheritance value is less than €335,000 (minus any gifts received over lifetime). Because we have decided to put down our roots in Ireland we want to bring that €100,000 to Ireland. Will there be any tax implications?
In my wife's case, she will inherit a property from her mother whose value is little under €100,000. If she chooses to bring that money to Ireland, will there be any tax implications for her ?
More complex maybe, I own a two-bed apartment in my home country. It is registered on my name. I am not deriving any rent from it because, since my father’s death, my mom lives there, rent-free.
The value of the apartment on today's exchange rate is about €80,000. Do I have to pay tax on that amount if I sell my apartment after my mom dies and bring that money to Ireland?
Please note that my principle residence is my home in Dublin. But at the same time, I have not used my apartment in my home country for investment purposes either. How will the Revenue look at this amount because this I believe does not fall under the remit of an inheritance?
– Mr K.R., email
It can be really confusing to sort out taxes when you move across borders – or when you have assets in different countries. Even within the European Union, there can be vastly different rules between one country and another – so much so that people are sometimes advised to have different wills to manage property issues in different countries.
The good news for you is that you don’t need to be worry about that.
There are a couple of different issues brought up by your questions: inheritance tax (also known as capital acquisitions tax), as you suspect, but also capital gains tax.
Under Irish inheritance tax rules, you are generally liable to the Irish inheritance tax regime as long as any of the following apply:
– the property involved is situated in Ireland;
– the person bequeathing the property or asset is resident or ordinarily resident in Ireland;
– the person receiving the inheritance is resident or ordinarily resident in Ireland.
Tax residency is determined by how long you are in the State. If you are here for 183 days or more in any year, or 280 days or more across two consecutive years, you are deemed to be tax resident here.
Five-year rule
However, there is an important additional criterion for people who are resident here but not Irish domiciled. This affects people like you and your wife who, though tax resident here, would generally (but not always) consider their domicile to be the country in which they grew up.
In that case, they will not be subject to Irish inheritance tax law until they have been resident in Ireland for five consecutive years.
In your case, the property is not here but you are and, as you say you have decided to put down roots here, I am assuming you are tax resident here. So, as long as you have been here five years by the time your mother dies, your inheritance would be assessed by Ireland’s Revenue Commissioners.
If your mother dies before you have been here five years, Irish inheritance tax rules will not apply.
In any case, as your share of the property is less than €100,000, you will not be liable to inheritance tax in Ireland, assuming you have not already received gifts or inheritances of more than €235,000 from your parents.
As you mention in your question, once your lifetime receipts from parents via inheritance or large gifts (worth more than €3,000 in any year) is below €335,000, no Irish inheritance tax applies. That limit can change from year to year and it is the limit that exists in the year your mother dies that will be relevant.
You mention in your letter that, in your case, there are no inheritance tax issues in your home country. I am not sure that is the case. It may not be called inheritance tax but I believe you may face a tax bill in your home country on your share of the eventual sale of your mother’s house.
Your wife faces the same issue – and the same domicile rules. And, as her likely inheritance is also around €100,000 she, too, will be fine here regardless as far as tax is concerned.
However, she also has to consider the inheritance tax rules in her home country. There may be a bill facing her there on the inheritance from her mother when the time comes. I don’t know what the country is, so she would need to check that.
In both of your cases, whether you bring the money into the State or not is irrelevant as far as tax is concerned.
Second property
We move, then, to your third query – the position with your own property in your home country, currently occupied by your mother.
In Irish law, this is seen now as a second property as your principal home is in Ireland. In general, then, if you sell it (after your mother dies), it will be subject to capital gains tax. If it was once your main home, the capital gains tax assessment will cover only the period during which it was your second property.
But, here again, domicile comes into play. If you are not Irish domiciled, outside of inheritance, you are generally taxed only on a remittance basis – ie on your earnings here and on any foreign income or gains that you bring into Ireland.
So, assuming you have a capital gain on its sale, it will be taxed in Ireland only if you bring the money from the sale of that second home into this State. If you leave it in your home country, no Irish tax will apply.
However, I suspect that you may have a liability to capital gains tax in your home country when you sell this apartment anyway, though a double taxation agreement between the two countries means you might receive credit in Ireland for any tax bill there even if you do subsequently bring the funds into Ireland. You’ll need to talk to a tax consultant specialising in the agreement to be sure.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice
