I have been employed and living in Ireland since 2012. Now, I intend to buy a house here. But I am little short on the amount needed to buy it. I own a property in India and I intend to sell it and bring in the proceeds from the sale to Ireland. Can you please help me with the taxation in this situation?
Mr M.K., email
The flow of people across national boundaries for work or relationships has led to many people finding themselves in the position you are in – resident in one country and looking to set down roots but still having assets in one or more other countries. It could be property, shares, a pension or residual income from dividends or employment.
In your specific situation, how the sale of your Indian property and the repatriation of the funds to Ireland will be treated depends in part on your status here. The only sure thing is that the tax involved is capital gains tax.
This can get complicated but I’ll try to keep it simple. If you are working in Ireland, as you are, for most of the year, you are tax resident here and your Irish income is taxed here.
There is a separate legal concept called “domicile”. Everyone has one, but – and here’s the tricky bit – it can change. And to make matters worse, it is not the same as citizenship, or residence.
At the outset, your domicile will almost always be the country in which you were born or, if your parents were working briefly in another country, the country they call home. For you, this would appear to be India.
Change domicile
However, it is possible to change domicile. If you move to a new country with the intention of living permanently there and acting accordingly by getting a job, buying property etc, your domicile can switch to this new country. In general, this means you are cutting – or at least loosening – your ties to your original homeland.
This would be the case for many Irish people who emigrated to Britain, the United States, Australia or elsewhere down the years. It is not something you can change regularly, or simply because you move country but you would need to consider where you now feel your permanent home is. There is certainly an argument that you could now have Irish domicile.
It’s important in this case because domicile has an impact on tax. If you are Irish domiciled, and tax resident in Ireland, you are liable to tax in Ireland on your worldwide income and assets.
If, however, you are tax resident here but domiciled in India, you are taxable in Ireland only on your earnings here – and on any other funds you bring into the State. Under recently introduced tax law, you should have notified Revenue of any property you had abroad, even if you were not liable to tax here on it.
If you are Irish domiciled, the full gain on any sale of your Indian property is taxable in Ireland under our capital gains tax regime; however, if you are Indian domiciled, Ireland will tax you only on the amount you bring into the State to help you buy your new home here. The rest does not interest the Irish tax authorities.
You tell me that this home in India was your principal private residence and correctly note that the sale of one’s principal private residence does not attract capital gains tax under Irish law.
I see no reason why this should be different just because the principal private residence is in India and you are now resident here but this is certainly a point that would require clarification with someone specialising in cross-border tax and I have not been able to do that thus far.
A separate issue is what has happened with the house in the six years since you moved over here. If it has been left vacant, fair enough, but if it has been rented, then part of the proceeds would be liable to capital gains as it would be deemed an investment property for that period.
As the property is in India, under the terms of the double taxation agreement between Ireland and India, that country is entitled to levy local tax on the gain from any property.
The reciprocal agreement ensures you are not taxed twice on that gain. You get a credit here against your Irish tax bill for any tax levied in India. But, if you are exempt in Ireland on the basis that the property is a principal private residence, you won’t be able to get a refund.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice
