Overseas home owners may be hit with tax bills

THOUSANDS of owners of holiday homes abroad may be hit with hefty tax bills following a Europe-wide directive authorising foreign Governments to pass on information to the Irish Revenue regarding Irish-owned property in that country.

A bid to track down “hot money” sent abroad has led to the Revenue Commissioners writing to people who own homes in countries such as Spain, France, Bulgaria, Turkey, and other popular destinations.

The letters received by Irish residents affected by the new crackdown are asking them how the properties were financed, and how they are being utilised. “If the property is being let, please forward a schedule of the lettings for all years,” it states.

The Revenue Commissioners said yesterday while they do not have figures for the number of Irish-owned properties abroad, “the growth of foreign property ownership by Irish people is a phenomenon of which we are aware and which we continue to monitor in terms of tax risk as part of our ongoing business”.

It is estimated that between 150,000 and 250,000 properties abroad — worth a billions of euro — are owned by Irish people.

According to tax experts Property Tax International (PTI), thousands of owners have been hit by these letters in recent months, causing “great concern” to those with property in the sun who are now afraid of being landed with tax bills and penalties — not just from the Revenue Commissioners in Ireland but also from overseas tax offices.

PTI have received calls from foreign property owners in relation to the Revenue letters, according to marketing director Colm Murphy.

“The letters we have seen are not threatening but simply state the location of the overseas property in question, request information on how the purchase was funded, if rental income was received and if a tax declaration had been filed,” he said.

“This is a clear indication on the new measures undertaken by tax offices across Europe in their attempt to clamp down on tax evaders.”

Mr Murphy said that the latest Revenue campaign, along with Finance Minister Brian Lenihan’s introduction of a €200 levy on all second homes “is not good news for investment and lifestyle property owners”.

A Revenue spokesperson said they couldn’t comment on individual cases.

However, Revenue regulations state the money used to buy property abroad must be declared for tax purposes and all due taxes must have been paid. Any money used to repay a loan on the property also has to be declared.

A bank account opened in a foreign country for the purposes of buying property must also be disclosed to the Revenue.

Meanwhile, income tax is payable on the net profit from any rent received from foreign properties.