This article looks at factors to be mindful of when non-resident owners are selling Irish real estate, highlighting the importance of advisors carrying out proper procedures. Failure to address these matters can lead to closing delays, cash flow challenges, and unforeseen tax costs. Key points within the article include the necessity of a CGT clearance, where the buyer must reserve 15% of the sales price without a CG50A certificate; the tax clearance process allowing a solicitor to pay sales proceeds to a non-resident; and the potential VAT implications. Paying careful attention to these details is essential for ensuring a seamless real estate disposal process.
Real Estate Disposal in Ireland: Key Steps for Non-Residents Selling Irish Real Estate
"Disposing of Irish real estate as a non-resident"
When selling Irish real estate as a non-resident owner there are a number of important procedural matters arising which you should be sure are being taken care of by your advisors.
Failure to do so can cause delays in closing, cash flow difficulties and potentially unforeseen tax cost.
A buyer is obliged to withhold 15% of the sales price on an acquisition of a commercial property for over €500,000 or a residential property for over €1m.
The withholding is not required where the vendor provides a CG50A certificate. A CG50A certificate can be applied for online through the Revenue OnLine Service (ROS) and the following documentation will be needed:
- Completed application form with details of the asset, the vendor(s) and the buyer(s);
- A copy of the signed contract for sale (or an undertaking from the acting solicitor to provide signed contracts if they are not available when applying); and
- A copy of a CGT computation and CGT payment receipt (or an undertaking from the acting solicitor to pay the CGT liability from the proceeds of sale if the liability has not been paid) where the vendor is a non-resident.
Once the application form has been submitted on ROS the CG50A should issue within 48 hours.
Irish situate real-estate is considered a specified asset for Irish tax purposes and therefore any gain arising on disposal of the asset, and any rental profits arising during the life of the asset, will always be within the scope of Irish tax.
Irish tax legislation provides that an agent, including the acting solicitor, can be assessable to CGT where the non-resident vendor does not pay the relevant liability arising on disposal of Irish real estate.
Given those circumstances there is an established tax clearance process whereby a solicitor acting on behalf of a non-resident vendor of Irish real estate can apply to Revenue for tax clearance to pay out the sales proceeds to the vendor from their client account. The application is done through ROS and the following documentation will be needed:
- Completed application form filled out and signed by the non-resident vendor;
- A Form CG1 for the tax year in which the disposal takes place;
- A CGT computation showing the sales proceeds and relevant base cost or other deductible expenses;
- Evidence of payment of the CGT liability arising (if any);
- A copy of the signed contract for sale.
When the application is made Revenue has undertaken to reply within 35 working days and confirm whether a review is to be conducted on the vendor by Revenue, further information is needed by Revenue, or that clearance has been given. If no reply is received within 35 working days, the agent who submitted the clearance is free to distribute the sales proceeds to the non-resident vendor.
As noted, this process can take up to 35 working days to finalise and vendors should be aware of this time delay in the context of any financial commitments made with respect to the sales proceeds.
You may be registered for VAT depending on the circumstances of the property (eg a commercial property where the option to apply VAT on a lease has been exercised, a residential property where a historic waiver of exemption on rents is in place).
If a VAT registration is in place careful consideration of the implications of the sale is needed. The sale could trigger an unexpected VAT cost such as a Capital Goods Scheme (CGS) adjustment or a Deductibility Adjustment. This risk is particularly prevalent where the asset being disposed of is subject to a historic waiver of exemption and the sale will therefore likely trigger a clawback of previously claimed VAT and / or a CGS adjustment.
If you have a query you would like to discuss, please get in touch with Cormac Doyle.