Non Dom profit on the sale of shares

[Gigi Buffon]

Hello,

I'm non Irish domiciled, tax resident in Ireland >10 years, but domiciled in Italy. I transferred some cash sitting in my AIB account gaining very little to DeGiro last year and made a substantial Capital Gain (~20k) on the sale of a number of Siemens shares which I disposed of recently (~ 20k gain).
So as I understand: I have no 33% - 1270€ tax liability on the 20k in Ireland until I remit the gains to Ireland, which it will never happen since I want to use the cash to refurbish my house in Italy next year. So because I'm tax resident in Ireland I have no CGT to pay in Germany and because I'm non-domiciled in Ireland I have no liability in Ireland since I won't remit the money here. Do I have to pay the tax in Germany or in Italy? How does the "double non taxation work" ? Is it really tax free? I checked the DTA Ireland-Germany Italy-Ireland but there is nothing that highlights how a non-domiciled tax resident in Ireland is treated concerning the taxation of shares.

Thanks

 

[AAAContributor]

I have no 33% - 1270€ tax liability on the 20k in Ireland until I remit the gains to Ireland

Small point - on the off chance that you have to remit a gain to Ireland in the future, or you make an Irish source gain with a tax liability, the annual exemption of €1,270 is deducted from the taxable gain (~€20k) first, and then tax @ 33% calculated on €18,730. The annual exemption does not come off the 33% amount.

This may not have been how you meant it, but it was how I read it.

 

[Farma1]

Yeah you are correct as long as you don't bring any of the money back to ireland - you can't spend the profit in Italy and bring the original capital that you invested in DeGiro back to Ireland.

 

[Gigi Buffon]

Thanks AAA for the note and Farma for the comment. Yes I'm not planning to move back the original investment to Ireland either but remit everything to Italy: origianl capital and gains. Anyway I think I will take some paid professional advice on this from a firm that specializes in internationl taxation. I know that no tax is attracted in Ireland since I won't remit anything back here, but I don't want to face a large bill from the German Revenue a few years down the road telling me that because no Irish tax was due thanks to my non dom status I should have paid the German revenue.....

 

[Gigi Buffon]

Hello folks,

I want to resurface this thread and ask a question please. Since my last post I took some paid professional advice from three tax advisor firms specializing in international non-dom, remittance baisis etc., some firms mentioned here but to be honest.....it was not very useful.

First I went to one of the big 4. I know it's not a good idea as suggested by many experts in this forum, but I know someone who works there (not in the tax business) who put me in contact with a senior guy there (in the tax business) who scheduled a meeting with one of his reports. I turned up and the guy who was probably 21 years old, just went on to explain the basics that you normaly get by searching google.com or openAI. What's tax residency, what's a domicile. He told me that if I have income outside of Ireland and I don't remit it I have to do nothing since it's not taxable in Ireland. No clues about ETFs UCITS taxations etc. I think he was an intern learning. I left after 15 minutes. Simply I was not too big fish for them as I don't handle millions.

Second firm and third firm (one was recommended here) were more clued in I must say, (I didn't go for the ones boasting big colorful ads in the web or mytaxback.com but small/medium size firms specialized in expats matters). They did go through the basics and discussed about what funds to avoid etc. etc. checked my investments etc. Still I felt that for the more advanced topics they were lost.

Example:
(I have also a U.S. broker)
If I ask: I buy a NVidia share today at 100$ and today 100$=100€ I sell the share tomorrow at 100$ and tomorrow 100$=150€ do I have a liability in Ireland on the 50€ currency gain. Is it valid for the remittance ? Both said no there is no tax liability since there is no currency conversion or exchanges and it's a capital gain but I don't think is right, I have a doubt since I'm acquiring and disposing of foreign currency when I do shares/dollars dollars/shares.

Then I asked if I have a full tax liability in Germany for my german profits according to the DTA (full income tax on the dividends and CGT) on the profits and to explain the article below DTA between Ireland and Germany since I'm non dom tax resident in Ireland with investment and gains in Germany for 2024 and both firms were totally lost:

(1) For the purposes of this Convention, the term "resident of a Contracting State" means any person who, under the laws of that State, is liable to taxation therein by reason of his domicile,
residence, place of management or any other criterion of a similar nature. But this term does not include any person who is liable to tax in that Contracting State only if he derives income from sources therein.

which to me it means that as a non dom I have to pay the full income tax and CGT in Germany because the DTA doesn't apply since being non dom I receive income from sources located only in Ireland (no WW taxation): read this "But this term does not include any person who is liable to tax in that Contracting State only if he derives income from sources therein." So If I have to pay taxes in Germany I then won't bother I will just remit everything back to Ireland and pay them here: the taxes are much higher but it would be a huge hassle paying the taxes in Germany and I speak no word of German

I wonder if anyone can please point me to a firm that not only tells me about tax residency, domicile, how ETFs are taxed etc. etc. but who has a real understaning of more advanced topics like DTA understanding etc. pls.

I wonder if anyone has used KTA ? They seem all senior people even if the charge much higher, www.kta.ie or any other firms ?

I don't mind paying but I don't want to pay again for someone who tells me what's tax residency, what's docmicile and how ETFs and shares are treated taxwise, and I would like to get the taxation right even if it's only a bit over 20k gain involved for 2024.

To conclude I found much more useful info browsing this forum than any paid professional advise received so far.

Thanks Luigi

 

[ClubMan]

If I ask: I buy a NVidia share today at 100$ and today 100$=100€ I sell the share tomorrow at 100$ and tomorrow 100$=150€ do I have a liability in Ireland on the 50€ currency gain. Is it valid for the remittance ? Both said yes there is no tax liability since there is no currency conversion or exchanges and it's a capital gain but I don't think is right.

Me neither. Look up Revenue document "Foreign currency gains / losses arising otherwise than in the course of a trade (S.541A) Part 19-01-14A".

Section 28 of the Taxes Consolidation Act 1997 (“TCA 1997”) provides that Capital Gains Tax (“CGT”) is charged in respect of chargeable gains accruing to a person on the disposal of assets. Under section 532 TCA 1997 any currency other than the euro is an asset for the purposes of CGT. Accordingly, a chargeable gain / allowable loss can arise to a person buying and selling foreign currency otherwise than in the course of trade. That gain / loss is computed by reference to the corresponding euro value of the purchase price and the sale proceeds.

 

[AAAContributor]

If I ask: I buy a NVidia share today at 100$ and today 100$=100€ I sell the share tomorrow at 100$ and tomorrow 100$=150€ do I have a liability in Ireland on the 50€ currency gain. Is it valid for the remittance ? Both said yes there is no tax liability since there is no currency conversion or exchanges and it's a capital gain but I don't think is right.

Yes, there is a tax liability on a foreign currency gain.

No, a foreign currency gain does not qualify for the remittance basis of taxation available to non-domiciled persons.

You had US$100 in a bank account.

Foreign currency is an asset for CGT purposes per Section 532 Taxes Consolidation Act (TCA).

The next question to be asked is: where is the asset located? A bank deposit is an asset located where the depositor is resident — in this case, Ireland. It doesn't matter where the bank/broker is located. The law underpinning this is set out in Section 533(c) TCA. The FX deposit is an Irish asset. Irish assets do not qualify for the remittance basis.

In the normal course, such a bank deposit does not generate gains. If you keep the USD in your account or transfer the USD from Bank A to Bank B (i.e. to get a better interest rate on your USD), there would be no capital gains tax implications.

However, in this example, foreign currency (an Irish asset) was disposed of (funds were uplifted from the account to settle the share purchase). The EURUSD FX rate on the date of that transaction was 1.0000 and so the disposal value of the Irish asset (in the currency of the State) was EUR 100.

The question then is, what was the applicable EURUSD FX rate on the acquisition of the US$100? I think this is more pertinent to the calculation of any FX gain in this example.

This is why tax advisers advise non-doms to rebase foreign currency deposits before becoming tax resident.

When USD is reacquired from the settlement of the share sale, the EURUSD FX rate of 1.5000 will become the acquisition rate for any FX gain/loss on any future disposal.

Go back to your adviser and get their take on it, quoting the references and logic above.

 

[Gigi Buffon]

Thanks AAA and Clubman for the replies and time taken to comment. So yes I asked both professional advisers if the FX was an element to consider, both said no, it's capital gain no need to worry unless remitted. Also I will have a small euros denominated deposit income with one of the Raisin banks maturing later this year. I asked and they (both) said it's foreign income not subject to irish tax unless remitted. So out of three questions two were answered incorreclty by both advisors and the third question about the DTAs, none of them had a clue, this is why I hope somone can give me a name of a serious advisor, not someone who will tell me if I'm tax resident in Ireland and if I'm domiciled here and how the remittance works in general. So far it cost me 1k and I'm still waiting for the invoice from the 21 year old intern on a summer placement mentioned above.

Thanks
Luigi

 

[AAAContributor]

So yes I asked both professional advisers if the FX was an element to consider, both said no, it's capital gain no need to worry unless remitted.

Go back to your advisers and query their interpretation of the taxation of the capital gain in the light of the information I have provided to you. You've paid your money after all! Refer them to 'The Remittance Basis - Practical Points to Note', (the bullet point dealing with FX accounts), in Chapter 2 of the text 'Practical Income Tax - The Professional's Guide' for further research!

Also I will have a small euros denominated deposit income with one of the Raisin banks maturing later this year. I asked and they (both) said it's foreign income not subject to irish tax unless remitted. So out of three questions two were answered incorreclty by both advisors

Your advisers are correct on the deposit income.

The legislative references I quoted to you in my post earlier relate to the part of the tax code dealing with the taxation of chargeable gains.

The taxation of your interest income and the operation of the remittance basis comes under Section 71(1),(2) and (3) TCA.

In this case, interest income received from a bank in Lithuania, Luxembourg, Sweden (or wherever your Raisin deposit is) is taxable under Case III of Schedule D. I, as an Irish resident and domiciled individual, have to pay tax on that income according to Section 71(1).

However, Section 71(2) says that Section 71(1) shall not apply in the case of a non-domiciled person. If the interest income is not remitted to Ireland, it is not taxable here [Section 71(3)].

I hope somone can give me a name of a serious advisor

You have already mentioned a firm in your earlier post. You can see from their website that their minimum fee is €1,600 + VAT (@23%). Contrast this with the €1k that you paid in total to two other firms.

Your query on whether you are taxable anywhere else in regards to your Siemens dividends and gains is more involved, with an adviser having to review the German/Ireland DTA and maybe the DTA in your country of domicile as well.

 

[Gigi Buffon]

Many thanks AAA for the feedback and further clarification. I will read Section 71(1),(2) and (3) TCA and also I will ask for a consultaion with KTA and see if they can help to interpret the DTAs. I will provide a feedback afterwards, but it will not be for a few weeks as I'll be going on holiday on Friday. Thanks again !!!