offshore fund tax

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firstquestion

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Hi
My first although i have been reading the forum for a few weeks
My non irish wife who is non domiclied has an offshore investment domicilded in luxembourg.
Up until recently we assumed (incorrecty it appears from reading threads on this tax forum) that as gains were never remitted to Ireland gains they were not taxable here.


I wish we had been aware of this liability to exit tax before the may deadline for disclosing offshore matters . we are very worried about this .

I see on revenue website there is tolerence of 6k before imposing penalties if the offshore fund error was an innocent mistake. I reckon the tax due is below 6k maybe 4k ( before interest).
1) Does anyone know is the 6k revenue limit before interest charges or must tax plus interest be below 6K?
b) Anyone any practical experience of contacting revenue offhshore division after the May deadline . Will this lead to a full audit ?

thanks
Leo
 
I’m only the messenger here and not a tax expert for sure but if you read the forum you should have noticed that there are many high calibre experts contributing all the time and hopefully someone will give you a better answer.

My brother in law is a EU national but non-irish and non-domiciled person same as your wife. He has an account in the U.S. on his name only which he opened before meeting my sister and moving to Ireland with her. He invested in various funds and shares buying and selling over the years also when he was already living in Ireland but never remitted anything to Ireland. He had similar questions last year when the foreign accounts crackdown was announced and got independent advise from a specialized tax consulting firm in Dublin for a hefty fee. He knew all ETF funds and shares were U.S. domiciled but initially he thought that one of the funds that he had bought and sold a few times was EU domiciled since all companies stakes were from the EU so he thought he could potentially be liable to taxes in Ireland on that fund and they told him they could calculate the tax due and do the voluntary disclosure etc.etc.etc. however they also told him that there was not too much tax to pay and probably it wouldn’t even be worth the effort to do the VD. They told him that the aim of the revenue would mainly be focused at irish nationals irish domiciled individuals that concealed large sums abroad to deliberately avoid paying taxes in Ireland. They told him that revenue normally would not be putting a lot of efforts in pursuing non-national non-domiciled persons where little or no tax would potentially be collected. In the end it turned out that the fund that he thought it was domiciled in the EU it wasn’t, it was a ETF fund administered in the U.S. even if it contained shares of EU companies. He had no tax liability on that so and he never had to do the voluntary disclosure

I hope the table below helps

1. Regulated funds domiciled within the EU/EEA or any OECD country (including the US) with which Ireland has a Double Taxation Agreement are treated as offshore funds. Gains arising on the disposal of such funds do not qualify for the remittance basis of taxation. This includes (but is not limited to) UCITS authorised investments within these countries.

2. Irish and EU domiciled Exchange Traded Funds (ETF’s) are subject to the offshore fund regime and gains arising on the disposal of such funds do not qualify for the remittance basis of taxation.

3. ETF’s domiciled in the US, EEA and other OECD countries are NOT treated as offshore funds and are subject to mainstream income tax (including USC and PRSI) and capital gains tax. Therefore, the remittance basis is available.

4. Unregulated offshore funds domiciled in the EU/EEA or any OECD country with which Ireland has a Double Taxation Agreement, are subject to mainstream income tax (including USC and PRSI) and capital gains tax. Therefore, the remittance basis is available.

5. Direct investments in foreign/ non-Irish equities are subject to main stream taxes, including income tax (and USC and PRSI) on dividend income and capital gains tax on gains. Therefore, the remittance basis is available.

6. Irish investments (in Irish domiciled funds or Irish equities) should be avoided as any income and gains would not qualify for the remittance basis.

Seamus
 
Thank you Seamus for taking the time to reply and sharing your brother in law's experience and its great it was positive outcome - no tax due.
Unfortunately my wife's funds are domiciled and regulated in Luxembourg. They are Fonds de placement which are priced daily and are very similar to irish unit linked funds so I think they fall under category 1 of the 6 categories you have outlined in your response. Thanks again.

Unless there is some angle that funds bought a long time ago (20 years in her case) are exempt I cannot see a zero tax liability in her case.

I hope too that some of the tax gurus on here have an answer to my 2 questions .

Thanks
Leo
 
Does anyone know the answer to questions or are they too detailed Or unclear. ? If do please let me know
firstquestion said:
I see on revenue website there is tolerence of 6k before imposing penalties if the offshore fund error was an innocent mistake. I reckon the tax due is below 6k maybe 4k ( before interest).
1) Does anyone know is the 6k revenue limit before interest charges or must tax plus interest be below 6K?
b) Anyone any practical experience of contacting revenue offhshore division after the May deadline . Will this lead to a full audit ?

thanks
Leo[/
Click to expand...
 
The answer to your first question is that the concession on penalties is by reference to the aggregate tax liability, before statutory interest.
 
firstquestion said:
Hi gordon I cannot post a bloomberg link yet

Here is ISIN no. LU0033034892

thanks
Leo
Click to expand...

That looks like “1” per the above categories.

Regulated and Luxembourg domiciled; 41% tax on both income and gains; no loss relief; no remittance basis for a Non-Dom.
 
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