Selling foreign property(not real estate)

Discussion in 'Tax' started by HutzLionel, Oct 12, 2017.

  1. HutzLionel

    HutzLionel New Member

    Last edited: Oct 12, 2017

    Non Irish resident, but Irish Domicile and Ordinarily resident(for 3 years anyhow).
    Now living and working in a country called Hyrule(for this purpose, the country is irrelevant)

    From Ireland Revenue's website:
    Foreign property sold through a foreign company
    You will have to pay Irish CGT when your foreign company sells your foreign property if:

    • You are a participator in the company. A participator is someone entitled to a share or interest in the capital or income of the company.
    • and
    • The foreign company would be considered a close company if it was resident in Ireland. Under Irish law, a close company is one controlled by five or fewer participators.
    You have to pay the Irish CGT on time even if you do not receive your share of the sale proceeds at the time the gain was made by the company. You may receive your share of the sale proceeds within two years of when the gain was made. If you do, the amount of foreign CGT you have paid can be offset against any Irish CGT you owe in respect of the gain."

    A company is a legal entity. It owns and sells it's own property, how can it sell 'your' property. Estate agent etc is not the issue because you never transfered ownership rights to EA's company(and you are now into arms length transaction territory.) These are not the issue.

    From revenue's POV, am I right in saying that they have this legislation for the following scenario:
    You move to Hyrule, you spot a house on a hill for 500k rupees and you think it's worth a million. You set up a Hyrule company in which you own all the shares, are the MD, and it's only employee(i.e a Close Company). You buy the house through your new Hyrule company, sell it for a million, you are then liable for Irish Capital Gains tax on 500k(Ignore DTT.)

    Now, different scenario. You set up a Hyrule software company called MadeupName LLC that allows architects to meet and discuss projects on your website using your software called Monty. The software started and was developed 100% in Hyrule. You were never an Irish tax resident for a moment in the life of Monty. You live and work in Hyrule. In fact during the year, you never set foot in Ireland.

    A big Architect company comes in and says they want to buy all the rights to Monty and pays MadeupName LLC 1 million for it. Am I liable to Irish CGT on the 1 million? Even if I let the million sit in MadeupName LLC corporate bank account.
    Last edited: Oct 12, 2017
  2. Palerider

    Palerider Frequent Poster

    You need to provide specifics in order to get the best response to your query which is a little unclear.

    Is there a double taxation agreement between Ireland and the country the property is located in, if so that will direct you somewhat.

    Is the overseas property in the name of a limited company, does that LLC make returns to the local revenue authority.
  3. HutzLionel

    HutzLionel New Member

    Hi Pale Rider

    Ignore DTT. There is no CGT or income tax in this country, so no double tax.
    There is no bricks and mortar property. It is software developed in the company, a non Irish company, but would be classified as Close Company if it were set up in Ireland. I don't understand how the software could not be in the name of the company. There is no agency here. I work for the company, the company owns the product and it's rights. With legislation like this, It seems they have specific assets in mind, i.e houses, rental income, and shares.
    The main issue relates to Monty(second last paragraph). i.e company developed Software.

    I set up a foreign company. That company develops a software application, completely outside Ireland. Another company buys all the rights to the software for 1 million. That million is now in my foreign company's bank account. There is no further movement of monies. Am I liable to CGT in Ireland? The legislation seems to treat the situation as if the person, like a sole trader, developed the application and sold it, then the money is sitting in her back account, so she is liable for CGT. Further, does this also apply to sales from the application itself, made by the foreign company. So basically revenue treats the company as if it were a sole trader set up and operating in Ireland.

    I can understand owning a Physical property or shares before you leave Ireland and trying to sell it under a foreign company's name, and revenue wanting a piece, but it's quite annoying that revenue would get any part of a product solely developed outside Ireland, by someone who lives and works outside Ireland and has no intention to return(Domicile is a Pandora's Box)
  4. Palerider

    Palerider Frequent Poster

    Some foreign companies are regarded as pass through entities, that means you personally also must file returns in that country.

    In the scenario you outline the company owns the software and treat it as an asset in its accounts, that asset is sold and the company now has funds in it, in my view there is no GGT payable here, I think Revenue will only be interested if you repatriate funds to this country and that would be an income tax matter.

    I would contact Revenue directly to clarify, your query is quite specific so get a ruling on it that can be relied upon.