Understanding Tax Implications When Buying Property Overseas

Introduction

Purchasing a home or investment property abroad can be an exciting prospect for Irish expats, residents and investors. Yet, beyond the search for the perfect location lies a complex web of tax rules that can have a big impact on the profitability of your overseas asset. Irish tax law treats foreign property much like a domestic one, but there are distinct reporting requirements, potential double‑taxation, and reliefs that you need to understand before you sign the contract.

This article breaks down the key tax implications for Irish taxpayers who buy property overseas, covering:

Income tax on foreign rental income
Capital Gains Tax (CGT) on disposals
Double‑taxation relief and foreign tax credits
Stamp duty, mortgage interest relief and other charges
Practical steps for compliance and planning

Armed with this knowledge you can avoid costly surprises and make the most of any tax reliefs available.

1. Who is liable for Irish tax on foreign property?

1.1 Tax residence

Irish tax liability is primarily determined by tax residence, not by the location of the asset. You are a tax resident in Ireland if:

You spend 183 days or more in Ireland in a tax year, or
You spend 30 days or more in each of two consecutive tax years and a total of more than 280 days over those two years.

If you are a resident (or ordinarily resident) you are taxed on worldwide income, which includes rental profits and capital gains from foreign property. Non‑residents are only taxed on Irish‑source income, but most Irish expats remain residents for tax purposes.

1.2 Domicile

While domicile does not affect income tax, it does influence Capital Acquisitions Tax (CAT) on gifts and inheritances of foreign property. Irish domicile generally means you are liable for CAT on worldwide gifts and inheritances, unless a double‑tax treaty provides an exemption.

2. Income Tax on Foreign Rental Income

2.1 What counts as taxable income?

If you let a foreign property, the gross rental receipts are taxable in Ireland. You must declare this income on your self‑assessment tax return (Form 11), even if the foreign country also taxes the rent.

2.2 Allowable expenses and deductions

Revenue permits a range of expenses to be deducted from the gross rental income, reducing the taxable profit. Common allowable items include:

Expense	Typical examples
Mortgage interest	Interest on loans used to purchase or improve the property (subject to mortgage interest relief at source)
Repairs & maintenance	Paint, plumbing, roof repairs – not improvements
Management fees	Letting agent commissions, property management fees
Utilities & rates	Water, electricity, council tax paid by the landlord
Insurance	Building, contents, landlord liability
Travel	Reasonable travel to the property for inspection or repairs
Capital allowances	Depreciation on furniture and fittings (if furnished)

Expenses that are not allowed include capital improvements (e.g., extensions) and personal costs such as your own travel for leisure.

2.3 Calculating the taxable amount

Total gross rent received in the year.
Subtract allowable expenses (including mortgage interest).
The remainder is the taxable foreign rental profit.

This profit is added to your other Irish income and taxed at your marginal income‑tax rate (20 % up to €40,000, 40 % above that, plus USC and PRSI).

2.4 Double taxation relief on rental income

If the foreign jurisdiction also taxes the rent, you can claim a foreign tax credit in Ireland for the amount of tax paid abroad, subject to a maximum credit equal to the Irish tax attributable to that income. The credit is claimed on the same self‑assessment return, using the Foreign Tax Credit (FTC) schedule.

Example: You earn €10,000 rent in Spain and pay €2,000 Spanish tax (19 %). Your Irish tax on that €10,000 (assuming a 40 % marginal rate) would be €4,000. You can claim a €2,000 credit, reducing your Irish tax payable to €2,000.

3. Capital Gains Tax (CGT) on Disposals

3.1 When does CGT arise?

CGT is triggered when you sell, gift, or otherwise dispose of a foreign property. The gain is the difference between the disposal proceeds and the base cost (purchase price plus allowable acquisition costs such as stamp duty, legal fees, and certain improvements).

3.2 CGT rates and exemptions

Standard rate: 33 % (as of 2024).
Annual exemption: €1,270 of gains per person per year (no tax on gains within this limit).
Principal private residence relief: If the overseas property was your main home for the entire period of ownership, you may be exempt from CGT, subject to the “absence relief” rules if you were temporarily away.

3.3 Foreign CGT relief (double‑tax relief)

Many countries levy CGT on the sale of real estate. Ireland’s Foreign CGT Relief allows you to offset foreign CGT against Irish CGT, subject to a maximum relief equal to the Irish CGT charge on the same gain.

Steps to claim relief:

Calculate the Irish CGT liability on the gain.
Determine the foreign CGT actually paid (in foreign currency).
Convert the foreign tax to euros using the exchange rate on the date of disposal (or an average rate approved by Revenue).
Claim the lesser of the Irish CGT due or the foreign CGT paid as a credit on your CGT return (Form CG1).

If the foreign tax exceeds the Irish CGT, the excess cannot be carried forward or refunded, but it does reduce your Irish liability to zero.

3.4 Reporting deadlines

CGT on disposals must be reported and any tax due paid by 31 December of the tax year in which the disposal occurs.
If the CGT liability exceeds €1,000, a pre‑payment (estimated tax) may be required by 31 October of the same year.

4. Other Taxes and Charges

4.1 Stamp duty on foreign purchases

Ireland does not levy stamp duty on properties bought abroad. However, the foreign country’s equivalent (often called transfer tax, registration tax or stamp duty) will apply. Keep detailed records of any such tax, as it forms part of the base cost for CGT calculations.

4.2 Mortgage interest relief at source (TRS)

Irish residents can claim Mortgage Interest Relief at Source on interest paid for a loan used to acquire a foreign property, provided the loan is secured on that property. The relief is a tax credit equal to the interest amount (subject to limits) and is applied automatically by the lender if they are registered with Revenue for TRS.

4.3 Gift and Inheritance Tax (Capital Acquisitions Tax – CAT)

If you receive a foreign property as a gift or inheritance, CAT may apply. Irish residents are taxed on worldwide gifts and inheritances, with a tax‑free threshold (currently €335,000 for a parent‑child transfer). The property’s market value at the date of receipt is used to calculate CAT.

4.4 Foreign tax identification numbers (TINs)

Many jurisdictions require you to obtain a local tax identification number for reporting and withholding purposes. Ensure you register for a TIN in the foreign country to avoid unnecessary withholding tax on rental income or CGT.

5. Practical Steps for Irish Buyers

Step	Action	Why it matters
1. Confirm tax residence	Check days‑spent test; consider split‑year treatment if you move part‑year.	Determines whether worldwide income is taxable in Ireland.
2. Open a foreign bank account	Required for mortgage payments, receiving rent, and foreign tax filings.	Facilitates proper record‑keeping and eases foreign tax credit claims.
3. Obtain the foreign TIN	Register with the local tax authority.	Avoids automatic withholding and ensures you can claim reliefs.
4. Keep detailed records	Purchase contracts, invoices for legal fees, stamp duty, improvement costs, rental receipts, expense invoices, foreign tax statements.	Needed for accurate Irish tax returns and CGT base cost.
5. Register for ROS (Revenue Online Service)	Set up a self‑assessment account if you don’t already have one.	Allows electronic filing of Form 11, CG1, and foreign tax credit schedules.
6. Calculate and claim foreign tax credits	Use the FTC schedule on your Form 11 for rental income and CG1 for CGT.	Prevents double taxation and reduces Irish tax payable.
7. Review double‑tax treaty provisions	Ireland has treaties with most EU states, the US, Canada, etc.	Some treaties provide exemption or reduced rates on rental/CGT.
8. Seek professional advice	Tax advisors can optimise reliefs, especially for complex structures (e.g., holding companies).	Saves money and ensures compliance with both Irish and foreign law.

6. Common Pitfalls to Avoid

Assuming foreign tax will automatically be credited – You must actively claim the foreign tax credit on the correct schedule; otherwise the credit is lost.
Mixing personal and rental expenses – Only expenses wholly incurred to generate rental income are allowable; personal travel or upgrades are excluded.
Neglecting exchange‑rate conversions – All foreign amounts must be converted to euros using the Revenue‑approved rate (usually the Central Bank rate on the date of receipt/disposal).
Missing filing deadlines – Late filing can attract penalties of up to €5,000 and interest on unpaid tax.
Over‑looking principal residence relief – If the property was your main home for part of the ownership period, you may be eligible for partial CGT exemption.

7. Example Scenario

John, an Irish resident, buys a €250,000 apartment in Portugal in June 2022, financing €150,000 with a mortgage. He lets the property for €800 per month and pays Portuguese rental tax of 28 % (€2,688 per year). In June 2025 he sells the apartment for €300,000.

Calculation	Amount (€)
Rental income (2022‑2025)	€800 × 12 × 3 = €28,800
Allowable expenses (interest €6,000, repairs €2,000, management €1,200)	€9,200
Taxable rental profit	€19,600
Irish income tax (40 % marginal)	€7,840
Foreign tax credit (Portuguese tax paid)	€2,688
Irish tax payable on rent	€7,840 – €2,688 = €5,152

CGT on sale

Item	Amount (€)
Sale proceeds	€300,000
Purchase price (incl. legal, stamp duty)	€250,000
Cost of improvements (none)	€0
Gain	€50,000
Irish CGT (33 %)	€16,500
Portuguese CGT (28 % on €50,000)	€14,000
Foreign CGT relief claim (lesser of Irish CGT or Portuguese CGT)	€14,000
Irish CGT payable after relief	€2,500

Total Irish tax: €5,152 (rental) + €2,500 (CGT) = €7,652. Without the foreign tax credits, John would have paid €23,340, illustrating the importance of relief claims.

Conclusion

Buying property abroad offers diversification and lifestyle benefits, but Irish tax law ensures that worldwide income and gains are brought into the tax net. By understanding:

Your residency status
How rental income is taxed and which expenses you can deduct
When CGT applies and how foreign CGT relief works
The need to claim foreign tax credits and meet filing deadlines

you can protect your investment from unexpected tax bills and make the most of the reliefs available. Always keep meticulous records, stay on top of both Irish and foreign filing requirements, and consider professional advice for complex situations. With the right preparation, overseas property can be a rewarding addition to your portfolio without costly tax surprises.