Irish Property Buyer 06.08

Questions Answered (Irish Property Buyer)
(June 2008)

Got an overseas property query but don't know who to ask? Tom McGrath & Associates, a leading Irish law firm, specializing in overseas legal services, have the answers

Question: What do you think of the recent announcement by Revenue that they are going to pursue people who have bought properties abroad? Answer: We always advise our clients to ensure that they pay whatever taxes arise, first of all in the country in which they have bought the property, and then also to declare any rental income that they might obtain to the Irish Revenue.

It is surprising how many people do not realise that there are local taxes to be paid on their foreign investments. Many people confuse this with community charges relating to maintenance for their apartment complex. Of course, they have to be aware that in addition to these charges, there are the local taxes, which cover roads, utility, and refuse collection. It is important that these taxes are attended to. If they are not, penalties can be applied. In any event, when you go to sell the property, you would be unable to do so, until these taxes have been paid.

It is also important when purchasing property overseas you should find out in advance what are the tax liabilities. For example, is there a double taxation agreement in place between your purchase destination and Ireland? If there is not, you could end up paying capital gains tax (CGT) on the sale of your property in two countries, and also tax on income, such as rent. Homework on this should be done before you buy. I suspect that what Revenue will be looking for is where people have obtained the finance to fund their overseas purchases. The most likely difficulty Revenue will encounter is that many people will have bought direct from foreign developers or through foreign agents. Indeed, even if buying through Irish agents it will be difficult to ascertain true facts and figures with regard to their clients, as it is an unregulated industry.

Obviously with the eventual introduction of regulation in the overseas property industry and with the cooperation of the various revenue offices, particularly in Europe, it will become far easier for the Revenue to trace where purchase funds emanate from. We always advise our clients to do things the right way. Do your homework, deal with professional people, do not get involved with under declaring values, and you will have no problems.

Is it true that foreigners cannot become the registered owner of property in Turkey? Due to an internal communiqué of the General Directorate of the Land Registry on 16 April 2008, following a High Court ruling necessitating amendments to existing legislation governing property sales through foreigners, the Turkish Tapu offices temporarily suspended ownership transfer to non-Turkish persons. However, it should be emphasised that this was a temporary ruling only and recently the Ministry of Public Works has declared that this prohibition will shortly be lifted.

Notwithstanding the above, foreigners are still entitled to purchase property in Turkey, albeit with some restrictions. For instance, foreigners cannot buy more than 30 hectares, and there are some areas which are off limits.

I have been asked to sign a document which I believe is power of attorney, but it is in German. I have asked for a translation but I have been told that none is available. Should I sign this document?

Under no circumstance should you ever sign a document without taking legal advice - particularly so if it is in a foreign language. We have encountered a number of cases where people have come to us having done so, and they have lost properties and vast sums of money as a result. In one case, a gentleman signed a power of attorney, believing that this was giving an agent power to rent his apartment in France. The agent sold the apartment, as he was entitled to do under the terms of the Power of attorney, but the owner never received a penny. Seek professional advice immediately.