Must I pay tax on sale of inherited apartment in Baltics?
If you transfer the money to an Irish account, it may be subject to capital gains tax
In Ireland you are allowed deduct expenses involved in the sale of the property from any gain before considering tax. Photograph: iStock
I am selling my apartment in Lithuania, which my father left me after he died. I want to transfer money to Ireland to my account. It is about €35,000. Do I have to pay any fee to Revenue?
Ms ES, email
The rules of tax across international borders are becoming increasingly relevant in a world where people travel to new countries for work and then set up new lives, especially given the freedom of movement that is intrinsic to the European Union.
You will already have had to contend with managing your father’s inheritance while you have been living here in Ireland. Now, as you look to sell the apartment he left you, you must also juggle the provisions of two taxation codes.
While you are resident here, even though you remain most likely domiciled in Lithuania – the country where you were born – you will be liable to capital gains tax on any profits from the sale of an asset when you bring this money into Ireland.
Because this is a property in Lithuania, if you keep the money over there it would be not be subject to Irish tax laws. But, of course, as you are living here, it makes more sense that you wold want to bring the money over here.
So, is this particular €35,000 liable for tax in Ireland? First up, that depends on whether it is a capital gain.
When you inherited the property from your father it would have had a certain value. Now that you are selling, there will almost certainly be a different value. Assuming it is more than the value when you inherited it, you do have a capital gain. But it is not necessarily the €35,000 that is a capital gain; only that amount that exceeds the value when you inherited the apartment.
And, in Ireland, you are also allowed deduct expenses involved in the sale of the property from any gain before considering tax.
You are also exempt on the first €1,270 of any gain in a tax year. This is a strange figure but it makes more sense when you consider that it was £1,000 in Irish punts before we moved to the euro. Rounding up, that £1,000 translates to €1,270.
Before determining whether it is liable to tax over here – and if so, how much – you must first consider whether you will have a tax liability in Lithuania.
I am not an expert in Lithuanian tax law by any means, but it appears to me that property sales in Lithuania are liable to capital gains tax at a rate of 15 per cent.
There are some exceptions as far as I can see, but I do not see how these apply to you as you have been living over here in recent years.
Coming back to Irish Revenue, the tax rate here on any “net” gain after expenses and allowing for the €1,270 exemption is 33 per cent.
Because of the double taxation agreement between Ireland and Lithuania, the 15 per cent tax you will most likely have paid in Lithuania will be deducted from any liability here, mean you will pay roughly another 18 per cent here.
It won’t be quite that, as you have to allow for the expenses and the exemption.
And, as I said, the full €35,000 will only be liable if all of it is the gain. If only, say, €10,000 of it is the gain in the value between the inheritance and the sale, then only that sum is liable to tax.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email firstname.lastname@example.org. This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into