Offshore assets and working in Saudi Arabia

I am Irish citizen who has worked in Saudi Arabia for the last 17 years. I will return to live in Ireland on December 1st.

I have offshore bank accounts but will close these and send funds to Ireland before I leave Saudi. I also have two overseas properties (in Spain and Italy) which I rent out for maximum of three weeks a year.

Am I liable to the Irish Revenue for rental income while I was outside Ireland? Or will I only be liable for any rental income when I return to Ireland?

I have a bank account in Spain where rental funds are sent. It is my plan to re-enter the Irish workforce part-time in January 2018.

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Ms CE, Saudi Arabia

Clearly, news that the Irish Revenue is clamping down on offshore assets held by Irish taxpayers is causing a bit of a stir. Hardly surprising, I guess, when as many as 500,000 letters are being sent to taxpayers on the subject.

The key thing, especially for people in your position, is that Revenue’s target is assets or income earned and held offshore by people who are tax resident in Ireland – ie, they are liable to tax here.

As someone who has been out of the State for 17 years, you will not have been liable to Irish tax at all. Your liability would be to the local Saudi authorities.

Of course, up to now there has been no tax on personal income in the kingdom, although that is changing as the country comes to terms with declining revenue from oil. I gather a nominal annual charge is being introduced this year – up to roughly €25 a month – although this will scale up to €200 per person a month by 2020.

Interest earned abroad

By European standards these rates may sound laughably low but it is a major step for the Saudis where up to a third of the workforce is expatriate and there is a battle to find a balance between the need to boost exchequer funds and the importance of remaining attractive for prospective expatriate employees.

Anyway, the point is that for the past 17 years, any accounts and/or property you own and any rental income from it has been a matter for the Saudis and of no relevance to the Irish Revenue.

So you have nothing to fear on your return home. It is only once you are back in Ireland that you will become liable to Irish Revenue.

The concern for Revenue, in relation to offshore bank accounts, is where the money in them came from and what income is delivers by way of interest. On property, again they want to be reassured that it was bought with money that was properly taxed and they also want to know about rental income.

In your case, the accounts are funded with money earned in your job in Saudi Arabia which is absolutely valid and not liable to Irish tax. If you keep these accounts open following your return to Ireland, you will need to declare any interest income in an annual tax return.

Offshore bank account

It is important to note that there is nothing preventing an Irish taxpayer having an offshore bank account as long as it contains money that has already been taxed and, if necessary, declared to Irish Revenue.

As you’re closing the Saudi account, that’s a moot point but it may be an issue for the account in Spain that receives the rental income on your holiday/investment properties – or at least the interest those funds earn. But, importantly, there is no retrospective liability. You will only be liable to income earned after your return to Ireland.

The same is true of your properties in Spain and Italy – you will liable to tax on any income earned on them (after allowing for expenses) only from the date you return to Ireland. Any income they yield up to December 1st is of no relevance to Irish Revenue.

Finally, if you receive any further income from Saudi Arabia following your return to Ireland – such as a pension – it would need to be declared.

Send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice.