If you own foreign assets and haven’t included them in your tax return, you need to make a qualifying disclosure before 1 May 2017 otherwise you could very easily lose them! This is the message to taxpayers that underlies Revenue’s Foreign Income and Assets Disclosure Deadline.
Information Exchange is the new buzz-phrase in international tax these days. Alarmed by the proliferation of offshore tax structures such as those revealed in the Panama Leaks disclosures of 2016, a new information-sharing agreement, known as the Common Reporting Standard, has been developed by the OECD. Its signatories include countries such as Switzerland, Panama and Bermuda which previously had been extremely reluctant to divulge private information. In Ireland the Revenue Commissioners will begin to receive information under the Common Reporting Standard from September 2017.
A Change in the Law
Finance Act 2016 has amended Irish tax law so as to prevent taxpayers who have tax liabilities in respect of foreign income, gains or assets from making what’s known as a Qualifying Disclosure after 30 April 2017. If a taxpayer who wishes to regularise his tax affairs is unable to make a Qualifying Disclosure he/she will be exposed to a much higher level of penalties (75%-100% of the tax due) than otherwise.
Revenue have made it known that as a result of the Common Reporting Standard they will soon be in receipt of an unprecedented level of data from foreign jurisdictions and that their software enables them to cross-reference this data to the records of Irish tax payers. They have indicated that in their view the non-disclosure of foreign income and assets attracts the highest levels of penalties contained in the statute books and have encouraged taxpayers to make qualifying disclosures by 30 April 2017 in order to avoid these.
What Assets are included?
From 1 May 2017 the reduced penalties that apply to Qualifying Disclosures will no longer apply to disclosures that relate to any of the following:
- An account held in a jurisdiction other than the Republic,
- Income or gains arising from a source that is located in a jurisdiction other than the Republic,
- Property situated in a jurisdiction other than the Republic.
What are the consequences of being unable to make a Qualifying Disclosure?
If a taxpayer fails to make a valid qualifying disclosure prior to the deadline and subsequently either discloses to the Revenue or the Revenue discover the default, the following consequences apply:
- The taxpayer will be liable to higher penalty rates of up to 100% of the original liability,
- Any settlement could be published in the quarterly list of tax defaulters and
- The taxpayer could be subject to criminal prosecution which may include a prison sentence.
What Action is Required?
You should review your investment portfolio (for both real estate and other investment assets such as bank accounts and holdings in foreign equities) at the earliest possible time and check that all necessary disclosures have been made. Bear in mind that the new rules will catch inadvertence as well as deliberate non-disclosure.
If you have any questions concerning the disclosure deadline, please contact Dara Burke or Joe McAvoy.
*This Tax Alert is written in general terms and should not be relied on as a comprehensive summary of the relevant tax law. Professional taxation advice should always be sought before any action is taken.