Deadline for Making Disclosures of Foreign Income & Assets
Many individuals will have received a letter from the Revenue Commissioners in recent days relating to the upcoming 30 April 2017 deadline for disclosing undeclared offshore assets and income.
Who is affected by the deadline?
The matter was discussed at length at a recent joint Revenue/Irish Tax Institute conference. The effect of not complying with the deadline on “onshore” liabilities was in particular discussed. Non-compliance with the 30 April 2017 deadline not only affects “offshore” income and gains but also adversely affects domestic, i.e. onshore matters. For this reason, it is important that all taxpayers carry out a review of their tax position to determine whether the 30 April 2017 deadline is relevant.
An example will best illustrate the wide application of the new provisions.
An individual makes an error in the calculation of their Irish trading income which results in additional assessable income of €25,000. The same individual was also in receipt of US pension income in the sum of €20,000 which has not been declared in their tax returns. The foreign pension income increases the individual’s tax liability in the year by greater than 15%. The individual makes a disclosure to Revenue in relation to both the Irish and offshore liabilities on, say, 1 June 2017.
As a result of the new legislative changes, both the Irish and offshore liabilities will be subject to a 75% penalty (assuming full co-operation by the taxpayer) and statutory interest rates. The settlement will also be published in the quarterly Tax Defaulters’ List if the liabilities are in excess of €35,000.
If the disclosure was made on or before 30 April 2017, the penalties would be capped at 10%, statutory interest would be capped (currently at circa 88%) and there would be no publication in the quarterly Tax Defaulters’ List.
To assist individuals, Revenue have sent letters (see sample letter here) to all self-assessed taxpayers as a reminder to undertake a review of their tax returns and consider whether they need to make a disclosure in advance of the deadline. Revenue also issued a press release in relation to the offshore deadline in the past days which is available here.
We at CTS previously discussed the changes to offshore disclosures in great detail in our December Newsletter which is available here.
Definition of “Offshore”
It is important to note that the definition of “offshore” applies to all countries except the Republic of Ireland (Northern Ireland is regarded as “offshore”). Offshore assets and income will therefore not be limited to tax havens traditionally associated with the word “offshore”, such as the Isle of Man or the Cayman Islands.
We attach at Appendix 1 a sample list of items which will be regarded as “offshore matters” for the purposes of the new offshore regime.
The wide-reaching application of the new provisions (perhaps unintentional?) needs to be considered urgently by all taxpayers with offshore assets and income.
Owing to the potential adverse consequences arising in relation to offshore matters post 30 April 2017 and the impact of non-disclosure in relation to “onshore” matters, it is important that all taxpayers review their affairs thoroughly to determine whether the changes affect them and to take immediate action if required.
If you feel that the above may affect you or if you would like to discuss the proposed changes please feel free to contact us.