Taxation on rental income can be complicated, especially for landlords who live abroad. While non-resident landlords are subject to the same taxes as Irish landlords, there are a few important distinctions to be aware of. We’ll look at the rules for non-resident landlords when it comes to tax collection, as well as which taxes you must pay and which you can avoid, in this guide.
As A Non-Resident Landlord, How Do I Pay Tax?
One of the most important things to remember when renting out Irish property from abroad is that you will not be able to pay your taxes in the same way that a resident of Ireland would. If you were a resident landlord, you could easily file your annual tax return and pay your bill through the Revenue website.
If you live somewhere else, however, you must choose between two options. Depending on your personal circumstances, both options have advantages and disadvantages, which we’ll go over here. Whichever option you choose, it’s critical that you understand how they both operate, as non-compliance can have serious consequences for both you and your tenants.
Withholding Tax on Tenants
Non-resident landlords’ standard practice is to have their tenants withhold the standard 20% income tax from their rent each month and pay it to Revenue on their behalf. The tenant would then fill out an R185 form to give to the landlord at the end of the tax year, detailing how much tax had been paid. This is how it works in practice.
Advantages and disadvantages
This approach can be a simple solution if you are renting out your property to someone you know and trust, such as a close friend or relative, as it does not require the involvement of any third parties or additional costs. However, if you’re renting to other people, it might be a problem.
Taking care of someone else’s taxes is a big responsibility, and as a landlord, you’d have no way of knowing if it’s being done correctly. You might also have a hard time finding suitable tenants who are willing to take on this additional responsibility, especially if there are other properties available that do not require them to deal with taxes. Even though your tenant will hand over money on your behalf, you must still fill out and submit your own annual tax return if you choose this option (or enlist the services of an accountant).
Paying your tax return. As a non-resident landlord, tax return.
If your net rental income exceeds €5,000, you must file a self-assessment tax return and complete Form 11. If your net rental income is less than €5,000, you can use your online Revenue account to declare it as non-PAYE income.
Agent for Collections
The collection agent should have their own PPS number and should not send the landlord an R185 form. Instead, they keep a portion of the rent to cover taxes, which they then pay to Revenue when they file their annual tax return. Despite the fact that the assessment is made in the collection agent’s name, the tax is charged as if the non-resident landlord were assessed separately. However, the collection agent, not the landlord, will be held liable for any fees or penalties incurred as a result of incorrectly filing or paying the taxes.
Advantage of agent
For non-resident landlords, using a collection agent is a convenient option that involves no additional responsibility for your tenants and reduces the risk of penalties for non-compliance. It’s especially useful for landlords who don’t have much contact with their tenants or have multiple properties.
This option also comes with the added benefit of having someone else prepare and file your tax return on your behalf. While there is a fee for using a collection agent (unless you ask a friend), you can deduct the cost from your tax bill as explained below.
As a non-resident landlord, what taxes do you have to pay?
Let’s talk about which taxes you have to pay now that you know your options for paying taxes. While income tax is usually the most significant tax bill, as a non-resident landlord, you are also responsible for a few other taxes.
The Universal Social Charge
If your Irish income (including rental income) exceeds €13,000 per year, you must pay the Universal Social Charge as a non-resident landlord. USC currently has a standard rate of 0.5 percent for the first €12,012 and 2 percent for the next €8,675.
Property Taxes on the Local Level
Local Property Tax, or LPT, is a tax levied on the owners of almost all residential properties in Ireland. It is calculated based on the owner’s assessment of the property’s market value. The basic LPT rate is currently 0.18 percent for properties worth less than €1 million and 0.25 percent for properties worth more than €1 million, though local governments can set their own rates for residential properties in their area.
Even if you live abroad, you will be responsible for paying property tax on a yearly basis. Unpaid taxes accrue an annual interest rate of 8%, with the possibility of additional penalties, so it’s critical to remember to pay on time.
Non-Resident Landlords Are Exempt from Taxes
You are entitled to the same tax relief as resident landlords, as you are subject to the same taxation as resident landlords. There is a wide range of expenses that are permissible, including:
- Your mortgage’s interest component
- Premiums for homeowner’s insurance
- Property management companies, letting agents, solicitors, and accountants all charge fees.
- Fees for advertising and marketing
- Your registration fee for RTB
- Any property taxes you owe to the local government
- Allowances for capital
We have team of charted accounted we provide a comprehensive end-to-end service that includes management, compliance, accounting, and taxation. We help to make the entire process smooth and stress-free by providing a single point of contact for your Irish rental property, no matter where you are in the world.
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