If you’re renting a property in the Republic of Ireland but live abroad, there are a few things you might want to know.
Whether you live in Belfast or Belize, if you rent property in the Republic of Ireland any money you make from lettings is still chargeable to the same tax as residents of the State. Your gross monthly earnings are subject to income tax, and you're still required to submit a return to the revenue every year.
However, in terms of paying your tax, the standard practice for non-resident landlords is that your tenants withhold the standard 20% income tax from their monthly rent and pay it to the revenue on your behalf.
We have a dedicated tax return service for landlords
This might seem like a strange way of doing things, but it was implemented as a way of ensuring that these taxes are actually paid by foreign landlords. By placing the responsibility of withholding with tenants, it basically means that the people responsible for any payments are located in Ireland instead of overseas, and makes the process more straightforward than having to send or receive a return from abroad.
Confused? How it works
Say you live in Lyon, and charge €800 a month on a house you're renting in Cork. Once the tenancy is agreed, you or your tenant would have to contact your local Revenue Office to make arrangements with regard to where your income tax is payable to. Once that's sorted, every month your tenants deduct 20% from the rent due to you and send this over to Revenue as your income tax.
If you're charging €800, your tenant would pay you €640 and send the other €160 either as direct debit or cheque. At the end of every year, they complete a Form R185 documenting how much has been deducted for tax payments that year, and send it to you for your personal records.
Using a Tax Collection Agent
Although the reasoning makes sense on paper, it can still be a bit of a hassle for you and those renting from you. Your tenants are essentially taking on another person's tax responsibilities that they wouldn't have to deal with if they were renting from an Irish resident. If you're unfortunate enough to get a tenant who doesn't pay those taxes, it can cause you trouble that might not be easily resolved if you're living in another country. As a result of this, many landlords chose to use the services of a tax collection agent.
A tax collection agent is an Irish resident who collects rent and files your income tax on your behalf. They can be a professional mediator or just a trusted friend or family member. They will be allocated a second PPS number to be used exclusively when dealing with your property, and basically act as an intermediary whilst you're abroad. If you use a family member or friend as an agent, you are of course free to complete your own return and then give it to them to file on your behalf.
Using an agent is usually the course of action preferable to both landlords and tenants. For landlords, it allows them to receive all of the due rent (via the agent) and take control of their own taxes. For tenants, it relieves them of any responsibility and liability when it comes to paying those taxes. Paying taxes as a foreign resident might seem like a bit of a drag, but there's a silver lining:
Even if you're a non-resident landlord, you're entitled to the same expenses as resident landlords.
Need help with your taxes?
Just try our dedicated Landlord tax service here for a hassle-free way of complying with tax legislation! We'll take the burden off your shoulders and make sure you claim expenses due so you can maximise any investments in your property portfolio!
Email us at firstname.lastname@example.org.