Ireland is and has always been a country where the demand for houses to rent exceeds supply. And when one is moving to Ireland, there are a number of factors that is important to be considered. One such very important factor is to check if your landlord is a resident of the country or not; as the laws for each scenario vastly differ. And you definitely don’t want to be surprised with litigation!
Before we get into the details of the incidence of taxation of a non-resident landlord, it may be pertinent to understand the various scenarios under which rent is paid. There are four possibilities under which rent could be paid to a non-resident landlord. Let us look at them in a logical sequence:
- Rent paid by a tenant to a non-resident landlord, directly.
- Rent paid to a person resident in the State who acts on behalf of the non-resident landlord in the collection of rent (a “collection agent”).
- Individual who was previously resident, becomes non-resident and is letting a property in the State
- Tax charge to a non-resident landlord, which is a company.
If the scenario calls for rent to be paid directly by a tenant to a non-resident landlord the onus of deducting tax from rent falls on the tenant. The standard rate of income tax deduction is currently 20%. The payment can be done directly into a bank account in the landlord’s name.
Strictly, the tenant should account for the tax soon after it is deducted. The tenant gives the landlord a TDS (Tax Deducted at Source) Certificate on Form R185 (Certificate of Income Tax Deducted).
The landlord is entitled to claim relief for expenses allowed in arriving at the rental profit. However, it should be noted that the tax that a tenant is required to deduct and pay cannot be offset against the tenant’s own income tax liability.
Utilising the services of a Collection Agent is a suitable option for non-resident landlords. However, both the owner and the tenants might feel it is unfair to pass the burden of collecting taxes on to them. Furthermore, there is no guarantee that a given tenant will pay the requisite taxes, which could cause a lot of hassle down the line for a non-resident landlord. Hence, it is important to pick a trusted agent, be it a company or an individual. They can be a professional person, a family member or any other person prepared to be responsible for the non-resident landlord’s annual tax returns.
The Collection Agent option works out best for both tenants and non-resident landlords. Collection Agents become a bridge for Tenants (to avoid the burden of becoming responsible for another person’s tax affairs) and landlords (to receive their rental income with full knowledge that they are complying with taxation laws).
Found this information useful? Well, there is more you need to know and should be cognizant of! Stay tuned for the next blog to discover two more scenarios and the actual process involved in filing the tax!