It is true that finding a suitable place to live once you arrive in Ireland is one of the most important first steps to getting settled. But what is more important is being aware of the landlord, and his status of domicile. In an earlier blog, we have described two of the most common scenarios of paying rent and tax obligations concerning a non-resident landlord.
Let us now look into two other possible situations and it’s tax liability.
An individual who leaves the country may still have a property which is let and for which rent is received. If an Individual was earlier a resident but now becomes a non-resident and is letting a property in the State, he is still liable to pay tax to the government. And as mentioned in a previous scenario, the onus continues to be on the tenant to ensure taxis deducted at source and duly paid to the government.
If the landlord is a non-resident company, the company is chargeable to income tax, rather than corporation tax, unless it carries on a trade through a branch or agency. In such cases of trade activities, corporation tax would be chargeable.
Now that we have delved into the policies of paying rent to a non-resident landlord, what is in it for the landlord? Can he get some relief and claim some share of his tax back?
Landlords who are non-residents and who live outside of the Republic of Ireland must pay tax on rental income. The onus of such taxes falls on the tenant of a rented property of a non-resident landlord.
Using a tax collection agency is a simpler solution to paying tax for non-resident landlords that suits both landlords and tenants. Taxes paying non-resident landlords are entitled to the same tax relief by claiming expenses, as normal resident landlords.
If you let a property in Ireland and live either in Northern Ireland or in a different country, you are construed as a Non-Resident Landlord.
Any rental income earned from properties in Ireland by people living outside the state is subject to the same tax as residents of Ireland ought to pay. Non-Resident Landlords are governed by rules to ensure returns are submitted. Non-compliance with these rules could have serious repercussions for both non-resident landlords and tenants.
There are many “allowable deductions” which can offset the tax on rental income for both Resident and Non-Resident Landlords. In general, one can claim deductions for these common rental property expenses:
1. Repairs & Maintenance
Expenses incurred such as cleaning, painting and decorating are allowable. Repairs include treatment for rot, mending of windows, doors or machines.
2. Capital Allowances
Depreciation (Cost of wear and tear of furniture and equipment), provided by the Landlord, over 8 years.
Insurance premiums for liability against fire are allowable expenses.
4. Mortgage Protection Premiums
The policy must relate specifically to the rented property.
5. Accountancy Fees
Accountancy fees are tax deductible, For example, fees for engaging Tax Return Plus are allowable expenses.
6. Property Management Services
When the services of a letting agent or a property management company is used, these are allowable expenses.
7. Mortgage Interest Relief
A Landlord can claim 80% of the interest paid on mortgage on a rental property. The Landlord, however, must be registered with the Residential Tenancies Board (RTB).
8. Residential Tenancies Board (RTB)
This cost to register with the TRB is tax deductible. Furthermore, it permits the Landlord to claim the allowance for Mortgage Interest Relief.
9. Home Renovation Incentive Scheme
Tax credits can be availed by landlords under the scheme, relating to large scale construction work carried out on the rented property after October 2014.
Prior Year Losses
Losses incurred in previous years can be set off against current year profits. However, the losses incurred must be declared to the Revenue Commissioners.
This should be a great guide to help you comprehend the taxation laws for renting a property in Ireland. For more resources or help with actually filing the returns, we would be delighted to walk you through! Get in touch with us at firstname.lastname@example.org