Whether you have to move abroad for work but don’t want to sell your house or are looking at ways to make some money in retirement while you soak up the sun, you may have considered becoming a non-resident landlord in Ireland. It’s absolutely possible to rent out a property while living in a different country, but it comes with its own set of guidelines that you must adhere to – particularly when it comes to tax.
Managing and filing your tax from abroad can be confusing, so we’ve put together this handy guide to help familiarise you with the essentials. Read on to find out all the tax requirements for non-resident landlords in Ireland.
A non-resident landlord is anyone who rents out a property in Ireland but lives in another country (including Northern Ireland). Any rental income you earn on that property is subject to the exact same taxation as that earned by landlords living in Ireland, and you must file a tax return in Ireland every year. The key difference for a non-resident landlord is that you have two options for collecting rent and paying tax on your rental income, which we will explore below.
How To Pay Tax As A Non-Resident Landlord
Landlords living in Ireland can simply submit their annual tax return and pay their income tax online. This isn’t possible for non-resident landlords, who have to choose one of the following methods instead.
Tenant Withholding Tax
Non-resident landlords will generally expect that tenants withhold 20% of their rent and pay Revenue the tax. The tenant will give you a R185 form at the end of each year that details how much tax was withheld.
Agent for Collection
Another option is to appoint an agent who will handle your taxes for you. A resident of Ireland must be appointed as the collection agent. This can be someone you trust, such as a friend, or relative. However, it is more common to be a professional, such as a property manager, or letting agent.
A new Personal Public Service number should be used to set up the collection agent. They will submit an annual return on rental income and pay any taxes due to Revenue. The collection agent is responsible for the payment of the tax bill if it is not paid.
Which is the better option?
Depending on your situation, both tenant tax withholding agents and collection agents offer benefits. Tenant withholding tax is a simple solution if you rent to a friend or relative of the family. It doesn’t involve any third parties and does not incur additional costs.
Other tenants might not want to deal with tax for you, and you may not know if your taxes are being properly handled. Potential tenants may be put off by this responsibility. They would prefer to deal with a regular tenancy. This method is not recommended if you don’t have complete faith in your tenant. There are significant penalties for late or incorrect tax returns.
A collection agent, especially through a property management firm, can give you greater security in knowing that your responsibilities will be taken care of. For landlords who don’t have much contact with tenants, who own multiple rental properties or just want to be sure they are following Irish tax laws, this is often the best option.
Submitting Your Tax Return
Note that whichever option you choose, you are still required to submit an annual tax return to Revenue. The only difference is that with tenant tax withholding you will have to do your own return whereas a collection agent will do it for you.
If your net rental income exceeds €5,000 you will need to register for self-assessment and complete a Form 11. If your net rental income is less than €5,000, you can declare this income as non-PAYE income through your online Revenue account. Since 2020 it has also been a requirement to indicate on the tax return whether a collection agent is in place or if the tenant is withholding tax.
Local Property Tax
Abbreviated to LPT, Local Property Tax is charged to the owner of property in Ireland and is calculated according to your own assessment of its market value. The basic LPT rate is currently 0.18% for properties valued under €1 million and 0.25% on the amount of the value over €1 million, though local authorities can vary the rate on residential properties in their area.
Even if you live in a different country, you will still be liable to pay LPT, which is due on the 1st November every year. The interest on unpaid tax is 8% per year with the potential for additional penalties, so it’s important that you remember to pay.
Pay Related Social Insurance is a tax paid into the national Social Insurance fund. As a non-resident landlord, you are not liable to pay PRSI. If you have at any point accidentally paid PRSI on your Irish rental income then you can request an amended assessment for that year (as far back as 2014).
Universal Social Charge replaced the income levy and health levy in Ireland in 2011. As a non-resident landlord, you are liable to pay USC, but only if your Irish income (including rental income) is more than €13,000 a year. The standard rate for USC is currently 0.5% for the first €12,012 and 2% for the next €8,675.
Tax Relief For Non-Resident Landlords
The good news is that non-resident landlords are entitled to claim the exact same expenses as resident landlords. These include:
The interest portion of your mortgage payments
Capital allowances (for the wear and tear of furniture or white goods you have provided)
Repairs and maintenance costs
Residential Tenancies Board registration fee
Property management, advertising, accounting and legal fees
Any rates you pay to the local authority for the property
For a closer look at these deductions, head over to our blog post ‘How To Calculate Income Tax For Irish Rental Income’.
Being clear on your tax requirements in Ireland as a non-resident landlord is essential for avoiding penalties and significant interest charges. But when you’re living abroad, it can be particularly hard to keep on top of everything you need to be tax compliant.
Working with a property management company can make renting out your property easier and less stressful, with professionals on hand to offer guidance and take care of most of the heavy lifting. In addition to assistance with tax, using a property management service means there is someone on the ground to deal with things like repairs, maintenance and tenant queries.
At SCK Property, we specialise in property management for non-resident landlords, offering a complete end-to-end service that includes your annual tax return. With a team of in-house chartered accountants, we can provide you with expert advice that will help you get the most out of your investment. If you would like to find out more about our services or arrange a complimentary consultation, give us a call on (01) 291 0800 or head over to our contact page and we’ll get back to you as soon as we can.