Updated 11 January 2018
Do you live outside Ireland but own an Irish property? Are you worried about Irish Income Tax or Property Taxes? If so, read on…
If you own an Irish property but live in Northern Ireland or overseas, you will be liable to Irish Income Tax on your rental income, in addition to Property Taxes on the property.
As a non-resident landlord with Irish rental income, you are subject to a series of special Income Tax rules.
1. You will first need to register yourself as property owner for income tax with Revenue, with effect from the date you first start renting the property. Ideally, you should register with Revenue as soon as you first receive rental income although it is possible to register retrospectively.
2. You should also register with Revenue a person you nominate as your ‘Collection Agent’ for Revenue income tax purposes.
3. Once your rental commences, you will need to register your tenancy/tenancies with the Residential Tenancies Board (RTB). Otherwise, you will not be entitled to claim mortgage interest as a deduction against taxable rental income. Since May 2009, the amount of mortgage interest you can claim as a deduction against rental income is capped at 75% of the total interest charge.
You will be liable also to repay to Revenue any TRS you have been paid since you vacated the property.
To engage with Revenue TRS unit, you will normally just need your PPS number, mortgage account number and your property address. I have always found them to be efficient and helpful.
5. After the end of each year, you (or your accountant) need to complete a Rental Profit & Loss Account and income tax return, and file these with Revenue.
The Irish Income Tax system works on a calendar year basis, ie each tax year starts on 1 January and ends on 31 December.
It may transpire that you have little or no tax liability for each year (particularly if there is a large mortgage and you have registered with the PRTB) but you won’t know this for certain until each year’s tax return is prepared.
If you are not entitled to any Irish tax credits as a non-resident, your Income Tax liability will normally be a flat 20% of your rental profit for the year. (A higher tax rate of 40% applies to any excess profit over €34,550 in 2018 & €33,800 in 2017).
You may also be liable for Universal Social Charge or USC on your rental profit, but you should be exempt from PRSI on the basis that you are non-resident.
6. Your tax return for any given year is due for filing by the following 31 October, and this is also the payment deadline for any tax liability you have. For example, you must file your 2017 tax return and pay the liability by 31 October 2018.
The deadline for filing a 2016 return was 31 October 2017, with similar annual deadlines for earlier tax years.
If you have a number of annual tax returns outstanding, it is important that these are completed and filed at an early date, in order to minimise the risk of Revenue applying interest or penalties or late or non-filing.
In my experience, once an individual makes a decent effort to bring their tax affairs up to date within a reasonable timescale, Revenue are generally helpful and co-operative.
A 5-10% tax surcharge automatically applies to late-filed returns, eg a liability of €500 is increased by 10% to €550.
Revenue routinely apply this surcharge when processing late-filed returns, but if late returns are filed voluntarily (eg without prompting from Revenue & in advance of any Revenue audit notification or warning being issued) they may, in individual cases, opt not to charge additional penalties or interest.
However, if you find yourself in this position, you need to tread very carefully.
If Revenue believe you have underpaid tax, or made incomplete tax returns, they have extensive powers to impose more serious penalties and interest charges, and they reserve the right to initiate prosecution for suspected evasion.
For this reason, I recommend that you seek professional assistance if you are filing late or are uncertain as to what to do.
In addition, all owners of Irish residential property are obliged to register and pay an annual Local Property Tax (introduced on 1 July 2013) Interest and penalties apply to late payments.