If you are an Irish non-resident with Irish rental income, your tenants must deduct 20% tax from the rents they pay to you. If you appoint a ‘Collection Agent’ you can avoid the headaches that this can involve.
The Irish Income Tax code requires tenants to deduct 20% tax on rents paid to a non-resident landlord. This requirement does not apply if you nominate an Irish-resident person as your ‘Collection Agent’.
The ‘collection agent’ effectively acts as your nominee for Irish tax purposes. It is possible for a family member or close friend to act as your ‘collection agent’ as they normally don’t have any duties to perform in this capacity, although some people prefer to nominate their letting agent.
Take note that, if you have engaged a letting agent who is collecting the rents and engaging with tenants on your behalf, they are not actually obliged to deduct 20% tax from you, once you nominate either them or another Irish-resident person as your ‘Collection Agent’ for Revenue income tax purposes.
Acting as a ‘collection agent’ doesn’t affect or impact upon the nominated person’s own tax affairs in any way. It is still your responsibility, as property owner, to file your annual tax return and pay your tax liability each year.
If no ‘collection agent’ is appointed, the tenant must deduct tax at source from the rents and pay it to Revenue. As you can imagine, this sort of situation can get messy, especially if the tenant deducts 20% from the rent payments but ‘forgets’ to pay the deductions to Revenue. In my experience, this potential nightmare is best avoided.
The ‘collection agent’ regulations may seem complex, but thankfully once everything is done properly, they are relatively straightforward – they only get complicated if the landlord fails to file tax returns or pay tax bills, in which event Revenue chase the ‘collection agent’ for them.
See my previous blog post: Irish Property, Living Abroad – What To Do About Tax or Revenue’s Guide to Rental Income.