Non-Residents: How to Avoid a 20% Tax Deduction on Your Irish Rents

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’.

Rental Property

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.

Ease your Irish Tax Return worries by getting in touch with Thomas McGibney & Company today.

17 Responses to Non-Residents: How to Avoid a 20% Tax Deduction on Your Irish Rents

  1. Gary says:

    I’m confused. The 20% tax STILL has to be paid, right? So what’s the advantage?

    • Hi Gary
      The 20% withholding tax that the tenant must deduct is levied on gross rental income.

      However almost all landlords can deduct overhead costs (repairs, maintenance, insurance, 75% interest etc) from their gross rents in arriving at their net taxable rents.

      This means that their eventual tax liability (even allowing for the USC charge) will be much lower than the 20% deducted at source.

      In addition, the landlord will be in a difficult position if their tenant deducts the tax but neglects to pay it to Revenue, particularly if the tenant has limited means or proves difficult to trace at a later stage.

      Tommy

      • Gary says:

        I thought the liability lies with the tenant , not the landlord to deduct the 20% and pay. Where does the liability actually sit?

  2. Barry says:

    Great Info Tommy.. is there a form to nominate a Collection Agent?

    Thanks

    Barry

  3. F khan says:

    Hi if you are a non resident and above 65yrs and rental income from ireland is your total income which is less than less than 20000 per yr do you still have to pay tax

    • Hi,

      If your Irish rental income comprises most or all of your total worldwide income, you will be entitled to claim your personal tax credit against your liablity.

      As an over-65, if your income after deductions amounts to €18,000 or less (€36,000 for jointly-assessed married couple, one or both aged over 65), you should also be entitled to income tax exemption on your rental income, although you may have a minor USC liability.

      Even if you are tax-exempt, as a non-resident, you should still register for Income Tax with Revenue, in order to ensure that you have correctly claimed your credits & exemptions and also to avoid any future Revenue investigation for non-filing.

  4. Jim McCarthy says:

    Tommy

    Interesting article on collection agents. we have been living in London and renting out our house in Cork since the start of the year with the tenants paying rent into an Irish account. Is it valid to nominate a collection agent now who will retrospectively be the collection agent since the start of the letting?

    Your article suggests that the collection agent effectively has no duties to carry out but the nomination form on the revenue.ie site asks for details of the ‘collection agent’s accountant or adviser who will prepare accounts and tax returns’. So could you clarify what the agent is actually required to do.

    We have a potentially complicated Irish Tax return to submit shortly and I would be interested in seeing if you could assist in this. Perhaps you could advise me of your services and rates and how we might arrange an exploratory discussion.

    Regards

    Jim McCarthy

    • Jim, thanks for your message, would you mind sending me a brief email (tax@McGibney.com) with your contact details so we can continue our discussion online.
      Thanks
      Tommy

  5. Ann-Marie says:

    Many thanks Tommy for this overview! I’m a non-resident based in Germany planning to buy an apartment to rent in Dublin. Can I offset my flight costs to Dublin on my Irish or German tax return?
    Thanks again and regards
    Ann-Marie

    • Hi Ann-Marie

      Generally travel costs are not normally deductible against taxable rental income, under Irish tax legislation. I have heard that they may be deductible against tax in Germany but I don’t have a source for this.

      Feel free to come back to me if you’ve any other queries.

      Best regards

      Tommy

  6. Majella says:

    Hi Tommy,
    As a non-resident landlord who doesnt have a collection agent appointed and receives 100% rent from tenants, what tax returns do I need to fill out? Do I fill out a TR1 form and then a Form 11E?
    Thanks

  7. Emma Whelan says:

    Hi Tommy,

    Thanks for this nice article. I have been worrying about how to handle the issue of the tenants paying 20% to the revenue. I didn’t know you could appoint a collection agent. I am currently working in Germany and renting out my apartment in Dublin. Maybe you can answer a question for me about the foreign incomes section on form 11. Do I have to declare my Germany salary here? Also do I have to list the bank account I opened in Germany under foreign bank account.

    Thanks

    Emma

  8. Stewart says:

    Hi Tommy could you please advise..myself and my family are currently residing in Australia and we jointly own a property in Ireland. I’m a dual resident (Irish and Australian) my wife is Irish. Do I still have to fill out the collection agent forms, tax forms etc even though I’m an Oz citizen?
    Thanks in advance…great site by the way, very informative…

  9. Fred says:

    Hi Tommy,
    We are non-residence who have no choice but to tax the 20% at source as we rent to the council. We make a loss on the property for the last 2 years. Can we reclaim the 20% for previous years?

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