Tax on foreign rent

1

115606

Guest
Apologies, I would imagine there are thousands of threads witht the same theme but I'm looing for advice on an individaul level.

I'm thinking of purchasing a property, completely renovated and furnished, for a total of €135,000 (inclu stamp, agency and legal fees) in Poland. My intention is to rent the property for around €400 per month while residing here in ireland. My salary is €31,500 gross.

SO making the assumption that I rent this property for a full(tax year) under the above conditions.

How much rent/income tax would I have to pay here in Ireland?

How much rent/income tax would I have to pay in Poland?

I know I will not be paying double tax but how would the taxback be calculated?

Do I declare the property in both countries?

Bringing up another topic. Since I am a first time buyer and would consequently lose any stamp duty exemption for a property here in Ireland, if I proceed with the purchase of this investment. Am I actually better off pursuing this forign investment or should I continue to save and take the stamp duty exemption? I presume that all first time buyers are exempt from the new scheme?

Thanks in advance
 
Re: Tax on foriegn rent

Taxes payable when purchasing a property are as follows:
Transfer fees (Civil Law Activities Tax) are charged on property which is not subject to VAT @ 2% of the market value of the property. Transfer fees are applicable on the sale of second-hand properties.
VAT on buildings is charged by registered companies @ 7% but this is to increase to 22% from 1 Jan 2008. For second-hand houses and land, a property becomes second hand 5 years after being built. Second- hand properties are exempt from VAT. There is only one exemption to this rule: if the seller is VAT registered, owns a second hand property and invested over 30% of the property value in order to improve the property, then 22% VAT is charged.
Ongoing taxes payable in Poland on property are as follows:
A Rental Income Tax return must be filed on a monthly basis (if rents are received monthly), quarterly (if rents received quarterly) or annually (if rents received annually). The rate of tax is calculated using one of two tax methods:
  1. Scaled rates 19%-40% on rental profits after costs; or
  2. Reduced rates 8.5% or 20% on gross rental income, with no deductions for costs.
Corporate Income Tax @ 19% is charged on company profits after allowable costs, if you purchase property in Poland using a Polish company.
Local Property taxes (rates) are also payable quarterly and vary per location. Rates range between 0.33 PLN – 0.68PLN per sq. mtr (circ €0.09 - €0.17/sq.mtr).



 
Re: Tax on foriegn rent

You will pay tax on your rental income in Poland. You will have to declare this income in line with the Polish tax rules for this (I don't know the rules, but assume they will be different to Irish rules).
You will have to declare your Polish rents on your Irish tax return calculated under Irish tax rules, and you will receive a credit for any Polish tax paid.
 
Re: Tax on foriegn rent

Thanks for that,

Would I be entitled to rent relief of any kind under the Irish tax system??
 
Re: Tax on foriegn rent

115606 said:
Thanks for that,

Would I be entitled to rent relief of any kind under the Irish tax system??
Click to expand...

From my understanding, no. You may be entitled to whatever reliefs are applicable in Poland when filing your Polish rent return but when your money reaches here it's considered income and is taxed appropriately.

Moreover, if your mortgage has been taken out here, as opposed to in Poland, it may not be possible to write off your interest against rental income for your Polish rental returns.
 
Re: Tax on foriegn rent

well I will be taking a mortgage out in Poland. can you explain further the concept of 'writing off your interest against rental income for your Polish rental returns'. Can I do this through my mortgage in Poland??
 
Re: Tax on foriegn rent

You will need to get Polish tax advice on anything to do with Polish taxes and claims for deductions against your rental income in Poland.
 
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