# are tenants liable for non-resident landlords tax?



## Janeom (13 Apr 2004)

hi,

my husband and I are currently renting and are moving to a new property at the end of the month. We wish to claim tax back on the rent we have paid for the past 12 months and went to the revenues home page to download the appropiate form.

However I now see that we were supposed to deduct the tax on the rent when we paid it (as our landlord is currently living in England) and if not, that we are liable for the tax that is not paid.

here's what it says.....
"If you are a PAYE employee and are paying rent to a landlord living outside Ireland, you account for the tax you deduct by applying for a tax credit and completing Form Rent 1 (see how to apply). If you pay tax by self-assessment, you account for the tax you deduct in your notice of self-assessment which you send to Revenue. Failing to deduct tax from rent you pay to a landlord living outside Ireland will mean that you (and not the landlord) will be liable for any tax which should have been deducted" 

I certainly have no intention of being liable for paying his tax and should n't we have been informed about this on taking up the lease as he has rented this property for the past 10 years ? We don't deal with the landlord directly but the builder (who by the way is a complete w***** and totally unapproachable) who built the apartment complex manages it for him. 

I don't want to evade tax but I don't want to pay our landlords tax either.....
We paid him €750 per month so I guess we should have been paying him only €500 and the revenue €150. If we have to back pay his tax that will effectively mean our rent was~ €900 per month.

What do any non-resident landlords out there do ?

Regards,
Janeom


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## zag (13 Apr 2004)

janeom - unfortunately, the rules and regulations are there for a reason, and that reason is to ensure that tax due by the landlord is paid.  The Revenue know that the chances of them pursuing someone outside the country are pretty slim, so they make the tenant liable for the collection 'in advance'

I'm not sure how the Revenue expect people to know the residency status of their landlord.

I'm not sure what will happen now, but I presume the Revenue will hold you liable as that's what it says in the Act.  It may be possible to argue that you were dealing with the (resident) builder/manager, but this would presumably depend on whatever agreements you signed and who else signed them, and also possibly on who you actually paid the rent to.

Sorry I don't have any particularly good news on this front.

z


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## Janeom (13 Apr 2004)

*re*

Thanks for that Zag.
We pay the rent into the landlords Irish bank account but the manager told us he was living in England. However we have never once spoken to the landlord and we signed the lease agreement with the manager. THe ESB bill is in the landlords name though...

I still think the manager has some onus to inform us of our liability before we start paying the rent (we just moved back to Ireland so have n't encountered this before).

We asked the manager about reclaming our tax back when we moved in he said " that we could as everything was above board". I think we need to speak to the landlord as hopefully he is declaring the rent to the Irish tax authorities.

Otherwise I think we will forget about reclaiming our tax as renting that property was not worth €900/month as otherwise we are just drawing attention to the situtation.
I know its evading tax but we feel ripped off enough having paid good money for a grotty/run down apartment (another story) but will not pay the landlords tax. It all seems very strange that the onus is on the tenant. We can't afford to buy a house with the high prices at the moment and yet we are potentially liable for our landlords tax....it all seems very unfair.

Janeom


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## rainyday (13 Apr 2004)

*Re: re*

It really would be disgraceful if you were faced with paying the landlord's tax bill in this scenario.


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## Tommy (13 Apr 2004)

*Re: re*

A few years ago, the Revenue lost a court case after they had tried to force a tenant to pay tax on rents paid to a non-resident landlord. They subsequently changed their procedures so as to ensure that each non-resident landlord must now appoint someone (resident in this country) to be responsible for rent collection and tax payments on their behalf. This effectively means that the rules regarding tenants deducting tax are now largely superflous. Contact the Ombudsman's Office if you need any assistance on this.


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## zag (13 Apr 2004)

*Re: re*

If you signed a lease agreement with the manager, then I would presume it is *his* residency status that is the issue.

I don't think the Revenue expect tenants to wade through several levels of ownership to establish who truly owns the property - if you signed an agreement with the Irish resident manager, then that makes him your landlord.

This would also tie in with his claim that all is above board with regard to claiming the tax relief, so it may not be as bleak as it first appeared.

z


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## Janeom (14 Apr 2004)

*re*

Thanks for that....the situtation seems somewhat rosier. The revenue should clarify the situtation on their web page as its somewhat misleading.
I'll post back here if we ever get our tax back.

Janeom


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## Tommy (14 Apr 2004)

*Re: re*

[broken link removed]


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## Ham Slicer (14 Apr 2004)

*Re: re*

The manager is not the landlord.  

However it sounds like he is the landlords agent.  If this is the case, there was no requirement for you to withhold any tax from rent payments and thus you have no liability.

I haven't got a rent 1 form to hand - but there should be a line for entering the landlords agents details in cases such as this.

This will enable to you make the appropriate claim and get €508 refund.

Good luck


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## Janeom (14 Apr 2004)

*re*

yes there is a space for filling in the agents name and address but only it seems if the rent is paid to him.
However unfortunatley we did n't pay the rent to him...we paid it into the landlords Irish bank account.
However I think I will still put down the agents name on the form (and maybe note on it that we did n't pay the rent to him) as he is the person we have been dealing with all the time.

Janeom


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## Ham Slicer (15 Apr 2004)

*Re: re*

Yes but by supplying the agents name etc, Revenue know that it is/was not your responsibility to withhold the tax.

Thus, as I said everything will work out and there is nothing to worry about.  You can quote me on that.

HS


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## c1966 (30 Apr 2004)

*Path of least resistance*

I agree with all of the above comments.  I would however express my doubt that the property manager is the landlord's tax agent.

I am aware of the case taken to the Obundsman concerning the Revenue looking for the income tax not withheld on the rent paid to the foreing landlord.

My advice would not be to claim the rent allowance as you may be opening a large can of worms.  As the rent credit is much lower than the potential tax not withheld the risk may nt be worth it.  I also would consider that to fight the Revenue looking for the "easy" money would be time consuming.


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## Marie (7 May 2004)

*best way to do it?*

I'm a virgin to house-letting, now have a couple of prospective tenants wanting my 3-bed house in West Dublin at Euro900 month.  I've learned much from AAM so am trying to set things up properly, have a signed tenancy agreement, deposit, references etc. They currently live on mainland Europe so offered me guarantor's and bank details instead of references, which I accepted.  

One of the couple is "self-employed"; the other a post-doctoral student moving to Ireland to pursue research.

I opened an Irish Nationwide current a/c into which rent could be deposited by direct debit each month, and bills, charges etc. paid out as needed.

As I am non-resident, how do I communicate this info about the "tax" and what exactly do they need to do (they don't know RoI system!)  Should I download these forms and give them to the tenants in advance, or what?


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## Tommy (7 May 2004)

*Re: best way to do it?*

Hi Marie 

They don't have to do anything once you follow recommended Revenue procedures and nominate a "collection agent" who will be responsible for ensuring that you pay 20% tax at source over to the Revenue.

See 

Also, do get professional advice on this, unless you have the stomach for dealing with the Revenue yourself. This sort of thing works seamlessly if you are fullly informed but can get messy if errors are made.


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## Marie (8 May 2004)

*tax on non-resident's income from houselet*

Tommy - I couldn't get the links from the "key post" as they seem to have been deleted but your own webpage was most helpful.

So is this it!  My "Collection Agent" (next-door neighbour would do it for a few bob!) needs to be the named account holder for the bank or building society a/c into which rental income is deposited. She would then - every month when the Euro 900 deposits, draw a cheque for £180 to the Inland Revenue.  At the beginning of each financial year I have an Accountant such as yourself prepare accounts.  Your fee can be added to the list of allowances, all of which are deducted from the gross rental income before the 20% tax is assessed. If  for example I spent Euro 5,000 on refurbishing the bathroom in the first year, 12.5% of this also goes onto the list of allowable expenses. 

Is this pretty much it.....apart from pitfalls like rapid turnover of tenants, rise in mortgage interest-rates etc?

This seems like such a huge investiture of effort for what amounts to income covering HALF my monthly mortgage repayment, and a lot of risk and hassle.  I'm beginning to understand why Brendan Burgess elsewhere advocates stock-market investment as preferable to property-investment!


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## Janeom (12 May 2004)

*update*

Just an update to my first post. We are dealing with the agent now and its proving troublesome to get the landlords PPS number or address. I am beginning to think the agent lied when he said everything "was above board" as he is making comments like " the rent was reduced by €50 a month to compensate for this".

The agent is saying that the landlord has no PPS number as he does all his busisness in the UK but surely thats not the case? He is Irish and has a bank account with BOI here. 

I rang the revenu but they were no help...just told me I was liable for the non-paid tax and that was it. I at least want to report him...just wonder can I report him (anonymously) with just his name and bank account (+ I have the address of the agent) ?

Janeom


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## John (13 May 2004)

*Reporting the landlord*

You can report him anonymously, but you won't get any real joy with it.

I had a similar situation with a landlord a couple of year back who wouldn’t give his PRSI / PPS number, or home address in Ireland, and we reported him to the Revenue, but the guy on the phone said that there was little chance of them pursuing him. He said the Revenue have bigger fish to fry (in his words) than just an amateur landlord.

Net result: we got stiffed on the rent relief, and he probably never paid any tax on it.


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## Marie (13 May 2004)

*hassle*

These stories are appalling!  How can the Revenue "turn a blind eye" when ignoring corruption at the interpersonal level gives the go-ahead for more widespread corruption and fraud!  I'm really struggling with a revised picture of Ireland and seriously wanting to sell up/pull out, though I love my country very much.  It is hard to reconcile these stories of people screwing each other financially, with the (relatively!) friendly, ethical Dublin of my earlier years.  This throws light on the off-hand attitude of prospective tenants (one e-mailed that though the deposit was Euro 900 he was 'offering' me 300 till he got more funds!!!!) none of whom I would feel safe to turn my back on.   I've also had difficulty with trying to get bona-fide tradespeople to do renovation.  The fashion seems to be that everyone is working 'off the books'........which means no protection for me on the standard, and no records of money spent on refurbishment.  Have I been living in Pollyanna-land or something!  Is this the current Irish version of 'business'?  If so it's completely unviable. :\


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## rainyday (13 May 2004)

*Re: hassle*



> Net result: we got stiffed on the rent relief, and he probably never paid any tax on it.


Hi John - Just to clarify, are you saying that you were refused rent relief because you couldn't produce the landlord's PPS number?


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## Marie (15 May 2004)

*hassle*

Can this be true?  Where's ethics, where's 'the' law in this.  Really sounds like the pioneering settler days in USA complete with highwaymen, rustlers and lynchmobs.  You - surely? - can't be just "stuck" with someone else's tax evasion!


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## Janeom (17 May 2004)

*re*

yes, it appears its true that we the tenants are liable for the landlords tax.

I contacted the ombudsman and they informed me that there are two rules covering tax collection from non-resident landlords.

"Section 1034 applies where there is a collection agent in the state and the extent of the liability is the same as if the person was resident.

Section 1041 applies to rental income received by a non-resident in respect ofproperty located in the state. It differs from Section 1034 in that the tenant pays the
rent directly to the landlord and is obliged to deduct tax at the standardrate from the rent"

they included some extracts from the Taxes
Consolidation Act, 1997

 "Section 1034 shall not apply to

( a ) tax on profits or gains chargeable to tax under Case V of 
Schedule D,
or
( b ) tax on any of the profits or gains chargeable under Case IV of Schedule D which arise under the terms of a lease, but to a person other than the lessor, or which otherwise arise out of any disposition or contract such that if they arose to the person making it they would be
chargeable under Case V of Schedule D, where payment is made (whether in the State or elsewhere) directly to a person whose usual place of abode is outside the State; but section 238 shall apply in relation to the 
payment as it applies to other payments, being annual payments charged with tax under Schedule D and not payable out of profits or gains brought into charge to tax."

So being totally unfamilar with the above jargon I guess it means that if there is not an agent apointed then the tenant must deduce tax. (If I had been aware of that at the start of the lease I can imagine what the landlord and agent would have to say if I had deducted tax before paying them the rent !!! I am should I would have been kicked out straight away minus the deposit..at least then I could have reported them to revenue without being liable for any tax myself).

The ombudsman said that if I  feel that I am not being treated fairly by Revenue, that I could make a formal complaint in writing to Revenue and if I still feel that I have been treated unfairly I may contact them again at that stage.

I am just going to let the matter die as I am not going to write to the revenue office telling them of MY non-complicance with the tax law.

Having moved back to Ireland a year ago, I have found many things extremly fustrating but this is way up there. 

Janeom


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## Marie (18 May 2004)

*commisserations*

It's still galling to think you have to put up and shut up when you had what in every way appeared to be a contractual relationship in a business situation!  An expensive lesson, and it's these kind of stories on AAM that make me fearful of retaining the family home in Dublin to retire to in 3 years.  It's a long way away when there are problems, and as Tommy wrote in his post, the Revenue issues are tricky.  Hope you encounter more ethical relationships in your next accommodation.  Take it easy!


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## Janeom (20 Jul 2004)

*Re: commisserations*

Just an update on the story. After meeting the agent to get back our deposit I made it clear to him that we were not happy with the situtation, that the landlord should be declaring this income to the revenue commissioners etc.
Anyway the next evening we get a phone call from the agent ..wondering had we done anything about the tax yet ?When I said no, he said that the landlord would give us €250 (half what we would get back if we were able to claim back our tax) to make peace with us due to the misunderstanding about us being able to claim tax back...or some B*** like that.

so now I know for sure that he is not paying tax, has got scared when we mentioned revenue commisioners and is paying us of to stay quiet. anyway we took the money as as far as I can see both revenue and the landlord were treating us unfairly. Does n't make me proud to take it as I feel we are no better than him now....

Would still love to report him... It disgusts me to think people can get away with that here and it disgusts me even more to think that we were lied to but are still liable for the landlords tax.  

Janeom


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## Tommy (20 Jul 2004)

*Re: commisserations*

Hi Janeom

I don't want to unduly alarm you or over-dramatise your problem but I fear that you have made a big mistake in taking what is effectively a bribe from this geezer. He is breaking the law. Technically, at least according to the (imho erroneous) opinion of the Revenue, you are also breaking the law. Technically both of you have colluded with each other in breaking the law. This guy doesn't appear to be a particularly savoury individual and I would fear that, should things go wrong (ie should he have a Revenue Audit) he would try to pin the blame on you for the entire mess. The fact that you have accepted a bung from him to keep quiet could leave you in a very weak position in arguing your innocence in the whole affair.

You should either (1) disclose everything to the Revenue and refer the matter to your ombudsman and/or your solicitor if necessary (2) consider moving house. The best pad in Ireland would not be worth this sort of hassle.


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## Janeom (21 Jul 2004)

*Re: commisserations*

Thanks tommy for the warning. Fortunately we have already moved. We waited until moving out to claim back our tax and thats when this all came to light. We lived there for a year but I think he has been renting it for at least 10 years so probably we are not the only tenants who have n't paid tax on his behalf...maybe revenue will come after all of us but hopefully common sense would previal and the landlord and agent will get what they deserve.

Janeom


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