# What if tenant doesnt deduct tax for Non Resident Landlord?



## Caili (13 May 2008)

Hi All,

As a non resident landlord your tenant is supposed to deduct 20% tax from rents paid every month. What if the tenant doesnt deduct this tax??


----------



## ubiquitous (13 May 2008)

*Re: What if tenant doesnt deduct tax for Non Resident Landlord??*

Nothing happens. The landlord is still tax-liable.


----------



## Caili (13 May 2008)

*Re: What if tenant doesnt deduct tax for Non Resident Landlord??*

So the landlord will have to pay it?


----------



## ubiquitous (13 May 2008)

*Re: What if tenant doesnt deduct tax for Non Resident Landlord??*

Yes, the landlord will still have to prepare their tax return & pay their liability regardless.


----------



## Whiskey (13 May 2008)

*Re: What if tenant doesnt deduct tax for Non Resident Landlord??*



Caili said:


> So the landlord will have to pay it?


 
The 20% is a withholding tax.

It's a mechanism used by the government to make it less likely that the exchequer will be defrauded of tax revenue which it is entitled to.

The law requires the tenant to pay 80% to you and 20% to the tax people.

When you submit your tax return, you will work out how much tax you owe from renting out you property.
If you owe 2000 tax, and the tenant has already paid 500 tax on your behalf, then you pay 1500.

The tenant is effectively paying tax in advance on your behalf. If the tenant pays too much, you get the money back from the tax people.

i.e if the tenant pays 2000 tax and your tax liability ends up at 500, then you will get a cheque or credit for the 1500 overpayment.

There are other great posts about this witholding tax on AAM if you do a search


----------



## Caili (13 May 2008)

*Re: What if tenant doesnt deduct tax for Non Resident Landlord??*

Thanks Whiskey

To be honest the rent that will be charged will just about cover the mortgage so the tenant taking 20% off it just isnt an option but i am fully prepared to pay it at the end of the year, is this acceptable do you know?

Thanks


----------



## ClubMan (13 May 2008)

*Re: What if tenant doesnt deduct tax for Non Resident Landlord??*



Caili said:


> To be honest the rent that will be charged will just about cover the mortgage


Other than being able to write off mortgage interest against rental income when doing your rental income tax return (and this is why an interest only mortgage on a rental property may be a good idea - see the _Property Investment _key posts) the fact that your rental income does not cover or only barely covers your mortgage repayments is irrelevant to the issue of rental income taxation. If this is the case then you are presumably banking on capital appreciation to make money on this investment. Maybe this is just a bad investment and you should consider cutting your losses?


----------



## Graham_07 (13 May 2008)

And whatever you do dont forget PRTB registration or no interest allowance against rents for tax.


----------



## Caili (13 May 2008)

*Re: What if tenant doesnt deduct tax for Non Resident Landlord??*

We are paying interest only on the mortgage and as i said the rent we will receive is just about covering that!? We're only renting for a year while we go on a working holiday to Australia! I will be registering with the PTRB so i can claim interest as an expense!


----------



## ClubMan (13 May 2008)

If the rental income is less than or equal to the interest payments on the loan then you will have no rental income tax liability. You will still have to make a return with the relevant details. If you don't know how to do this then get professional advice.


----------



## Caili (13 May 2008)

I have the Form 12 ready to be filled in but it asks about the 20% tax paid by the tenant which will be nil so will we be liable just for the 20% that the tenant hasnt paid??


----------



## Graham_07 (13 May 2008)

Caili said:


> I have the Form 12 ready to be filled in but it asks about the 20% tax paid by the tenant which will be nil so will we be liable just for the 20% that the tenant hasnt paid??


 


ClubMan said:


> If the rental income is less than or equal to the interest payments on the loan then you will have no rental income tax liability.


 
As ClubMan said, If income < interest then net income is nil so no tax.


----------



## ubiquitous (13 May 2008)

Caili said:


> I have the Form 12 ready to be filled in but it asks about the 20% tax paid by the tenant which will be nil so will we be liable just for the 20% that the tenant hasnt paid??


No - you have to work out your rental profit/loss and you are normally liable for 20% tax on the profit. 
You also need to appoint an Irish-resident person collection agent who will be responsible for ensuring that you pay your taxes and look after your tax obligations in this regard.

As Clubman said above, if you don't know how to do this then get professional advice.


----------



## Caili (13 May 2008)

Thanks All


----------



## ClubMan (13 May 2008)

Caili said:


> I have the Form 12 ready to be filled in


I thought that if you had non _PAYE _income over c. €3K (€3,175 or something like that?) then you became self assessed and had to use a _Form 11 _rather than a _Form 12_? Once again I would suggest that you get professional advice due to the risk of making an incorrect return.


----------



## Captin Sobel (22 May 2008)

If in doubt contact revenue directly with the home address of the non-resident landlord and their PPSN.

As a tenant you are liable to withhold 20% as revenue have no powers to chase the non-resident  Landlord for the 20% ( that is what revenue told me when 'Tax paid to non-resident landlords' appeared on my balancing statement 2500 euro!

I paid through an Irish Agent so the they were responsible for stopping the tax at their end before sending on the remainder to the Landlord.

Either way revenue removed that debit from my balancing statement - you live and learn.. how it got there in the first place I still do not know.


----------



## ubiquitous (22 May 2008)

Captin Sobel said:


> ( that is what revenue told me when 'Tax paid to non-resident landlords' appeared on my balancing statement 2500 euro!



Was this within the past ten years? If so, its quite likely that Revenue were acting outside their powers in doing so.

[broken link removed]



> Revenue Commissioners
> Non-Resident Landlords - Tax Deductions
> 
> Dealing fairly with people involves accepting that rules and regulations should not be applied so inflexibly or rigidly as to create inequity. The Revenue Commissioners recognised this in its final response in the case of a tenant who was unaware that she should have been withholding tax from rent paid to a non-resident landlord.
> ...


----------



## dereko1969 (22 May 2008)

ubiquitous said:


> Was this within the past ten years? If so, its quite likely that Revenue were acting outside their powers in doing so.


the quoted material does not state that revenue were acting outside their powers just that the particular instance was inequitable (as the sister was not treated the same way) and the law has not been changed since. 

getting back to the OPs point my understanding is that even though the rent is not covering the mortgage and there is likely to be no tax liable at the end of the year the tenants will still have to withhold 20% of the rent and return it to the revenue.


----------



## ubiquitous (22 May 2008)

dereko1969 said:


> the law has not been changed since.


Indeed, but Revenue practice in this area has changed drastically. They now insist that each non-resident landlord appoints a "collection agent" to assume responsibility for their tax affairs. This need not be the person who collects or receives the rent payment. Despite dealing with many, many cases of this type during the past decade, I have never seen the Revenue attempt to enforce responsibility upon tenants for tax deduction and remittance, following the Ombudsman's damning report as linked above.



dereko1969 said:


> the tenants will still have to withhold 20% of the rent and return it to the revenue.



see above.


----------

