# Filing first tax return on rental property - Living abroad



## Sipe (13 Jan 2014)

Hi,

We moved abroad last April and have rented our Irish home since then. It's now time to submit our first tax return in relation to this property. Can anyone point me in the direction of form I use? Do I keep my personal medical expenses from Jan to Apr separate or are they all included on the one form? 

Also, can I only claim for the interest paid since the tenants moved in or can I use the full year of interest (probably not)

I understand Rent - 75% interest - expenses (insurance, propriety tax, letting and management fees) * 20% tax. Is this correct? 

Thanks


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## murphaph (13 Jan 2014)

I believe you should fill a Form 11 (the short version should be fine). It's likely that with at least 8 months rent that you are over the threshold for a form 12, if that is even an option now that you're no longer PAYE (assuming you were).

Did you work as PAYE before leaving?

If so, have you already claimed a refund of overpaid tax? (you will have paid too much tax if you left mid year as your tax credits are spread evenly throughout the year normally)

Property tax is not necessarily an allowable expense. Some say yes, many say no. Do your own research and make your own call on that.

Your medical expenses will all go on the one form. You are doing a tax return for the whole year, so all your income will be included (and of course tax already paid). 

Depending on what you earned from your job before you left, some or all of your rental income might be at the higher rate but in future years assuming a standard enough house in a normal enough neighbourhood then all your rental taxable income will be taxed at 20% (currently).

For 2013 assuming you were PAYE then you are probably exempt from paying PRSI on the rental income but from 2014 on it will depend on your tax residence status: non residents are exempt from PRSI while resident landlords must pay it. Don't forget USC is also due on rental income regardless of residence status. 

PRTB fees are also allowable (you're PRTB registered, right?)

You can't use the full year of interest payments as you correctly assumed.

Given it's the year in which you left Ireland, you'll be entitled to claim your full tax credits, but this situation changes as you become non-resident. Be careful in future tax returns.


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## Sipe (13 Jan 2014)

Hi, thx for your very comprehensive reply. 

I was a PAYE employee until the end of November and have already claimed back the December credits. Earnings circa 18k for the year.  As soon as I moved I notified revenue etc. And yes, fully compliant with PTRB.

I'll assume I'll pay the higher rate of tax of the small difference between the interest + costs V rental income. Luckily (????) Mortgage only under 7yrs old so still high interest to capital repayments. Anyway medical expenses at 20% will sort it out.

I have had medical expenses in my 'new' home country. As I was still a PAYE employee, can I included these up to the end of November?


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## marathonic (13 Jan 2014)

As my question is relevant, I'll add it to this thread. 

Does a non-resident landlord complete their foreign income details on their tax return?

If not, and their gross rent falls under the threshold for USC, I assume USC is not payable?


Sent from my iPhone using [broken link removed]


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## Bronte (14 Jan 2014)

marathonic said:


> Does a non-resident landlord complete their foreign income details on their tax return?


 
No, foreign income will be taxed in your country of residency and is not relevant to your income tax return in Ireland for rental properties in Ireland.


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## dereko1969 (14 Jan 2014)

Should the rent not have been paid minus the 20% deduction to Revenue? Or did you appoint an agent resident in Ireland to manage and receive the rent?


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## murphaph (14 Jan 2014)

Bronte said:


> No, foreign income will be taxed in your country of residency and is not relevant to your income tax return in Ireland for rental properties in Ireland.


This is not strictly true. An Irish citizen (or en EU citizen) who is non-resident in Ireland but who has rental income in Ireland can claim a portion of their tax credits in Ireland. The portion the person can is that portion of their total worldwide income that is derived in Ireland.

Example:
You earn 100k in a salaried job in Germany. You have Irish rental income of 25k. The Irish part forms 20% of your total worldwide income so you can claim 20% of the tax credits available. I do this myself after being advised by Revenue (in writing) that this was an option. (See Section 1032 Taxes Consolidation Act 1997). So the foreign income is needed on the tax return to calculate the percentage of credits and reliefs due on the Irish income.

Indeed, if the individual lives in the EU and 75% of their worldwide income is derived in Ireland (think retirees in Spain!) then they can claim their full tax credits and reliefs in Ireland, with no apportionment.


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## murphaph (14 Jan 2014)

dereko1969 said:


> Should the rent not have been paid minus the 20% deduction to Revenue? Or did you appoint an agent resident in Ireland to manage and receive the rent?


If no agent present then yes, the tenant should be deducting 20%, forwarding it to Revenue and furnishing the landlord with a completed R185. In practice tenants want nothing whatsoever to do with this, even though they are liable for the tax (but not chargeable, stupid system IMO).

Some Revenue offices may be stricter than others on this matter.

So long as the correct tax is paid I would try to avoid tenants deducting tax and I wouldn't pay an agent just to do that part of it. If Revenue push on it then you will have to either appoint an agent or go the R185 route with the tenant.

To the OP:
You should, no matter what else you do, get registered for ROS so you can do your tax returns online from abroad. ROS will calculate your liability etc. If you go the paper route mistakes will be made by the drones that input the data. I'm talking from bitter experience here! You have plenty of time now to get registered (tax return not due until mid November if using ROS, end of October otherwise). You will find as an ex-PAYE that you need to contact the Income Tax (NOT PAYE!) local office where you last worked and have them add income tax to your PPS profile. Without that step registering for ROS will not be possible.


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## murphaph (14 Jan 2014)

marathonic said:


> As my question is relevant, I'll add it to this thread.
> 
> Does a non-resident landlord complete their foreign income details on their tax return?
> 
> ...


See my other reply. You should include worldwide income for the purposes of getting an apportioned tax credit where due, but USC is only due on Irish sourced income, so the foreign income is ignored when calculating USC (and all the other taxes due).


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## murphaph (14 Jan 2014)

Sipe said:


> I have had medical expenses in my 'new' home country. As I was still a PAYE employee, can I included these up to the end of November?


I would have thought so but I don't know. If you had medical expenses on holiday in Spain you'd surely be able to include them so I don't see any difference but perhaps an expert could clarify.

Edit: Just to clarify...were you on a secondment or posted abroad by your Irish employer and continuing to pay PAYE in Ireland before transferring permanently to the new county and entering their tax system?


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## Sipe (15 Jan 2014)

murphaph said:


> Edit: Just to clarify...were you on a secondment or posted abroad by your Irish employer and continuing to pay PAYE in Ireland before transferring permanently to the new county and entering their tax system?



I was on paid maternity leave for the first part followed by a build up of holidays / public holidays / overtime for the rest. Does this change things?

Re the european income for next year, i have an entitlement to receive social welfare benefit here for 7 months (thx to being EU) - it won't be as much as the rental income - will I be able to use this rule next year to say 60% of my earnings are Irish and therefore claim my tax credits?


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## murphaph (15 Jan 2014)

Sorry, don't know for sure. By the way, I thought the system allowed EU citizens to transfer their benefits to their new country only for up to 3 months?

I don't see why you could't apportion tax credits just because the foreign income is in the form of a welfare payment, but I have no experience of this and I'm not an expert, just a layman who is non-resident but has rental income in Ireland.


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## Sipe (15 Jan 2014)

murphaph said:


> Sorry, don't know for sure. By the way, I thought the system allowed EU citizens to transfer their benefits to their new country only for up to 3 months?
> .



I only received 2 mths social welfare mat pay when abroad, and I'd checked with them beforehand and the maternity benefit section told me that there was no restriction in terms of location for maternity benefit so perhaps it's different for other social benefits. I think it's three months for unemployment benefit tho.

Btw thanks for your help!


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## Bronte (16 Jan 2014)

murphaph said:


> This is not strictly true. An Irish citizen (or en EU citizen) who is non-resident in Ireland but who has rental income in Ireland can claim a portion of their tax credits in Ireland. The portion the person can is that portion of their total worldwide income that is derived in Ireland.
> 
> I do this myself after being advised by Revenue (in writing) that this was an option. (See Section 1032 Taxes Consolidation Act 1997). So the foreign income is needed on the tax return to calculate the percentage of credits and reliefs due on the Irish income.
> 
> .


 
This is amazing, I've never heard of this.  Any chance you could scan the letter (without any personal details)?  I want to discuss this with my accountant.


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## murphaph (16 Jan 2014)

Sure. Send me a PM with your email address and I'll email you a copy. Don't want to post letters from Revenue (even anonymised) in open forum.


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## T McGibney (16 Jan 2014)

Bronte said:


> This is amazing, I've never heard of this.  Any chance you could scan the letter (without any personal details)?  I want to discuss this with my accountant.



This is commonly known and is explicitly mentioned on the Personal Details tab of the ROS Form 11 return.



> A non-resident is not due any tax credits or reliefs except as  provided for in S. 1032(2).  If you wish to claim a portion of the allowances/reliefs under  S.1032(2) state the amount of your:  Income  chargeable in the State €
> World  Income(includes income chargeable in the state)


but it is really only of use if you are earning little or nothing in the country where you now live.


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## murphaph (16 Jan 2014)

T McGibney said:


> but it is really only of use if you are earning little or nothing in the country where you now live.


...or if you have "decent" rental income from Ireland that compares well with the income derived in the foreign state. In any case, better a few quid in my pocket than Revenue's. If I'm going to include postage and telephone calls you can be damn sure I'm going to claim all my apportioned tax credits, no matter how large or small they are.

You're right though, this should not be a surprise to any accountant. It's not hidden away in the tax code by any stretch of the imagination. I don't use an accountant for my returns but if I did and he wasn't aware of that I'd look for another accountant. It's pretty blatantly there in black and white on the Form 11 (even the paper one).


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## Bronte (17 Jan 2014)

T McGibney said:


> but it is really only of use if you are earning little or nothing in the country where you now live.


 
OK that's not the case for me so it's not relevant.


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## murphaph (17 Jan 2014)

No matter how small your Irish income is compared to your total worldwide income you are entitled to some portion of your tax credits.


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## Sipe (20 Jan 2014)

I just called The local income tax office and they said you have to registered as a sole trader to use ROS online and a PAYE person must used the paper based form....


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## Grimy (20 Jan 2014)

Hi Sipe, re: ROS - that sounds like nonsense to me Now I know it is not the most reliable of sources - but you could direct them to the following link en.wikipedia.org/wiki/Revenue_On-Line_Service.


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## T McGibney (20 Jan 2014)

Sipe said:


> I just called The local income tax office and they said you have to registered as a sole trader to use ROS online and a PAYE person must used the paper based form....



That advice is correct.


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## Grimy (20 Jan 2014)

Apologies !!


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## zephyro (25 Sep 2014)

murphaph said:


> I believe you should fill a Form 11 (the short version should be fine). It's likely that with at least 8 months rent that you are over the threshold for a form 12, if that is even an option now that you're no longer PAYE (assuming you were).



What's the threshold you refer to for Form 12? Also are there any other criteria to decide whether a Form 12 or 11 should be used?


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