Exemption? Rental Income while non-resident

R

raven

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Hi,

I'm recently returned to live in Ireland after a stint of a number of years in Australia. During this time I would have been non-resident for tax purposes (quite literally not having set foot in Ireland for 5 or 6 years).

During this time I had a property rented out. I had no other income in ireland during my time away. I am now aware that I am liable for income tax on this rental income. I understand that I can deduct interest payments on my mortgage during the time. With some of the various other deductibles I would estimate my taxable rental income to be around 3000 euro per year.
ie. this is based on annual income of 10,000 less annual mortgage interest of 6000 leaving 4000 income approx, - say another 1000 deductibles for insurance, wear and tear etc. leaving 3000 euro taxable income.

Now, i see there are income tax exemptions for persons with total income of less than 5,210 euro per year.
ie. See
[broken link removed]

Does anyone know if this means that I would not be liable for any tax based on the above exemption?

Thanks for any help, it would be very much appreciated.
 
The other thing that should have happened is that your tenants should have deducted 20% of the rent if it was being paid through an agent or directly to a non-resident landlord.
 
It was paid as a gross amount to me through my father.
Yes, I do see that an agent or tenant is supposed to withold this tax.
I am however, in a process of getting up-to-date at this point of time, so am technically in arrears.
 
You seem to have done what I am considering doing. (see post tax on rental income) today.

If your tennants had paid the tax at 20% then surely you would have paid 20% on the 10k and not the 3k you were left with after deductions for mortgage interest and insurance.
 
Unfortunately they haven't paid anything out of the gross. I guess in this case the agent would be deemed to be my father, - so i guess it simply comes back to me to pay the tax (i'm certainly not going to stiff my father by insisting he's liable to pay the tax as an agent).
I'm pretty much resigned to paying the tax, the question is how much, and can my income be taken as being below the Euro5125 exemption threshold (as I had no other irish income), - or, is this exemption only for resident or PAYE earners?

Incidentally, does anyone know if mortgage interest is 100% deductible? or is there some strange formula for calculating "allowable interest"
 
Well maybe you're not entitled to pay any tax. Is your father really deemed as an agent? If your tennants knew you were abroad then they should have deducted the tax from the rent. If they didn't surely thats not your fault.
 
Well, either way, I would't stand to gain from that.
ie. I'm still obliged to submit a return.
My return needs to cover my full tax liability regardless of the tenants paying 20% or not.
Then, if the tenants did pay, I would be entitled to "claim credits", ie. deduct the same from my total return (See the text I have highlighted in red below).

As they didn't pay it, I would assume I am not entitled to claim these credits.


ie. The extract below is from
[broken link removed]
How are non-resident landlords taxed?

On receipt of the annual tax return, profit rent i.e. rent received less allowable expenses will be assessed. The landlord is entitled to claim relief for expenses, which are usually allowed in arriving at the rental profit. The landlord is also entitled to a credit for the tax deducted by the tenant. [broken link removed], should be submitted by the landlord with the tax return to obtain credit for the tax retained.
 
ie. The extract below is from
[broken link removed]
How are non-resident landlords taxed?

. The landlord is also entitled to a credit for the tax deducted by the tenant. [broken link removed], should be submitted by the landlord with the tax return to obtain credit for the tax retained.[/quote]


Cheers for info, it answers my query from another post.
 
Maxblack said:
Well maybe you're not entitled to pay any tax. Is your father really deemed as an agent? If your tennants knew you were abroad then they should have deducted the tax from the rent. If they didn't surely thats not your fault.
Click to expand...

There is still some resposibility with the landlord, what the tenants would be expected to deduct is a withholding tax the landlord can credit against his ultimate tax liability (which could be more than 20% if there are not many deductibles).

If the rent was being paid through his father the tenants may not even have been aware they should have been deducting the tax. From the post it seems rent was paid to the father whether the tenants are aware or not of the landlords residence status its how they pay that matters if its directly to the landlord they have a problem if someone else that person is an agent.

Also the landlord is not totally innocent in this if he never received the form to say the tax was being withheld then he was most likely aware none was being deducted.

As an aside I believe it is an unjust requirement to put any responsibility for withholding tax on the tenant (as opposed to professional property agents) who is generally the weaker party in a landlord tenant relationship. An investor who is profiting from their investment should be the one who has to worry about the tax implications. Many tenants are unaware of this requirement and while ignorance of the law is not a valid defence I think it is unreasonable of the government to expect tenants to be aware of what is a relatively obscure and not well flagged law. How many people take tax advice when becoming a tenant?
 
Yes I do agree with the above. Many or even most landlords aren't aware of this requirement, so a tenant can hardly be expected to be aware that they are responsible for their landlord's tax return!
It really is a daft one. I guess the revenue is trying to collect the tax "in advance" for fear that the non-resident land lord may never actually make a a tax return, in the knowledge that they are overseas.
 
raven said:
Incidentally, does anyone know if mortgage interest is 100% deductible? or is there some strange formula for calculating "allowable interest"
Click to expand...

Any interest on a mortgage used to purchase or improve the property is deemed to be 'allowable interest' i.e. if you got a top up mortgage and used the funds to finance something else this portion would not be allowable.

Note that you must be registered with the PRTB in order to use mortgage interest as an expense against rental income.
 
To be honest, I'm not sure if the house with was registered the PRTB during my time overseas, need to check with my father (I hope so, but fear not, more out of lack of dilligence on the part of my father rather than anything malicious). BTW, the house is no longer being rented out; its now my home since I returned to Ireland for nearly a year now.
What is the link between the PRTB and claiming interest? ie. do you need to provide a PRTB number when claiming?
 
No, at the moment Revenue are just taking your word for it. They are in the process of cross checking the PRTB registration list with Income Tax returns so I wouldn't claim it unless you were entitled to it.

This requirement only came into force in 2006 so will not be relevent for previous tax years.
 
I wouldn't recommend doing these tax returns yourself as you are sure to miss something.

The cost of a decent tax advisor will make sure the returns are correct and may save you some money overall.
 
Raven you need to get an accountant to do the tax returns for you as you are getting bogged down in things that are irrelevant such as whether the tenant/agent should have withheld the tax. You are the person who has to pay the tax.

Don't forget if you owe tax for previous years there will be interest and penalties to pay.

Your biggest problem is the PRTB. If the property was not registered (from 2006 onwards) then the mortgage interest can not be claimed. Prior to 2006 you have no problem as it was not a requirement. You cannot register now unless the tenant is still in the property. There has been much discussion here on AAM on this.
 
raven said:
Yes I do agree with the above. Many or even most landlords aren't aware of this requirement, so a tenant can hardly be expected to be aware that they are responsible for their landlord's tax return!
...
Click to expand...
No, this is in preparation for the tenant's own tax return, in the event that a non-resident landlord's PPSN is not readily available.
 
Tenants may still be technically liable to deduct tax from rents paid to non-resident landlords. However this law has been obsolete since the Ombudsman ruled in 1998 that the Revenue really have no powers to enforce same in respect of residential tenants.
 
That's good to know Ubiquitious. Would you have a link to the ruling? I'm a non resident landlord but my tenant's do not withhold tax - can you imagine trying to get that back or relying on them to actually pay it to revenue. Revenue so far have never had an issue with this in relation to my accounts. I know according to Revenue the tax should be deducted but I don't want anyone else to deal with my tax affairs it's none of their business.
 
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