Tax payable on foreign rent

Hi there, I'm looking at buying a property in France, and taking out a small mortgage in France to meet the price of the property. There is a double taxation agreement between Ireland and France. In France you pay tax on the income, and have reliefs, one of which is your mortgage repayments. So if I have rent income of 800e and my mortgage repayment is 200, and all my other management deductibles are 100, then I have to pay tax on 500e. So probably leaving me with a net rent income of about 600e or so.

That's all fine. The question is though how much tax do I have to pay in Ireland. Does Ireland respect the mortgage repayment as a tax relief, as we don't have this here? How does it work? I have paid fully my tax in France. What do I declare here for tax reasons...surely if I declare my whole income of 800e, I might end up with a loss and then if I declare 600, I'll be doubly taxed...

anything

See also [broken link removed] from revenue

Basically, You pay tax in france according to the laws of france.
Then you have to do a return in ireland as though the property was irish and pay the relevant tax. You can deduct mortgage interest paid during the year and fixture and fitting over 8 years plus other expenses. You are then taxed at your marginal rate. You then deduct any tax paid in france. The balance you pay to irish revenue.

You should be aware that CGT is currently not covered by the double tax agreement, currently being negotiated, but this should not concern you at present.
There are also inhetitance issues

Thanks asdfg for speedy response, I had a look around alright the other threads, but this one seems to be more in terms of helping you buy the property rather than rental income and tax payable in Ireland.

I've read the Tax Deductions stuff on the OASIS website too in terms of deductions, but they don't really go into the detail I want/need and certainly don't mention mortgage repayments relief.

The link to revenue that I provided goes into a lot of detail incl mortgage interest payments - remember it is the interest element of the mortgage that is allowed not the full repayment
See what expenses can be claimed and how are foreign rents taxed
Let me know what you don't understand or the detail you require and i'll try to explain or get same.

AFAIK, the mortgage interest relief is allowed on one property only, so since we have a mortgage on a property in Ireland this is not applicable to us. What I really want to know though is since we will be paying tax in France and by French law we are entitled to mortgage payments relief, does the Irish government respect the reliefs of the other countries?

In my example, I have rent income of 800e and my mortgage repayment is 200, and all my other management deductibles are 100, then I have to pay tax on 500e. The first 300e is tax free.

So since I have fully paid up my tax in France (albeit only on 500e as the first 300e was tax free), how much do I declare in Ireland. Especially since Ireland doesn't allow mortgage repayment relief on rental income. Do I declare 800e and state how much tax I've paid in France? Is that offset against the income? Are their reliefs offset? It's all very confusing.

Ok, Maybe i'm not explaining this properly so here goes
You make an annual return to both countries.

Assumptions
The figurres you provided are monthly
Rental income is taxed at 20% and tax free is 3,600
the mortgage is an annuity mort not an interest only mort
Mortgage is for 35K
Interest rate 5%
Furniture/fittiungs to off fit the apartment 16K

Your french rental income tax return would look something like this

Rental Income 9,600


Mortgage repayment 2,400 (Are you sure the full repayment is allowed)
Other Management Deductibles 1,200
Total Deductions 3,600

Net Rental income 6,000
Tax free 3,600
Taxable 2,400 @ 20% (don't know if this is right)

Tax due to french authorities 480


Your Irish rental income tax return would look something like this

Rental Income 9,600


Mortgage interest 1,750 (the interest only is allowed i am assumming the 400 is paid off the principal)
Wear & tear on Furniture and fittings say 1,000 - 16K deducted over 8 years (no idea how much to fit out)
Other Management Deductibles 1,200
Other deductions (legal accountants etc) say 500
Total Deductions 4,450

Net Rental income 5,150
Taxable 5,150 @ 20% = 1,030
Taxable 5,150 @ 42% = 2,163

Assuming you are paying tax at 42% in ireland
Tax due to irish authorities 2,163
Tax paid to french authorities 480
Tax payable in ireland 1,683

Hope calc are correct

Post crossed with delgirl

The example I have is:

You buy a villa at a cost €800,000 and you rent it out at an annual rent of €60,000.

The Mortgage interest cost in the first year is €33,266. Your marginal Irish tax rate is 42%.

As a non-resident, you are liable for French income tax at 25% of the net rent, i.e., €26,734.

You are also liable for Irish income tax at 42% of the net rental income, i.e., 42% x €26,734 = €11,228.

Under the Ireland-France tax treaty, the French tax (€6,683) can be credited against your Irish tax (€11,228) leaving Irish tax of €4,545 still to be paid.

Apart from the first year of rental income, you pay this tax as preliminary tax on a self-assessment basis on or before 31 October in the tax year you receive the rent.

Am fairly new to French/Irish income tax calculations and am open to correction.

You are also liable for Irish income tax at 42% of the net rental income, i.e., 42% x €26,734 = €11,228.

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AFAIA - After calc the french tax due you then make a return to the irish authorities as though the property was an irish rental
and are entitled to additional deductions under irish law

From revenue link above
my underlinging

How are foreign rents taxed?
In general, income from foreign property is computed on the full amount of the income arising, irrespective of whether the income has or will be received in the State. In the case of foreign rental income this income is charged under Case III of Schedule D and the same deductions and allowances are available as if the income had been received in the State. Deductions are also normally available in respect of such income for sums in respect of foreign tax paid. This income should be included in an individual’s tax return on the Foreign Income panel.

These rules do not apply to a person who is not domiciled in the State or who is an Irish citizen not ordinarily resident in the State. In such cases, income tax is computed on the full amount of the actual sums received in the State from such remittances, etc. without any deduction or relief given.

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So more deductions = less tax in ireland

The only thing to be aware of is that if you have rental income in ireland you can't offset losses in ireland against rental profit abroad, they are considered 2 different sources of income and go into 2 different heading on the tax return.

Thats useful to know.
Following on from this, in the case of someone owning a rental property in a country that DOESNT have a double tax agreement with Ireland - would I be right to assume (taking the above example) that person would pay 42% tax on €26,734 less deductible charges.

would I be right to assume (taking the above example) that person would pay 42% tax on €26,734 less deductible charges.

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The person would pay tax on 60K less deductions of which mortgage interest is one of the many deductions.
see link to revenue i posted on post 2 of this thread and post 6 - section on "Your Irish rental income tax return would look something like this"

If there is no double tax agreement then tax is payable in both countries. You cannot offset tax paid in one country against tax paid in another.
Turkey as far as I know does not yet have a double tax agreement with ireland

Thanks everyone for your replies, great information, and examples.

Just in relation to rental expenses on foreign rents - is the cost of travelling abroad to maintain / check on your property a couple of times per year a deductible expense?

Liamos said:

Just in relation to rental expenses on foreign rents - is the cost of travelling abroad to maintain / check on your property a couple of times per year a deductible expense?

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The simple answer is 'no', I'm afraid.

I.m told by an Irish accountant that you can pay tax just to Irish revenue. Is that the case?

Depends on the tax laws in the foreign jurisdiction involved and what, if any, double taxation agreement exists between them and Ireland. I would be very wary of just assuming that only Irish tax was payable in the general case.