PRSI on income less than 5000 euro

dako

Hi all,

My wife has recently become a self-employed sole-trader for her business which barely turns a profit (less than 2000 per year). It's really a hobby, but does generate some income for her.

Earlier this year, her mother (who lives outside of the EU) wanted to buy an apartment in Dublin with her lump sum pension. Due to the legal rigmarole of trying to buy property in Ireland and travel and visa costs in doing so, my wife agreed to buy the property in her own name, using her mother's money, and for my wife to pay the income tax on the rental income, before transferring the balance back to her mother as her monthly pension. At the time of purchase, our solicitor agreed that this would be a good solution.

Now, the rules of self-employment say that if you earn < 5000 per year, you can be exempt from paying class S PRSI. This is the case for her.

How does she prove that she makes no profit from the apartment rental income? Are bank transfers showing the balance of rental income (after deduction of income tax) being transferred to her mother (who originally transferred the purchase amount of the property to my wife) enough to prove that she makes no profit on this? I guess the payments could be considered a repayment of a loan from her mother

Please note... we are trying to do everything legally here. The intention is not to do anything illegal or evade/avoid tax or anything like that. We are disclosing all income to revenue and paying income tax accordingly.

But the fact is that my wife is NOT making any profit from the rental income.

Thanks in advance for taking the time to read & reply!

Lockedout2

Poor advice from your solicitor to say buy the property in your wife's name if it does not belong to her.

She has told the Irish revenue that she ownes it as the contact was stamped.

She is declaring the income as hers on her tax return! How does your MIL account for the income in her home county?

Perhaps your MIL should charge interest to your wife on the loan used to buy the property and therefore reduce your wife's income.

Geuze

Your wife received a gift of cash from her mother.

Your wife bought a house with the cash.

Your wife now owns that house.

Your wife now earns that rental income.

Your wife is exposed to tax on that rental income.

If your wife choose to pass on this income to her mother, then the tax doesn't change.

This would seem to be weird advice from a sol, unless I'm not seeing the whole story.