Irish rental income but tax resident abroad?

Masi

Hi guys,

My sister is living and working in holland but has a rental property in Ireland.

Her understanding up until now has been that she is tax resident in holland and therefore pays tax on the rental income there.

Is this correct?

Does anyone have any helpful advice or links that can clear this up please?

Many thanks,

Masi

myshirt

Where is she domiciled?

Where is she ordinarily resident?

And are you sure she is not tax resident here?

These terms all have specific meanings.

4ensic15

Masi wrote: »

Hi guys,

My sister is living and working in holland but has a rental property in Ireland.

Her understanding up until now has been that she is tax resident in holland and therefore pays tax on the rental income there.

Is this correct?

Does anyone have any helpful advice or links that can clear this up please?

Many thanks,

Masi

Tax on rental income is paid in the jurisdiction in which the property is located. It may also be taxed in the jurisdiction of tax residence. Where there is a double taxation agreement the tax paid in the jurisdiction in which the property is located is credited against the tax payable in the jurisdiction of tax residence. This means that the tax paid is always whichever would be the higher of the two jurisdictions if it was earned and taxed in the same jurisdiction.

relax carry on

Masi wrote: »

Hi guys,

My sister is living and working in holland but has a rental property in Ireland.

Her understanding up until now has been that she is tax resident in holland and therefore pays tax on the rental income there.

Is this correct?

Does anyone have any helpful advice or links that can clear this up please?

Many thanks,

Masi

She is a non resident landlord. She should be filing income tax returns here in relation to her Irish rental​ property. Does she have a collection agent appointed?

http://www.revenue.ie/en/about/foi/s16/income-tax-capital-gains-tax-corporation-tax/part-45/45-01-04.pdf

myshirt

Witholding taxes need to be applied aswell

Peregrinus

Masi wrote: »

Hi guys,

My sister is living and working in holland but has a rental property in Ireland.

Her understanding up until now has been that she is tax resident in holland and therefore pays tax on the rental income there.

Is this correct?

Does anyone have any helpful advice or links that can clear this up please?

Many thanks,

Masi

She is not correct.

The Ireland-Netherlands Double Taxation Agreement Article 4 says that income from immovable property (i.e. land, buildings) may be taxed in the country where the property is located. So income from a rental property located in Ireland may be taxed in Ireland.

This is a pretty standard term in double taxation agreements. It doesn't preclude the rental income also being taxed in the Netherlands on the basis that your sister is resident there - you'd need to check Netherlands law to know if she is liable to Netherlands tax on her income in Ireland. But, if Netherland also taxes the rental income from the Irish property, under Article 22 of the Double Taxation Agreement it has to give a credit for the Irish tax paid.

As others have pointed out, there are Irish administrative requirements to be dealt with. Your sister should appoint an Irish-resident agent to collect and handle the rent on her behalf. (This doesn't have to be a professional estate agent; just someone who will do this for her. It could be a friend or a family member.) If she doesn't do this, and has the tenant pay the rent directly to her(e.g. to a bank account in Ireland in her name) then the tenant should be withholding 20% of the rent and sending it direct to the revenue as a down-payment on your sister's ultimate tax liablity on the rent. If it turns out that she owes less tax than that, she can get the excess back from the Revenue.

Masi

Thanks for the reply.

She lives and works in hollland and has done for years.

She has no other job or reason to pay tax here or claim any benefits here in Ireland. She visits here for a weekend every few months....

myshirt wrote: »

Where is she domiciled?

Where is she ordinarily resident?

And are you sure she is not tax resident here?

These terms all have specific meanings.

Masi

Thanks for the reply, unfortunately that makes sense!!

4ensic15 wrote: »

Tax on rental income is paid in the jurisdiction in which the property is located. It may also be taxed in the jurisdiction of tax residence. Where there is a double taxation agreement the tax paid in the jurisdiction in which the property is located is credited against the tax payable in the jurisdiction of tax residence. This means that the tax paid is always whichever would be the higher of the two jurisdictions if it was earned and taxed in the same jurisdiction.

Masi

Thanks,
No formal collector appointed....

relax carry on wrote: »

She is a non resident landlord. She should be filing income tax returns here in relation to her Irish rental​ property. Does she have a collection agent appointed?

http://www.revenue.ie/en/about/foi/s16/income-tax-capital-gains-tax-corporation-tax/part-45/45-01-04.pdf

Masi

That started to happen recently as a new tenant is on the HAP scheme...

myshirt wrote: »

Witholding taxes need to be applied aswell

Masi

Thanks for that detailed post.
I would say that the next step for her is to talk to an Irish tax advisor.
As someone who is not tax resident for years do you know if she has any tax credits to apply to the income or is it simply income less qualifying expenses x 20% and USC etc??

Many thanks again

Peregrinus wrote: »

She is not correct.

The Ireland-Netherlands Double Taxation Agreement Article 4 says that income from immovable property (i.e. land, buildings) may be taxed in the country where the property is located. So income from a rental property located in Ireland may be taxed in Ireland.

This is a pretty standard term in double taxation agreements. It doesn't preclude the rental income also being taxed in the Netherlands on the basis that your sister is resident there - you'd need to check Netherlands law to know if she is liable to Netherlands tax on her income in Ireland. But, if Netherland also taxes the rental income from the Irish property, under Article 22 of the Double Taxation Agreement it has to give a credit for the Irish tax paid.

As others have pointed out, there are Irish administrative requirements to be dealt with. Your sister should appoint an Irish-resident agent to collect and handle the rent on her behalf. (This doesn't have to be a professional estate agent; just someone who will do this for her. It could be a friend or a family member.) If she doesn't do this, and has the tenant pay the rent directly to her(e.g. to a bank account in Ireland in her name) then the tenant should be withholding 20% of the rent and sending it direct to the revenue as a down-payment on your sister's ultimate tax liablity on the rent. If it turns out that she owes less tax than that, she can get the excess back from the Revenue.

Peregrinus

Masi wrote: »

Thanks for that detailed post.
I would say that the next step for her is to talk to an Irish tax advisor.
As someone who is not tax resident for years do you know if she has any tax credits to apply to the income or is it simply income less qualifying expenses x 20% and USC etc??

She gets a proportionate tax credit.

If here Irish-source income (i.e. the rent from the Irish property, less the deductible expenses) represents, say 20% of her worldwide income, then she gets 20% of the usual tax credit to set against her Irish tax liability.

If her Irish-source income represents 75% or more of her worldwide income, then she gets a full tax credit. But that's not very likely to be the case here.