Non domiciled landlords, question for you..

James Bond Junior

Hello, all I have a property let in Ireland via an agent who refuses to act as my collection agent for tax. I understand I am liable at the 20% rate as I am non domiciled in Ireland but what is the best course of action to pay?

As an aside, all of the letting agents I contacted refused to act as collection agents for tax purposes which is pretty crap seeing as they know how to charge!

The_Conductor

Your tenant is liable to deduct 20% witholding tax from the rent and forward it to the Revenue Commissioners.
You are not liable at the 20% rate- it depends entirely on your rental income and a number of other factors. You are also most probably liable for income tax on the rental income in the country in which you're tax resident (and if there is a mutual tax agreement between Ireland and that country, your income tax due on the rental income will probably be reduced by the amount of tax which you pay in Ireland.

The 20% rate- is the witholding tax rate- it doesn't mean its the rate you are due to pay tax at- you may be due to pay a significantly higher- or lower amount- determined on an annual basis by means of a balancing statement- and you pay the difference.

Agents do not act for you in a tax capacity (other than some larger agents- and even then they're not interested in new business- its just too damn convoluted). If you are not tax resident- employ an accountant to do an Irish tax return for you- cognisant of the witholding tax that your tenants pay.

You seem to be mixing up your tax obligations and those of your tenants..........

sunnysoutheast

James Bond Junior wrote: »

Hello, all I have a property let in Ireland via an agent who refuses to act as my collection agent for tax. I understand I am liable at the 20% rate as I am non domiciled in Ireland but what is the best course of action to pay?

As an aside, all of the letting agents I contacted refused to act as collection agents for tax purposes which is pretty crap seeing as they know how to charge!

Is there a family member or friend who could act as resident collection agent for you? You would be unwise to rely on the tenant forwarding the witholding tax IMHO.

I don't know about managing agents but accountants may not be licenced to handle client money in this way, ours wasn't so couldn't act as a collection agent.

James Bond Junior

sunnysoutheast wrote: »

Is there a family member or friend who could act as resident collection agent for you? You would be unwise to rely on the tenant forwarding the witholding tax IMHO.

I don't know about managing agents but accountants may not be licenced to handle client money in this way, ours wasn't so couldn't act as a collection agent.

Rent lands in my Irish bank account minus agent fee. I plan on leaving it accumulate and not touching it. I won't be liable for tax in my new country as there is no income tax here. I have access to an accountant so may just leave it their hands. I am just worried that the tax needs to be paid from source eg tenant which is not going to happen.

I am happy to pay any tax due, I just want it done correctly so I don't fall foul upon my return.

sunnysoutheast

James Bond Junior wrote: »

Rent lands in my Irish bank account minus agent fee. I plan on leaving it accumulate and not touching it. I won't be liable for tax in my new country as there is no income tax here. I have access to an accountant so may just leave it their hands. I am just worried that the tax needs to be paid from source eg tenant which is not going to happen.

I am happy to pay any tax due, I just want it done correctly so I don't fall foul upon my return.

I'd hope your accountant will be able to submit the yearly return for you, when we contacted Revenue in a similar position they seemed happy enough with that arrangement (but wouldn't put anything in writing).

According to the rules the tenant is obliged to withhold if the landlord "lives abroad" but if you submit the return every year you may be able to do it more simply. If you've only moved recently you may still be tax resident for 2019 anyway.

Don't forget your capital allowances!

Edited just to say that there are big differences between non-domiciled and non-resident regarding Irish tax liability on worldwide income, an accountant should be able to explain if needed!

Good luck with it.

James Bond Junior

sunnysoutheast wrote: »

I'd hope your accountant will be able to submit the yearly return for you, when we contacted Revenue in a similar position they seemed happy enough with that arrangement (but wouldn't put anything in writing).

According to the rules the tenant is obliged to withhold if the landlord "lives abroad" but if you submit the return every year you may be able to do it more simply. If you've only moved recently you may still be tax resident for 2019 anyway.

Don't forget your capital allowances!

Edited just to say that there are big differences between non-domiciled and non-resident regarding Irish tax liability on worldwide income, an accountant should be able to explain if needed!

Good luck with it.

Thanks very much. I have an accountant to hand who should be able to help me. I have also applied for split year treatment which will have me registered as non resident for tax purposes from the date we left. I paid for a few big ticket items in preparation for renting so will be putting those in to offset as much tax as possible.

sunnysoutheast

James Bond Junior wrote: »

Thanks very much. I have an accountant to hand who should be able to help me. I have also applied for split year treatment which will have me registered as non resident for tax purposes from the date we left. I paid for a few big ticket items in preparation for renting so will be putting those in to offset as much tax as possible.

Sounds like you're on the ball with it! Hopefully you'll be able to do it the easy way. I don't know if it depends on the specific Revenue office but we found it a little frustrating they wouldn't give us a simple letter to put the tenant's mind at rest, in the end we had to use a collection agent - we didn't use a lettings agency.

Even the small items add up when you depreciate them over 8 years. I know people who don't bother deducting them, they're crackers IMHO.

James Bond Junior

Worst case I have the rent paid into my wifes account, she is with me obviously but she isn't on the mortgage or deeds and we didn't bother going jointly assessed before we left. Can I depreciate items I bought before I rented the house but don't have reciepts for?

TheChizler

The_Conductor wrote: »

Your tenant is liable to deduct 20% witholding tax from the rent and forward it to the Revenue Commissioners.

Only if paying the rent directly into an account in the name of the landlord. If the tenant pays the rent to a local agent they shouldn't withhold anything.

James Bond Junior

TheChizler wrote: »

Only if paying the rent directly into an account in the name of the landlord. If the tenant pays the rent to a local agent they shouldn't withhold anything.

But is rent being paid directly to the Landlord and tax being paid after allowed as I want to know? Or is it a big no no?

The_Conductor

James Bond Junior wrote: »

Can I depreciate items I bought before I rented the house but don't have reciepts for?

Unfortunately not.

The_Conductor

TheChizler wrote: »

Only if paying the rent directly into an account in the name of the landlord. If the tenant pays the rent to a local agent they shouldn't withhold anything.

Unless the 'agent' has specifically agreed to act as the landlord's representative for tax purposes, they are assumed to not be acting in this capacity, and the tenant is legally liable to withold 20% of the gross rent and forward it to the Revenue Commissioners. Its actually quite straightforward.

James Bond Junior

The_Conductor wrote: »

Unless the 'agent' has specifically agreed to act as the landlord's representative for tax purposes, they are assumed to not be acting in this capacity, and the tenant is legally liable to withold 20% of the gross rent and forward it to the Revenue Commissioners. Its actually quite straightforward.

I've never spoken to the tenant, hence why I have an agent to do it for me. Agent is paid rent which is forwarded to my account.

sunnysoutheast

The_Conductor wrote: »

Unfortunately not.

Yes you can, unless this changed recently?

You just value/estimate the item at the start of the rental period, and depreciate the asset at 12.5% of that value every year.

I've never seen a) a definitive list of the items which can (or cannot) be depreciated or b) a definitive rule about how to value an existing item.

For a) I used the rule that, if the item could be removed without damaging it and reinstalled in another property, it's fair game. For b) I depreciated the item at 12.5% per year since purchase date to generate the starting value. Also I kept a detailed inventory in case of audit.

sunnysoutheast

James Bond Junior wrote: »

I've never spoken to the tenant, hence why I have an agent to do it for me. Agent is paid rent which is forwarded to my account.

From memory I think the term Revenue use covering the tenant's obligation is if the landlord "lives abroad" so it's a bit vague! In this case I'm not sure the tenant would even know!

TheChizler

The_Conductor wrote: »

Unless the 'agent' has specifically agreed to act as the landlord's representative for tax purposes, they are assumed to not be acting in this capacity, and the tenant is legally liable to withold 20% of the gross rent and forward it to the Revenue Commissioners. Its actually quite straightforward.

This document from revenue gives a different impression.

https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-45/45-01-01.pdf

Where rents are paid to a person whose usual place of abode is in the State, for
example to an Irish based estate agent acting on behalf of a non-resident landlord,
the tenant is not obliged or entitled to deduct income tax. The non-resident landlord
is chargeable in the name of the Irish agent. The Irish agent is not entitled to deduct
tax from the rent on payment to the landlord but may retain a sufficient portion of
the rents to satisfy the tax payable on the rents (section 1046(2) TCA 1997).

Doesn't look like the agent can opt out of paying the tax, apart from refusing to collect the rent at all.

The landlord is assessable and chargeable to income tax in the name of the Irish
agent (section 1034 TCA 1997). The agent should be set up under a new PPS number.
While the assessment is in the name of the Irish agent, the tax to be charged is the
amount which would be charged if the non-resident landlord was assessed in his or
her own right.

James Bond Junior

TheChizler wrote: »

This document from revenue gives a different impression.

https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-45/45-01-01.pdf



Doesn't look like the agent can opt out of paying the tax, apart from refusing to collect the rent at all.

I asked several agents explicitly to retain the tax and all refused and told me an accountant can do it ie get a tax return and the accountant works out what is due and it is paid at year end.

Marcusm

The_Conductor wrote: »

Your tenant is liable to deduct 20% witholding tax from the rent and forward it to the Revenue Commissioners.
You are not liable at the 20% rate- it depends entirely on your rental income and a number of other factors. You are also most probably liable for income tax on the rental income in the country in which you're tax resident (and if there is a mutual tax agreement between Ireland and that country, your income tax due on the rental income will probably be reduced by the amount of tax which you pay in Ireland.

The 20% rate- is the witholding tax rate- it doesn't mean its the rate you are due to pay tax at- you may be due to pay a significantly higher- or lower amount- determined on an annual basis by means of a balancing statement- and you pay the difference.

Agents do not act for you in a tax capacity (other than some larger agents- and even then they're not interested in new business- its just too damn convoluted). If you are not tax resident- employ an accountant to do an Irish tax return for you- cognisant of the witholding tax that your tenants pay.

You seem to be mixing up your tax obligations and those of your tenants..........

If an Irish resident collects or receives rents on behalf of a non-resident, he/she/it takes on responsibilities to make an income tax return and remit the necessary tax from the rent to Revenue. The OP has mixed nothing up in this regard.

Marcusm

The_Conductor wrote: »

Unfortunately not.

Absolutely yes but the OP must calculate either the current value of such items (appropriated as plant & machinery in a rental) or do a notional depreciation to date (not effective if more than 8 years old).

Marcusm

The_Conductor wrote: »

Unless the 'agent' has specifically agreed to act as the landlord's representative for tax purposes, they are assumed to not be acting in this capacity, and the tenant is legally liable to withold 20% of the gross rent and forward it to the Revenue Commissioners. Its actually quite straightforward.

That is absolutely and utterly incorrect. The mere receipt of the cash is what lawfully imposes the obligation on the agent. Once the agent has received or agreed to receive the money, he/she/it becomes liable to make the returns and pay the tax. If the agent passes the funds on without retaining sufficient to pay the tax, he/she/it will have to discharge the liability from their personal resources.

I truly wish Mods of this particular forum would not post such utter tripe when they know not of which they speak.

James Bond Junior

Marcusm wrote: »

That is absolutely and utterly incorrect. The mere receipt of the cash is what lawfully imposes the obligation on the agent. Once the agent has received or agreed to receive the money, he/she/it becomes liable to make the returns and pay the tax. If the agent passes the funds on without retaining sufficient to pay the tax, he/she/it will have to discharge the liability from their personal resources.

I truly wish Mods of this particular forum would not post such utter tripe when they know not of which they speak.

Can my accountant make the payment on my behalf? Surely revenue don't mind once they get their cut?

Appliance and furniture are 4 years old.

The_Conductor

The_Conductor wrote: »

Unless the 'agent' has specifically agreed to act as the landlord's representative for tax purposes, they are assumed to not be acting in this capacity, and the tenant is legally liable to withold 20% of the gross rent and forward it to the Revenue Commissioners. Its actually quite straightforward.

If the tenants aren’t told then they can’t deduct. If the op makes his tax return every year and pays what is owed why would revenue care.

I think it’s a really messy way to operate and it’s much simpler to not tell the tenant anything about being abroad or needing to deduct tax and then just make your tax return.

BrokenArrows

So if the tenant doesn't withhold the tax and the rent is forwarded to the landlord. Who is responsible for the unpaid tax. The tenant or the landlord?

The_Conductor

BrokenArrows wrote: »

So if the tenant doesn't withhold the tax and the rent is forwarded to the landlord. Who is responsible for the unpaid tax. The tenant or the landlord?

Technically the tenant is- as the obligation is on them to deduct witholding tax- however, its ended up in court a few times and as far as I know the judge deemed it unenforceable. Technically the responsibility lies with the tenant- whether they realise it or not.

Marcusm

The_Conductor wrote: »

Technically the tenant is- as the obligation is on them to deduct witholding tax- however, its ended up in court a few times and as far as I know the judge deemed it unenforceable. Technically the responsibility lies with the tenant- whether they realise it or not.

Again rubbish. There has not been a Tax Appeals Commission or legacy’s appeal Commissioners case on the point.

The landlord retains a responsibility to pay the tax if the tenant does not. Revenue will not chase a tenant for a technical liability where it is otherwise discharged.

Marcusm

James Bond Junior wrote: »

Can my accountant make the payment on my behalf? Surely revenue don't mind once they get their cut?

Appliance and furniture are 4 years old.

They can make the payments and effect the returns. The agent retains a technical liability and it might be preferable for the accountant to prepare agent’s returns for the agent to submit.

overkill602

This something from the dark ages when rents where collected manually hence no record and there was no rtb register
Revenue as long as correct returns are made through and accountant, tenant who pays DD wont want the hassle and a LL who has a provision for any maintence or agent managed.
An accountant confirmed the revenue just don’t bother and I know someone who hasn’t lived in Ireland for 10 years has a couple of properties agent managed but no 20% tax withheld
The tax was to protect tenants in the case of a property went into disrepair.

GGTrek

Dear OP, I was a non resident landlord for more than 7 years and I never found an Irish letting agent or an accountant willing to act as collection agents since it implies some serious responsibilities in front of revenue that they are (correctly in my opinion) not willing to take.

I have never seen Revenue enforcing the 20% witholding rule (never did with me and I managed to get non-audit letter this year in order to receive properties sales proceeds). I filed my Form 11s and paid my tax exactly like an Irish resident would do and as it should be (I shall explain below).

I spoke with a tax accountant before I invested in Ireland (and I had family in Ireland at the beginning that was acting as a collection agent, but then had to move outside Ireland): EU law is your friend in this case.

The different tax treatment (witholding if not resident and no witholding if resident) is very likely a breach of EU treaties that prohibit tax discrimination based on residency and Revenue very likely knows it, that is why I do not know of any case prosecuted on this particular rule. Spain was screwed on non residency discrimination on CGT a few years ago at the ECJ and I found Irish revenue officials very pragmatic as long as tax is paid unlike the Spanish ones who care more about the form than the substance (different culture in my opinion).

It is similar to locals only rules that were attempted by some Irish jokers councillors (for cheap populist political gain as usual) a few years ago and are still trying to attempt: the EU regulations and treaties are not a pick and choose from a basket of rules as a few local or national politicians in many countries (i.e Brexit) seem to think unless an exemption is negotiated by the member state: tax rules have to be applied in a consistent manner by the Irish authorities regardless of residency.