Understanding Tax implications as a Landlord

I am non-resident, how am I taxed? 

Tax is due on only your profit rent, i.e,. The balance of income after deductions of allowable expenses. 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. Form R 185. should be submitted by the landlord with the tax return to obtain credit for the tax retained.

I have a foreign property, how is my rent 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.

My tenants are looking for tax relief on the rent?

Tax relief. may be claimed by a tenant paying rent to a landlord for private accommodation by completing Form Rent I. This form is available at www.revenue.ie. Revenue’s Forms and Leaflets Service at LoCall 1890 30 67 06 or from any Revenue office. The annual maximum relief allowable is given on Form Rent I.

Do I need to keep records?

You must keep full and accurate records of your lettings from the start. You need to do this whether you send in a simple summary of your profit/loss, prepare the accounts yourself or, have an accountant do it. All supporting records such as invoices. bank and building society statements, cheque stubs, receipts etc.. should also be retained. You must keep your records for six years unless your Revenue office advises you otherwise.

What if I am not based in Ireland? 

If a landlord resides outside the country and rent is paid directly to him/her or to his/her bank account either in the State or abroad. Tax must be deducted by the tenant at the standard rate of tax (currently 20%) from the gross rents payable. Failure to deduct tax leaves the tenant liable for the tax that should have been deducted.

Example:
Gross rent per month €1000
Deduct tax (I 000 x 20%) €200
Pay to Landlord (1000-200) €800

The tenant must also give a Form R185* to the landlord to show that the tax has been accounted for to Revenue.

However as a non-resident landlord you can appoint a “Tax” agent, (estate agent, family member, accountant) who is resident in the State to manage the collection of the rents. The rents must be paid gross to the agent, the agent is then chargeable to tax on the rents as Collection Agent for the landlord and is required to submit an annual tax return and account for the tax due under Self Assessment. Leaflet IT10 Guide to Self Assessment- provides more detailed information.

Note: The agent appointed need not be a professional person, i.e., it can be a family member or other person prepared to take on the responsibility and undertakes to make annual tax returns and account to Revenue for the tax due.

* (Available from www.revenue.ie, Revenue’s Forms and leaflets Service at

LoCall 1890 306706 or your local Revenue office)

Certain mortgage protection policy premiums with effect from 1 st January 2002. Refer to Appendix I.

Capital Expenditure on certain properties under the various Incentive schemes.

Where do I stand with the interest paid on loans?

Certain restrictions were introduced on the deductibility of interest on borrowed money used on or after 23/4/1998. in the construction. purchase. or repair of rented residential premises in the State. or 7/5/ 1998 in the case of foreign residential premises. However the relief for interest on borrowed money was restored for such interest accruing on or after 1 January 2002. There were some transitional arrangements in place in the interim period.

Relief is disallowed as respects interest accruing on or after 6 February 2003 where the let premises was purchased from the spouse of the person chargeable in respect of the rental income. However. the dis-allowance of interest relief does not apply in the case of legally separated or divorced persons.

What can I offset against Wear and Tear?

If a premises is let for residential purposes and it is furnished. a claim can be made for a wear and tear allowance based on the cost of the furniture and fittings. It will be necessary to retain an itemised list of expenditure incurred each year.

With effect from 4 December 2002 the allowance is 12.5% per year over 8 years.

For the period between 1 January 2001 and 3 December 2002 the allowance was 20% per year over 5 years.

Prior to 1 january 2001 the allowance was 1 5% per year for the first 6 years and 10% in the 7th year.

What expenses can be claimed?

Broadly speaking. in calculating your rental expenses you can deduct expenses so long as they-

Are incurred wholly and exclusively for business purposes, and . are not of a capital nature.

The following are examples of the type of expenses that may be claimed for:

Rents payable by the landlord in respect of the property. i.e.. ground rent

Rates or levies payable on the property. i.e.. water rates, refuse collection etc.

Cost of any service or goods provided by the landlord. i.e.. gas. electricity. central heating. telephone rental. cable television etc. for which they do not receive a separate payment

Maintenance, i.e.. cleaning and general serving of the premises

Insurance of the premises against fire. public liability insurance, etc.

Management. i.e.. actual cost of collection of rents. advertising. etc.