Foreign landlord & tax

sharpsuit

Statement by Minister for Finance below.

You cannot do anything to withhold rent at this stage because you have moved out of the dwelling. This might only become an issue if you apply for rent relief.

If and when you apply for rent relief, you will have to include the address of the landlord. In the past, this is when Revenue would deduct your tax credits to account for the portion of the rent that should have been withheld by the tenant. This should no longer happen, in particular as you were not aware of the obligation. [In the past, certain Revenue districts were inappropriately penalising tenants and this should now have ceased.]

When you apply for rent relief, you should complete the Rent 1 form and also include a cover letter that you only became aware of the withholding obligation at the end of the tenancy and that you left because you felt he was not Revenue-compliant.

They should award you the rent relief and Revenue will now be aware that the dwelling in question is rented out by an overseas landlord, ensuring future compliance. If they do seek to penalise you, please post again here.

DÁIL QUESTION

NO 104

To ask the Minister for Finance his plans to reform the practice of the Revenue Commissioners in situations in which a tenant is paying rent to an overseas landlord, in order that there is direct contact from the Revenue Commissioners with the landlord and that the tenant is not penalised for failing to discharge the landlord's tax obligations; and if he will make a statement on the matter.


- Mary Upton.

* For WRITTEN answer on Thursday, 18th December, 2008.
Ref No: 47583/08

REPLY


Minister for Finance ( Mr Lenihan) :

I propose to answer questions 103 and 104 together. The operation and impact of tax law as it applies to the legal obligation on a tenant, who pays rent to a non-resident landlord, to deduct income tax from the rental payments is monitored and reviewed on an ongoing basis as part of the normal work of my Department and the Revenue Commissioners.

I am informed by the Revenue Commissioners that the withholding of tax on rental income by tenants of non-resident landlords acts to promote greater compliance and deter evasion in this area, having regard to the obvious risk factors associated with non-resident taxpayers. The provision also ensures that a minimum tax payment is made by such landlords which might not be the case if the provision were removed.

The Revenue Commissioners accept that this provision might not be well known to some tenants and as a consequence could give rise to some practical difficulties. In recognition of this, where a tenant acts in good faith and is genuinely unaware of the obligation to deduct tax or of the residence status of the landlord, Revenue will only seek to apply the legislation from a current date. There is no question of such tenants being penalised for past failures to withhold tax from rental payments. This practical approach is reflected in Revenue’s operational instructions in this area. In this context Revenue are prepared to review the specific case outlined by the Deputy. If the person forwards details of the assessment to Gerard Moyles, Customer Services, Galway County District, he will be pleased to assist. He can be contacted at 091535952 or by email at gmoyles@revenue.ie.

On the general issue raised by the Deputy there are a number of factors that need careful consideration, not least to protect the Exchequer from loss of revenue through tax evasion. The removal of the obligation to withhold tax would create a situation where it would be easy for non-resident landlords to evade tax. Revenue would have no way of recovering the tax due as Revenue would not be in a position to force such non-residents to make a tax return and to declare their income.

I have to ensure that Irish income tax is capable of being collected and, having consulted with the Revenue Commissioners and considered the matter, I am of the view that the current position, whereby tenants operate a withholding tax on such rental payments coupled with the Revenue practice of accepting the good faith of tenants who were genuinely unaware of their responsibilities or of the residency status of their landlords, remains the most effective approach in this area. An alternative arrangement that would avoid opening up opportunities for tax evasion simply does not present itself at present.

mmalaka

sharpsuit wrote: »

Statement by Minister for Finance below.

You cannot do anything to withhold rent at this stage because you have moved out of the dwelling. This might only become an issue if you apply for rent relief.

Is this mean that as long as I did not apply for the rent relief....I would be not asked about the tax?

sportloto86

Thanks a lot for advice sharpsuit. I hope I will not have to post here again but it's much better to be prepaired for battle.

silja

One more question: does the Foreign Landlord tax apply even if a residential landlord wouldn't pay tax, ie rental income is below 10'000 a year?

I have a large one bedroom flat in Dublin city I am looking to rent out as we'll be living abroad for a few years. With the current economic situation, I think I'd get just about around the cut-off, which would be 833 euro- well, I am hoping to get a bit more but if it means the 20% tax does not apply under the 833 euro a month, I'd happily price it below that to avoid the tax

The_Conductor

silja wrote: »

One more question: does the Foreign Landlord tax apply even if a residential landlord wouldn't pay tax, ie rental income is below 10'000 a year?

I have a large one bedroom flat in Dublin city I am looking to rent out as we'll be living abroad for a few years. With the current economic situation, I think I'd get just about around the cut-off, which would be 833 euro- well, I am hoping to get a bit more but if it means the 20% tax does not apply under the 833 euro a month, I'd happily price it below that to avoid the tax

The 10k cutoff only applies for the rent-a-room scheme. Any landlord who is not physically resident in the property they are letting- has to make a tax return declaring the income and pay any taxes due. Its entirely possible that you may have no tax due on low levels of rental income- however you still have to do a full tax return, declaring the income and offsetting your eligible costs against the income, before determination of tax due.

Note: in the context of a personal tax return- income, other than your rental income, may eat up any tax credits you have, and may push your rental income into a taxable band........

Ps- you still need to do an Irish tax return- if you have income originating in Ireland. We have reciprochal tax agreements with numerous other countries to minimise the risk of double taxation (all EEA States and the US have reciprochal agreements).

S.