Do I need an estate agent - Non-Resident landlord

bigbadcon

Hi folks,

Just wondering if my plans of getting a letting agent to manage the rental while we're living abroad is a waste of money.


The house we are renting is next door to my wifes dads house so he can keep an eye on the house and can do the periodic visits to see that everything is ok.

We have found tenants that we know and are happy for them to rent the house (all above board with revenue,prtb etc)

The house is only 4 years old with fairly new applicances etc so I cant see there being any issues with the house at all.

The only thing I can see as being an issue is the withholding 20% tax for non resident landlords...

If they paid the rent to an account in my wifes dads name and he forwards it on to us and I get an accountant to do the tax return would that make everything above board tax wise??

Would I be wasting my money or do you think the 8% (€1000 ish) would be worth it?

Thanks in advance

Marcusm

Your father in law is your agent in the situation you describe and the obligation mves from the tenant to him. If you're going to meet your obligations, he will hae little to worry about.

dandelion

The answer above is incomplete. Your wifes dad might be acting as the agent, but he is not your tax agent. To do this he has to apply to the revenue commissioners for a new pps number for your rental property. He then becomes personally liable to complete an annual return on your behalf and pay any tax due. In addition if the tenants are not comfortable having their landlord next door so to speak they may not stay more than a year. " We found tenants that we know" Sometimes it's better when you don't know them, more professional, sometimes tenants can take advantage of an existing relationship with their landlord. We charge a 10% letting fee, wouldn't do it for a cent less, most of our clients have been with us for years, many of the tenants have too. Hope ti works out well for you. Regards JC

murphaph

My advice is to ignore this silly law until Revenue tell you they have a problem with you doing the tax returns from abroad. Revenue often turns a blind eye to this silly rule, so long as the returns are well made and on time and any tax due is paid.

If you are an Irish citizen, you may still be able to claim a (small) portion of your tax credit (single/married credit, not PAYE though). Revenue allow you to apportion this credit according to the percentage share of your income that comes from Ireland.

Example:
-You have 10k taxable rental income (after all allowances) from Ireland.
-Your worldwide income (from your job abroad + Irish rental income) is 50k.
-You can apportion 1/5 of your single/married tax credit on your return (ca. 366 tax credit this year assuming single tax credit applies).

It all adds up

Marcusm

dandelion wrote: »

The answer above is incomplete. Your wifes dad might be acting as the agent, but he is not your tax agent. To do this he has to apply to the revenue commissioners for a new pps number for your rental property. He then becomes personally liable to complete an annual return on your behalf and pay any tax due. In addition if the tenants are not comfortable having their landlord next door so to speak they may not stay more than a year. " We found tenants that we know" Sometimes it's better when you don't know them, more professional, sometimes tenants can take advantage of an existing relationship with their landlord. We charge a 10% letting fee, wouldn't do it for a cent less, most of our clients have been with us for years, many of the tenants have too. Hope ti works out well for you. Regards JC

Just to be clear, merely agreeing to receive the income on behalf of the non resident person makes the father in law liable to account PERSONALLY for the tax on it - he does not become a tax agent (such as an accountant). Applying for a separate PPS etc is the administrative function. The father in law in the example cited will assume the liability to account for the tax by agreeing to be in receipt of the income on behalf of the non resident. In this context, he is no one's "tax agent" as might be understood to be the case in relation to your accountant. The father in law becomes PERSONALLY liable for the tax in this instance (albeit that he is entitled to acquit himself of the liability out of the incoem).

murphaph wrote: »

My advice is to ignore this silly law until Revenue tell you they have a problem with you doing the tax returns from abroad. Revenue often turns a blind eye to this silly rule, so long as the returns are well made and on time and any tax due is paid.

If you are an Irish citizen, you may still be able to claim a (small) portion of your tax credit (single/married credit, not PAYE though). Revenue allow you to apportion this credit according to the percentage share of your income that comes from Ireland.

Example:
-You have 10k taxable rental income (after all allowances) from Ireland.
-Your worldwide income (from your job abroad + Irish rental income) is 50k.
-You can apportion 1/5 of your single/married tax credit on your return (ca. 366 tax credit this year assuming single tax credit applies).

It all adds up

MAybe ask your father in law if he is willing to proceed on this basis; he is the one who has an obligation to file an income tax return in respect of the income received - he would be liable for any non monetary penalty. The easiest thing is to follow the rules as they are no more onerous than the process suggested by murphaph.

murphaph

Marcusm wrote: »

The easiest thing is to follow the rules as they are no more onerous than the process suggested by murphaph.

They are onerous for the agent of course and the agent then has to rely on your knowledge of the tax code or go and check it all out themselves to be sure they are not leaving themselves open to prosecution later.

Submitting the return yourself means any flak comes your way, and not to the agent.

Marcusm

murphaph wrote: »

They are onerous for the agent of course and the agent then has to rely on your knowledge of the tax code or go and check it all out themselves to be sure they are not leaving themselves open to prosecution later.

Submitting the return yourself means any flak comes your way, and not to the agent.

A non resident individual is not chargeable to tax in his own right and does not have standing to complete and file and income tax return in the manner you suggested. It might be the case that the Revenue processes the return (as that amounts to typing it into a computer or accepting one submitted via ROS), however, that will not relieve the father in law (in this instance) from his obligation to file a return as the agent in receipt of the chargeable income.

murphaph

Marcusm wrote: »

A non resident individual is not chargeable to tax in his own right and does not have standing to complete and file and income tax return in the manner you suggested. It might be the case that the Revenue processes the return (as that amounts to typing it into a computer or accepting one submitted via ROS), however, that will not relieve the father in law (in this instance) from his obligation to file a return as the agent in receipt of the chargeable income.

Then the rent should be lodged by standing order to the OP's account. The FIL can just check the place now and then.

The bit in bold is totally incorrect however! Non-residents are most certainly chargeable persons for all sorts of taxes and as such are REQUIRED in many instances to file a return! rental income is the odd man out with this weird deduction at source rule.

Marcusm

murphaph wrote: »

The bit in bold is totally incorrect however! Non-residents are most certainly chargeable persons for all sorts of taxes and as such are REQUIRED in many instances to file a return! rental income is the odd man out with this weird deduction at source rule.

There is a distinction with a difference; the Irish source income of a non resident is chargeable to Irish income tax but the assessment is raised in the name of the branch, agency, receiver, factor or manager. There must be an Irish resident on whom the assessment is raised in respect of the non resident's income. This aspect has not changed since (I think) the Finance Act 1918.

murphaph

Marcusm wrote: »

There is a distinction with a difference; the Irish source income of a non resident is chargeable to Irish income tax but the assessment is raised in the name of the branch, agency, receiver, factor or manager. There must be an Irish resident on whom the assessment is raised in respect of the non resident's income. This aspect has not changed since (I think) the Finance Act 1918.

Are you suggesting an non-resident Irish IT contractor, resident in Germany (for example), contracting to a company in Ireland for 5 months of a tax year. would need an agent to file his form 11 to Revenue?

The form 11 has a box to tick if you are non-resident!

It's only rental income that Revenue applies this silly agent rule to. I can own a company in Ireland and file my own tax return for the income extracted from that company as a non-resident. I don't need any agent to file my return for me.

Marcusm

murphaph wrote: »

Are you suggesting an non-resident Irish IT contractor, resident in Germany (for example), contracting to a company in Ireland for 5 months of a tax year. would need an agent to file his form 11 to Revenue?

The form 11 has a box to tick if you are non-resident!

It's only rental income that Revenue applies this silly agent rule to. I can own a company in Ireland and file my own tax return for the income extracted from that company as a non-resident. I don't need any agent to file my return for me.

The OP was having it paid to his father in law who would be his agent. You suggested/promoted that the FiL should ignore his own obligations. I explained that this was not possible. IF the income is not paid via the father in law, a different situation exists - the law assumes that the tenant will deduct tax which is not often the case.

You are confusing matters with issues relating to non resident contractors who while here are directly exercising a trade assessable under Case I of Schedule D rather than a non resident in receipt of income assessable under Case V of Schedule D. The position of a non resident in receipt of distributions from an Irish resident company are further complicated as, in your case, the Ireland/Germany Double Taxation Agreement will exempt them from the charge to Irish tax except to the extent that they are connected with a permanent establishment in Ireland (which I suspect is not the case).

You cannot simply read across from the taxation treatment of one source of income to that of another and encouraging the FiL in this isntance not to file a return is to expose him to penalties which, depending on his own relationship with Revenue, might actually be pursued.

In relation to dividends from your own Irish company I suggest that you speak with your Irish tax adviser if you have one as if you are paying Irish tax on them while a resident of Germany, it is likely to be unnecessary.

murphaph

Marcusm wrote: »

You are confusing matters with issues relating to non resident contractors who while here are directly exercising a trade assessable under Case I of Schedule D rather than a non resident in receipt of income assessable under Case V of Schedule D. The position of a non resident in receipt of distributions from an Irish resident company are further complicated as, in your case, the Ireland/Germany Double Taxation Agreement will exempt them from the charge to Irish tax except to the extent that they are connected with a permanent establishment in Ireland (which I suspect is not the case).

I'm not confusing them Marcus. I simply read your post that suggested that any non-resident submitting a tax return in Ireland needs an agent to do so and responded to that.

If you are just talking about rental income, then it wasn't clear to me.

IMO the OP should have the rent lodged to his own account and leave his FIL out of it altogether and submit his own form 11 returns, paying his preliminary tax and balancing amounts every year and Revenue will likely leave him well alone.

If his FIL keeps taking the rents, then yes he should be doing the returns. My point is that he shouldn't be taking the rents or doing the returns. It is not strictly kosher, but many many LLs do it and Revenue are aware of this and turn a blind eye.

Marcusm

murphaph wrote: »

I'm not confusing them Marcus. I simply read your post that suggested that any non-resident submitting a tax return in Ireland needs an agent to do so and responded to that.

If you are just talking about rental income, then it wasn't clear to me.

IMO the OP should have the rent lodged to his own account and leave his FIL out of it altogether and submit his own form 11 returns, paying his preliminary tax and balancing amounts every year and Revenue will likely leave him well alone.

If his FIL keeps taking the rents, then yes he should be doing the returns. My point is that he shouldn't be taking the rents or doing the returns. It is not strictly kosher, but many many LLs do it and Revenue are aware of this and turn a blind eye.

It is the case that Irish income tax in respect of non residents must (in orer to be enforceable) be assessed in the name of a branch, agent, receiver factor or manager. THis is becasue the historical position has been tha tit is impossible to recover tax from persons wholly located overseas. You refer to rental income as if this is one of the minor areas in which Irish income tax impacts on non residents. In fact it is probably the most significant.

Other than in the cases of non residents (generally Northern Ireland based) exercising employments in Ireland where the tax is collected under PAYE, non resident individuals are not generally assessable to Irish tax other than in respect of rents. (There are theoretical liabilities for residents of a small number of countries in respect of interest and dividends and even then the Revenue has given up on collecting that liability - to the extent that they have arrangements to pay the interest and dividends without withholding tax even where there is a residual income tax liability.)

The extent of the charge to Irish income tax in respect of non employees thereby extends only to rents (in practice). The point in insisting that an Irish resident takes responsibility for the tax is to make it easy to collect.

If I understand your position you are an Irish citizen resident in Germany in receipt of Irish rents from your former home but also a director/employee of an Irish company providing software/IT services to Irish clients and which involves some trips to Ireland. If you are paying full Irish income tax on your employment income plus and dividend income from the company, I suspect that you are paying far too much Irish income tax (and possibly too little German tax) but that is a matter for you.

We have been on quite a diversion here ....

JustAThought

Simple non tax expert /idealogue answer; NO!

Most people who rent just get on with things.

Estate/Letting agents don't file tax returns ; nor give any guarantees ; two people I know where stung very badly living abroad & thinking all was fine ; one company wasn't paying into their bank account & they heard it from the papers that they were in default ; 6 months mortgage gone forever. Another collected the rent but when there was a tenant problem backed away & declined them as a client ; breaking agreement & leaving them to have to engage solicitors & go to court to get resolved. Who needs that hassle?
Your father next door sounds the perfect solution. He can collect the cash ; lodge it to your account & you can file online tax returns ; like the tens of thousands of other landlords do , by themselves; without any complicated philosophical tax debates.

dandelion

To file the tax return he needs a NEW PPS number. He is paying tax abroad, the revenue know this as he is not in the system in Ireland. They don't allow you to use your original pps number, your (tax) Agent has to apply for a new one and then the revenue hold him liable for any taxes due. Once you get your new PPS number you receive your rent in full without deduction and you pay and file at the end of the year as is normal. It doesn't matter after who files the return but the Tax agent is liable for any underpayment. I don't think it's wise to offer advice on subjects of which you have scant knowledge and it's not fair on the person posting the original question.

Pawwed Rig

To answer the Ops question, Yes in this case an estate agent sounds like it would be a waste of money.

Re the Tax thing. If you do a return and pay tax on the income there will be no issue.
Legally the tenant (or your agent) is obliged to withhold 20% and forward to Revenue. In practise as long as the tax is paid Revenue are happy.

bigbadcon

Hi folks,

Thanks for the replies, at this stage we have decided to not use an estate agent and are going to get the rent paid directly into our account by the tenants without any involvement from my father in law. I might get him to pop into the house every so often to check on the place ( at agreed times with the tenants of course)

I have an accounts company that will do the tax return for me and make sure everything is in order with my tax affairs.

If things become a hassle with the tenant in future I may consider using an estate agent but for the mean time we're going to try not using one...

Mrs OBumble

Good luck.

Personally, I'd regard the tax issues as the least of the reasons to have an agent.

Is your father going to deal with maintenance issues - including ones that occur at 3am. Sorry, but even 4 year old houses can have these.

What about if the tenants stop paying their rent, start anti-social behaviour (domestics at 3am) - even if you know them, it's possible that you may not know them as well as you think once money becomes involved.

What if the tenants leave for reasons outside their control, and new ones must be found. Is your father going to do move-out inspection, the arguement about maintenance reqired, advertising for new tenants, interviews, reference checks, credit checks, move-in inspection etc.

fyi - I am the owner of a house that is located overseas. It's a little older than yours (20 years), and I don't have a relative living next door. But I regard my property manager as worth their weight in gold - or at least the 11% commission that I am paying them.

murphaph

Mrs OBumble wrote: »

Good luck.

Personally, I'd regard the tax issues as the least of the reasons to have an agent.

Is your father going to deal with maintenance issues - including ones that occur at 3am. Sorry, but even 4 year old houses can have these.

What about if the tenants stop paying their rent, start anti-social behaviour (domestics at 3am) - even if you know them, it's possible that you may not know them as well as you think once money becomes involved.

What if the tenants leave for reasons outside their control, and new ones must be found. Is your father going to do move-out inspection, the arguement about maintenance reqired, advertising for new tenants, interviews, reference checks, credit checks, move-in inspection etc.

fyi - I am the owner of a house that is located overseas. It's a little older than yours (20 years), and I don't have a relative living next door. But I regard my property manager as worth their weight in gold - or at least the 11% commission that I am paying them.

My property is looked after by a family member. Same tenants the last 5 years. I would have been throwing away money with an agent. If the FIL is happy to manage, then I wouldn't look a gift horse in the mouth. If it's too much for him later, an agent can always be used then.

BTW, an agent will be useless if the tenants decide to stop paying rent or become anti-social. Many just want the easy money and will as much as walk away as soon as the going gets tough.

Mrs OBumble

murphaph wrote: »

BTW, an agent will be useless if the tenants decide to stop paying rent or become anti-social. Many just want the easy money and will as much as walk away as soon as the going gets tough.

An estate agent who makes most of their money from selling property might do that.

A property manager who makes their money from managing rental properties won't.

I'm glad it's worked for you without one. However I know it doesn't work for everyone, and believe that it's important to tell both sides of the story.

Personally I would not want to put a friend or relative having to deal with tenancy sh*t just to I could make money renting out my house.

bigbadcon

The way Im looking at it is this...

If in 6 months or a years time its becoming a hassle managing the property I will get an estate agent to take over the management of the property.

If it is no hassle at all then I wont have wasted money on an estate agent.

Im not expecting my father in law to do anything relating to the house except maybe in go and inspect once every so often.

The tenants will have our contact numbers directly and if this turns out not to be an ideal situation I will get a agent involved.

JustAThought

Sounds like an estate agent to me. Oh - sorry " property 'management' agent".

Like the thousands of " estate management agents" that have sprung up effectively unregulated all over Dublin & are unregulated ; estate agents are now branding themselves " management agents" . My experience - and I've rented out for over 6 years now - is that the gaps in their service offerings & delivery are big enough to sink the titanic . A reappraisal this year of the actual product /"management" offerings of five so called " big" names in my area showed catastrophic basic gaps - you just have to clearly read & ask the correct questions .

And the percentage is chargeable PER tenant found - so if they clear a tenant, who moves in & skips or leaves a few months later either having paid their rent or not ; they will charge you the e800 or e1000 fee again to find another tenant. Ditto if you somehow manage to evict them or move them on for breech of contract ; like ,well, not paying the rent. That'll be another e800 or so.

The emergency lines of the big five ring & take messages ; but are maNNED by office staff : who work 9-5 or so.

Real Estate agents, oops sorry " management agents" cannot do police background or immigration searches, nor do they do " professional " audit checks like a company can ; they have no access or authority (& rightly do; arguably) so they ring the friend who says they're OK/great tenants etc ; you move them in....

Two of the houses on my street are " managed" by big brand real estate agents : dreadful events allowed to continue night after night ; multiple letters to REA from neighbours, neighbourhood way h etc ; outcome: nothing done.

Just google manager company problems & that will give you a taste ; and that's just the tip of the iceberg. Same families, same businesses, different tags; I wouldn't waste a penny on them.

Mrs OBumble

Ok - so the setup I have overseas is clearly a lot better service than you get here. Maybe there's a gap in the market for someone :-)

FWIW, I pay a % of every week's rent, so it's in the agent's interest not to change tenants (far less work for them to just keep a current one). They do 1/4 ly inspections, post me a written inspection report and put a set of photos onto a secure website that I can look at. They do credit checks and reference checks with employers and previous landlords on any serious prospectrive tenant. These are quite legal if the tenant agrees in writing - and anyone who doesn't agree won't be offered a tenancy! They monitor rent payments daily, and if a payment is just one day late start the formal process that would later be needed - and because they're pros, they have all the right legal bits in place to make sure that court actions succeed. I had quite a major maintenace issue (leak, leading to discovery of defective pipework throughout the property), and they managed the whole fix-up and proper repair job for me - and I've heard from a neighbour in the same complex that mine cost a good deal less than what some others cost.