Sick with worry - I'm a non-resident landlord - need advice

Lillyskye

Hi,

I could really do with some advice. I bought my apartment in 2007, obviously it is now in huge negative equity. I met my partner soon after I bought it and then in 2009 he lost his job and left the country.

I joined him in 2010 thinking naively that we would be back in a year. I rented my place out to my sisters and didn't think anything of it. A year ago my sisters moved out and I started renting to unknown tenants.

Now I'm left in a tricky situation. I am not paying tax and am claiming the tax back (I'm saving that in just in case they need it back). I would like to go legit and pay all taxes but I'm terrified that I'll loose my tracker mortgage!!! Is this a possibility if I tell the tax office I am no longer resident?

If I don't go legit how will I pay the new property tax?

I could really do with some good advice.

Sorry about the long winded email!

Victor

The tax situation has nothing to do with your tracker.

Talk to an accountant about the tax situation. Ireland has double taxation agreements with quite a few countries, so the tax you pay in one country is off-set against tax liabilities in the other.

Your tax liability would be rent, less expenses (insurance, repairs, decoration, etc.) and the interest part of the mortgage, however you need to be registered with the www.PRTB.ie to write off the interest.

Lillyskye

Thanks for your quick reply!


So if I start paying tax on the rent etc the bank won't be notified?

Will they not notice that I stop getting the TRS allowance to my account?

Obviously losing the tracker would be nightmare.

*I'm living in Dubai, thankfully we don't pay tax here.

StillWaters

Read your mortgage contract. It may be that there is no stipulation about it having to be your PPR.

NIMAN

You have 2 choices, either continue as you are or else come clean now to Revenue and pay back whatever you owe them, and then make tax returns each year going forward.

3DataModem

I will tell you the same thing I have told plenty of others here.

I have yet to hear of a SINGLE confirmed case where a bank forced a mortgage holder off a tracker due to renting out their former PPR.

Rumours, conjecture, but not a single confirmed case.

Bigcheeze

You haven't been caught up until now, so I'd say if you start declaring it going forward, the Revenue won't look at the history. They tend to go back through history when they've caught someone.

Victor

Lillyskye wrote: »

*I'm living in Dubai, thankfully we don't pay tax here.

Then you would be liable to the Revenue Commissioners for the full amount of any tax due.

P_1

Are the tenants holding back the tax and paying it directly to the Revenue?

AFAIK when you're a non-resident landlord you don't actually physically pay the tax, the tenants do.

Lillyskye

My tenants don't know I'm non-resident. I didn't realise that there were implications for them.

Will definitely try come home in the next month or so and clean all this up.

Might try tell tax office I'm leaving Ireland now and see what happens?

Good to know I won't lose the tracker...fingers crossed.

Pawwed Rig

Your tenants are ultimately liable for the tax as your sisters are for the tax before then. However who is currently collecting the rent? Where is the rent paid to?
Also consider if you are claiming mortgage interest relief on the mortgage.

If you pay the back tax you may be liable to interest and penalties but they shouldn't be too much.
Bear in mind there are alot of things you can write off against rental income such as your mortgage interest * 75%, 12.5% of the cost of the furnishings per annum etc etc

You should be aware of the NPPR. If you have never paid it then the penalties can be alot. It costs €200 per year but for every month you are over due costs €20 (€240 per year). So if you are 3 years over due the penalties are currently accruing at €60 per month.

Also you should have paid the household charge and registered each tenancy with the PRTB.

Lillyskye

Thanks for the replies. NPPR looks frightening I never knew about it, I know now why I've been keeping my head in the sand.

I've paid the household charge. Rent is just paid to my account. I found tenant when I was home.

I haven't registered with the PRTB, just reading about it now.

Pawwed Rig

NPPR is a pain as it is not even deductible for tax. This payment can be made immediately through the website.
You will also be liable for the new property tax and you should familiarise yourself with the Residential Tenancies Act 2004
Also as you are late registering for the PRTB you will be charged double.
You need to sort this out as on another thread here a tenant is being chased by Revenue for not withholding tax from a non resident landlord.

Sounds like you need to talk to someone who knows what they are doing so I would suggest spending abit of cash on a tax advisor. The calculation is simple enough once you know the different rules but it is a steep learning curve if you have never filled out a tax return before (Form 11 btw).
If you have any other questions feel free to ask.

Being a landlord is no joke (I could tell you some horror stories) so you need to come up to speed pretty quickly.

Pawwed Rig

Bigcheeze wrote: »

You haven't been caught up until now, so I'd say if you start declaring it going forward, the Revenue won't look at the history. They tend to go back through history when they've caught someone.

If the tenant ever claims their tax credits for rent paid (which they can do at any point) then the OP could be in a world of trouble.

Lillyskye

A tax advisor seems like a good idea. There is a lot to consider. Seems like Ill be hemagoring even more cash out on this apartment.

Thanks for all the help.

Shane732

Lillyskye wrote: »

My tenants don't know I'm non-resident. I didn't realise that there were implications for them.

Will definitely try come home in the next month or so and clean all this up.

Might try tell tax office I'm leaving Ireland now and see what happens?

Good to know I won't lose the tracker...fingers crossed.

Chr*st don't do that. You need to speak to a tax consultant and get it sorted out.

odds_on

You have to provide the tenants with an emergency contact address/phone number (in case of breakages/damage for which you are responsible and a place to where legal documents (e.g. PRTB documents if a claim is made against you) may be sent.

Have you done this?

Who collected the deposit? How would a deposit be returned to the tenant?

I fear that your tax implications are only scratching the surface of your problems unless you have an agent (either family member or professional letting agent) in Ireland looking after your affairs here.

irishguy

3DataModem wrote: »

I will tell you the same thing I have told plenty of others here.

I have yet to hear of a SINGLE confirmed case where a bank forced a mortgage holder off a tracker due to renting out their former PPR.

Rumours, conjecture, but not a single confirmed case.

KBC bank did this to a colleague of time about 18months ago. She rang to change her address and they informed her she will be moved to an investment mortgage as its no longer her ppr. You have to be sneeky with the bank if its in your contract.

riclad

MY friend lives in the usa, she pays an agent,to collect rent, an accountant
to do all her irish tax returns,
ALL the fees are allowable against her rental income,as part of landlord expenses,HER rental income is her only irish income,rental income about 6k per year.The rent goes to her irish bank account i presume.
I Think her accountant charges about 300 euro per year approx.
BUT that just means she pays 300 less tax.
Her tenant,is 63 years old, i think the accountant just pays her tax each year,after expenses,insurance,repairs,agents fee,accountants fee,
She has no mortgage.
the tenant has to have a rent book,with landlord ,or AGENTS Adress ,phone no.
You can get a friend to act as an agent, or hire a professional agent.
A agent doesnt charge much, but if they have to find you a NEW tenant ,
in the future ,its 500euro approx,last time i checked.
You could simply ,hire an accountant,by phone ,email , First get a written
quote ,price per year,
get your accountant to register you as a landlord,sort out your taxes,
Ask him ,how much will you charge me,ie sort out last 2 years taxes.
First get agent,get him to register the tenancy with the prtb, so you can claim ,
interest relief on the mortgage.

Victor

riclad wrote: »

I Think her accountant charges about 300 euro per year approx. BUT that just means she pays 300 less tax.

Not quite. Someone receiving a rent / income of €6,000 would be paying very little tax. Paying €300 to the accountant might mean a tax saving of only 20% = €60.

riclad

I,M think she pays,about, 600 in total,to her accountant, and agent ,but
she would get 600 tax credits for that,
i,m assuming she ,d be liable for at least 700 tax per year, since she has no loans, no interest payments on that house.
she just told her accountant take care of all my tax ,es in ireland.
She has the same tenant the last 5 years.

Pawwed Rig

riclad wrote: »

I,M think she pays,about, 600 in total,to her accountant, and agent ,but
she would get 600 tax credits for that,

Victor is correct. She would not get €600 tax credit but rather a deduction from her gross rent which would be a saving of 600@20%. Also most agents charge a months rent for finding a tenant so depending on where the apartment/house is located €500 sounds a little low. A management company will charge a further months rent as payment per annum.

She may also be liable to USC on the rent income (but I would need to look that up)

Because she has an agent in Ireland the tenant does not need to withhold the tax at 20%

D3PO

The OP's tax liability might not be too bad even with interest and penalties but she needs to sort it. I dont think she need worry about losing her tracker its unlikely and as already said I dont actually knwo anybody it has happened to just urban myths so to speak.

But ouch they will be hammered for NPPR and penalties. OP get your NPPR in order ASAP your running up a bill of thousands here thats growing by the month.

riclad

the AGENT collects the rent, tenant living there 5 years,Deals with repairs ,if they are needed,ITS ,a house, no management company involved.
I thought if landlord spends 300 euro,on agent ,she would get 300 tax credits,ITS an expense ,why is it 20 per cent of 300?
i understand she pays 20 per cent tax ,approx.On the rental income.
Maybe she pays,500 ,per year, to agent, ill ask her next time i see her.
ARE YOU saying they,tax ,6k, minus 600 expenses.?
IF you take care of this matter,get agent,accountant, in the next,2 ,to 3 months, its likely
they probably wont charge you interest on tax owed,
But you need to speak to an accountant in eire ASAP, if house is in kerry, get an accountant who lives in kerry,and an agent in kerry.
THE smaller the taxable income,profit, the less likely the revenue will be tough on you.

Pawwed Rig

It is an expense against gross income rather than tax.
Say
5000 Rent received
-500 Agent fees
4500
@ 20%
900 Tax payable

rather than 5000@20% = 1000 - 500 (agent) = 500 payable

riclad

Yes thats what i thought,
RENTAL income minus expenses,
expenses might be mortgage payments,insurance,agents fees, repairs,
MY sister had mortgage ,10k, her rental income was 8k, her tax liability was zero in 2010.She had to pay council fee 300 approx.
ie she made no profit ,eg no tax was due.

ie profit per tax year ,after allowable expenses is taxed.
ie you might end up being taxed on 70 euro in theory .
BUT she had to register with revenue, pay an agent, make a tax return.every year.
she lived abroad, in the us,never made 1 cent profit.AT any time,on btl house.HOUSE was sold in 2011.
SHE paid an agent, as far as i know she never paid an accountant,just filled in a self assessment for every year.
SENT Revenue, bank mortgage statement,with,letter ,copy of rent reciepts,tax form, each year.
rent was deposited in her irish bank account each month .

SHE only registered with revenue ,on the 4th year of renting the house.
Mostly she handled things by email,she,d get a friend to collect ,letters,forms etc as needed,
which would be posted to the US.
She hired lawyer to sell the house, hasn,t been back in eire, since 2007.

SHE may as well,,pay her agent,accountant ,500 plus,cos it s just come off her tax bill.
IN theory, every landlord must,make a tax return,every year, even if theres no profit made,
ever,Thats the law.Even someone with 200k BTL,mortgage, and 11 k,rental income has to
fill in a tax return and send it to revenue office.

D3PO

riclad wrote: »

Yes thats what i thought,
RENTAL income minus expenses,
expenses might be mortgage payments WRONG,insurance,agents fees, repairs,
MY sister had mortgage ,10k, her rental income was 8k, her tax liability was zero in 2010.She had to pay council fee 300 approx.
ie she made no profit ,eg no tax was due.

ie profit per tax year ,after allowable expenses is taxed. WRONG
ie you might end up being taxed on 70 euro in theory .

You DO NOT pay tax on "profit" you pay tax on INCOME. Please get the terminology right especially in a thread where the OP has a very poor understanding of their obligations from a tax perspective.

Also mortgage payments are not tax deducatble expenses. MORTGAGE INTEREST (75% of it) is however.

riclad

IS there a limit ,on how much tax credits, you can claim in a tax year,
eg ,if someone has paid 10k, interest on the mortgage, in 2011,Can they can claim 7500 euro tax credits in that year.
AS I Understand it for the first 10 years ,most of the mortgage payments,is interest payments,
The OP,S bank will send her a statement, with details of the mortgage,
payments, interest payments, paid ,how much is owed on the mortgage ,
etc anyway.
The OP needs to hire an irish accountant to sort out her tax situation,in my opinion.
SO you are saying the OP pays tax on her irish income,
after all allowable expenses,eg insurance, 75 per cent of interest ,paid on the mortgage,etc are deducted .

Pawwed Rig

riclad wrote: »

SHE may as well,,pay her agent,accountant ,500 plus,cos it s just come off her tax bill.
IN theory, every landlord must,make a tax return,every year, even if theres no profit made,
ever,Thats the law.

I think you are really confusing the matter here. The 500 DOES NOT come off her tax bill. It is deducted from Gross rental income PRE tax.
Yes every landlord should make a return.

Not sure what

riclad wrote: »

Even someone with 200k BTL,mortgage, and 11 k,rental income has to fill in a tax return and send it to revenue office.

means.
The amount of the mortgage (200K) is completely irrelevant other than for the mortgage interest paid (as the previous poster said). By reading what you wrote it seems you believe you can deduct the mortgage from the rental income? In case the OP is confused aswell - YOU DEFINITELY CANNOT DO THIS. There are some section 23 properties that are treated differently but there is no indication that that is the case here.

riclad wrote: »

IS there a limit ,on how much tax credits, you can claim in a tax year,
eg ,if someone has paid 10k, interest on the mortgage, in 2011,Can they can claim 7500 euro tax credits in that year.

You cannot get a 7,500 tax credit. You can get a 7500 deduction from gross income (provided you are registered with PRTB).

riclad wrote: »

AS I Understand it for the first 10 years ,most of the mortgage payments,is interest payments,

It depends on what mortgage you have but generally a good proportion would be interest. 'Most' is a loose term which may or may not be the case

riclad wrote: »

The OP needs to hire an irish accountant to sort out her tax situation,in my opinion.

Agreed

riclad

Yes , i understand,as far as tax goes, its only the mortgage interest you pay that matters,eg you can claim ,75 per cent of mortgage interest paid in a tax year.
A professional accountant will go through this with the OP, and send the relevant documents ,and a tax return to the revenue .
IF the op chooses to employ an accountant to carry out this work,on her behalf.
The op can also go on www.revenue.ie,
search landlord tax mortgage , theres detailed information there.

See
http://www.revenue.ie/en/tax/it/leaflets/it70.html#section21
ITS, better, to register tenancy, with PRTB, first, then have the accountant, submit,all forms ,
reciepts, tax return, as required by law.

AS you cant deduct mortgage interest ,from income ,unless the tenancy is registered
with the PRTB.

see https://www.prtb.ie/

You might be better off to hire an accountant first, before you register with the prtb.
IT might take an accountant a week ,to get all the documents,forms,receipts, etc
before he,s ready to send in the tax return to the tax office
ITS likely ,he would advise you to register with prtb, first, before he fills in the tax return.

riclad

There,s useful info here,
http://www.paylesstax.ie/103-Property-Investors---Tax-on-Rental-Income-How-to-Calculate-Your-Rental-Income

Any accountant should be able to take care of your accounts, tax
situation.
MY Friend pays 400 euro per year, to an accountant to submit his taxes.
HIS accounts are quite complicated , he,d have at least 100 reciepts
,eg garage repairs,diesel,tyres, drivers insurance etc as hes a taxi driver.
They would be alot more complex, than a landlord s tax return , from one house ,that might have
20 reciepts,plus a letter from bank,stating mortage payments, interest payments.
and documents, re insurance, prtb etc
I think a financial adviser would be more expensive than an accountant ,usually they are employed by companys or persons with a high income.

A landlord can claim tax credits for the last 4 years,
eg insurance,interest on mortage,75 per cent.etc