Rental Income tax

JimmyMickey

Hi, I'm currently buying a property to rent out but not working or living in Ireland so I have no income here. I'm wondering what tax am I due to pay on the income, if any at all.! I will be taking in about 7k a year, I reckon about 4800 will be profit.! Can anyone tell me what tax I would be paying on €4800? Am I liable USC or anything else? Accountant can't give me a straight answer.! Thank you

athtrasna

JimmyMickey wrote: »

Hi, I'm currently buying a property to rent out but not working or living in Ireland so I have no income here. I'm wondering what tax am I due to pay on the income, if any at all.! I will be taking in about 7k a year, I reckon about 4800 will be profit.! Can anyone tell me what tax I would be paying on €4800? Am I liable USC or anything else? Accountant can't give me a straight answer.! Thank you

Who will be letting it for you? If using an agent or other person to collect rent you'll be liable for standard taxes (what country are you in, there may be a double taxation issue also) but if the rent is being paid to you directly the tenants are charged with deducting 20% and sending that direct to Revenue each month.

SteM

You pay tax on the income, not the profit as far as I know.

JimmyMickey

athtrasna wrote: »

Who will be letting it for you? If using an agent or other person to collect rent you'll be liable for standard taxes (what country are you in, there may be a double taxation issue also) but if the rent is being paid to you directly the tenants are charged with deducting 20% and sending that direct to Revenue each month.

Haven't decided yet, letting agent fees come in at about 1000 a year so might do it myself.! I'll be in the uk, but rent will be paid to an Irish account, I won't be getting the money sent to the uk so they won't know about it.! Would I not be taxed as if I'm only earning 4800 a year? Thanks again.! I would have thought I could only be taxed on the profit and not the gross?

BabySlam

SteM wrote: »

You pay tax on the income, not the profit as far as I know.

Typo here I think! You pay tax on profits of course.

SteM

BabySlam wrote: »

Typo here I think! You pay tax on profits of course.

So if your mortgage is 1000 per month and you rent your property for 1000 you pay no tax because no profit is made? Didn't know that.

JimmyMickey

SteM wrote: »

So if your mortgage is 1000 per month and you rent your property for 1000 you pay no tax because no profit is made? Didn't know that.

I think that's slightly different considering you are actually making a profit.! Not in the form of cash but instead you own €1000 euro more of your asset.! You are financially gaining.!

Mrs OBumble

If your accountant cannot give you a straight answer, then you would be best advised to get a new accountant.

Do not rely on randoms on the Internet for things like this.

The J Stands for Jay

JimmyMickey wrote: »

I think that's slightly different considering you are actually making a profit.! Not in the form of cash but instead you own €1000 euro more of your asset.! You are financially gaining.!

For residential property, only 75% of the interest is an allowable expense. If you get €1000 and pay a mortgage of €1000, you will have to pay tax. If the mortgage repayment was €800 capital repayment and €200 interest, your tax adjusted profit would be (ignoring any other expenses) €1000 - (€200 * 75%) = €850.
Assuming tax @40%, that means each month from the €1000 rent, you would have minus €340 in your pocket.

Of course you will have other expenses that could reduce the profit figure but this should show that the property investment decision isn't completely straightforward.

How you are taxed will depend on your domicile and if you're ordinarily resident in Ireland. A competent accountant should be able to answer this one in less than 30 seconds.

lcwill

I am in the same position as the OP and have been for a few years.

Non resident landlords pay 20% flat rate tax, no USC, no PRSI, and can deduct the same expenses as resident landlords. You still have to pay Local Property Tax too. Also check with an accountant where you live - you probably have to declare the income there too but may not have to pay any extra income tax if there is a double taxation treaty.

I live in Italy and they accept proof that I paid all taxes due on rental income and don't charge me double but I have to pay them the difference between the LPT and the Italian overseas property tax which is much higher.

You should nominate an agent to collect your rent and pay tax for you but I just registered for self assessment and deal with it all myself (I was advised to do this by both my accountant and letting agent separately).

sunnysoutheast

JimmyMickey wrote: »

Hi, I'm currently buying a property to rent out but not working or living in Ireland so I have no income here. I'm wondering what tax am I due to pay on the income, if any at all.! I will be taking in about 7k a year, I reckon about 4800 will be profit.! Can anyone tell me what tax I would be paying on €4800? Am I liable USC or anything else? Accountant can't give me a straight answer.! Thank you

What are you deducting from the gross to arrive at your "profit"?

The allowable deductions are outlined in Revenue Guide IT70. Note that most pre-letting expenses are not deductible against income but may be allowable against CGT when property is sold.

As a landlord who "lives abroad" (note that the Revenue use this term rather than resident etc.) the tenant is legally liable for withholding 20% of the gross rent and forwarding to Revenue unless you have an Irish-resident collection agent. Doesn't matter if rent is paid to an Irish account. You can then make a return where your expenses and capital allowances are taken into account and you will receive a refund of tax overpaid.

As regards taxation the position is complex but as a rule for Ireland there are no tax credits, IC is 20%, no PRSI and I don't think USC will be payable on the amounts you have outlined. Your country of residence may apply tax treaties, remittance basis etc.

May be worth getting an accountant - obviously not the one who didn't seem to understand the basics - to do your first tax return. As a rule they will not be licenced to handle client money so can not act as collection agent but the fee is deductible.

ted1

SteM wrote: »

So if your mortgage is 1000 per month and you rent your property for 1000 you pay no tax because no profit is made? Didn't know that.

No if your repayment is 1000 and out of the your interest is 600 then you are exempt for 75% of that so 450, which means you kay tax on 550

JimmyMickey

sunnysoutheast wrote: »

What are you deducting from the gross to arrive at your "profit"?

The allowable deductions are outlined in Revenue Guide IT70. Note that most pre-letting expenses are not deductible against income but may be allowable against CGT when property is sold.

As a landlord who "lives abroad" (note that the Revenue use this term rather than resident etc.) the tenant is legally liable for withholding 20% of the gross rent and forwarding to Revenue unless you have an Irish-resident collection agent. Doesn't matter if rent is paid to an Irish account. You can then make a return where your expenses and capital allowances are taken into account and you will receive a refund of tax overpaid.

As regards taxation the position is complex but as a rule for Ireland there are no tax credits, IC is 20%, no PRSI and I don't think USC will be payable on the amounts you have outlined. Your country of residence may apply tax treaties, remittance basis etc.

May be worth getting an accountant - obviously not the one who didn't seem to understand the basics - to do your first tax return. As a rule they will not be licenced to handle client money so can not act as collection agent but the fee is deductible.

Thanks for that detailed reply, it's an apartment and rent would be about 625 p/m. Letting agent requires 2.5 weeks rent for sourcing a tenant and 8.5% on the rent every month to collect fee'a etc.! 1200 is due every year for block maintainence.! I reckon I would come out with about 4800 ish a year, not including wear and tear and assuming it's rented for 11 months of year , allowing 1 month down time between tenants.! IC? Not familiar with that term? Im
Aware the tenant would pay 20% to revenue, so that means that the 80% I get isn't subject to tax? If the tenant pays 20% of the gross, then I'm not taxed on my profits, I'll be taxed on the gross? Meaning I'd be paying more in tax? Thanks

CiboC

Get a new accountant.

It really isn't that complicated that a compitent accountant shouldn't be able to handle it for you.

vandriver

Thus should explain the withholding tax.

http://www.rentalincome.ie/rental-types/non-resident-landlords/

sunnysoutheast

JimmyMickey wrote: »

Thanks for that detailed reply, it's an apartment and rent would be about 625 p/m. Letting agent requires 2.5 weeks rent for sourcing a tenant and 8.5% on the rent every month to collect fee'a etc.! 1200 is due every year for block maintainence.! I reckon I would come out with about 4800 ish a year, not including wear and tear and assuming it's rented for 11 months of year , allowing 1 month down time between tenants.! IC? Not familiar with that term? Im
Aware the tenant would pay 20% to revenue, so that means that the 80% I get isn't subject to tax? If the tenant pays 20% of the gross, then I'm not taxed on my profits, I'll be taxed on the gross? Meaning I'd be paying more in tax? Thanks

Yeah sorry IC stands for Income Tax.

Personally I think a LL would be unwise to rely on a tenant making the return and paying over the 20% tax. Better to have a resident agent and do a proper tax return deducting capital allowances etc.

Fol20

SteM wrote: »

You pay tax on the income, not the profit as far as I know.

Its actually both..

You pay usc on income and tax on profit.

sunnysoutheast

Fol20 wrote: »

Its actually both..

You pay usc on income and tax on profit.

Not quite.

You pay USC on gross rental income - allowable expenses.
You pay IT and PRSI on gross rental income - (allowable expenses + capital allowances).

Obviously above is dependent on residency status, bandings etc.

Fol20

BabySlam wrote: »

Typo here I think! You pay tax on profits of course.

Dont you pay usc on gross profit and other taxes on net profit.