Non-resident buying property in Ireland

b4bmm

I am curious whether anybody on here has done this or knows the ins and outs of doing it? I read through the other thread about it being the end for landlords and it all seems very doom and gloom. As a non-resident would I be excluded from USC and some other charges that are applicable to residents and how would a non resident be taxed?
Im just trying to get my head around all the potential charges I would be on the line for to make a realistic estimate of the return I might get so any factual advice would be greatly appreciated.

GGTrek

b4bmm wrote: »

I am curious whether anybody on here has done this or knows the ins and outs of doing it? I read through the other thread about it being the end for landlords and it all seems very doom and gloom. As a non-resident would I be excluded from USC and some other charges that are applicable to residents and how would a non resident be taxed?
Im just trying to get my head around all the potential charges I would be on the line for to make a realistic estimate of the return I might get so any factual advice would be greatly appreciated.

The only tax you avoid as a non resident individual landlord in Ireland is PRSI. That's all. You don't pay it because PRSI are social contributions.

You loose on the other side any personal or family or married allowance which for Irish residents would be like this: the first  X amount of income is not taxed.

Now if you NET rental income is high enough (approx above 40k for sole ownership or 80k for joint ownership) it might be worth owning the property through a holding limited company in a jurisdiction (almost any jurisdiction is better than Ireland) where corporate and personal tax rates are substantially less than 41%. In such case you will pay 20% tax to the Irish revenue on net rental  income and that's all for Ireland.  However you will have the additional costs of maintaining a limited company (a few thousands per year and the additional taxes to pay in the jurisdiction of you residence country when you withdraw money from the company).

Another big headache is trying to open a bank account in Ireland for a foreign company with no filing history. In my opinion an impossible task in the decrepit and uncompetitive Irish banking environment. You will need an Irish account since a lot of dumb/old/smart tenants don't know how to setup SEPA standing orders or plainly do not care/want and they will insist on paying cash at a branch.

As an individual owner, the only bank in Ireland that will entertain open a bank account for a non-resident is Bank of Ireland if you present yourself in person at one of their big branches in Dublin. Any other Irish Bank will refuse.

b4bmm

[font=arial, sans-serif]Thanks for the reply. I posted just to get the ball rolling and have looked into it a bit deeper now. As an example, what are the costs for an investment property I would be looking at from the time of purchasing a property and then onto maintaining/ongoing charges/taxes I would be Liable for with the property, If the Purchase price $140,000. [/font]

[font=arial, sans-serif]In no particular order;[/font]

[font=arial, sans-serif]1: I would be paying stamp duty would be 1%, so €1,400 there. [/font]

[font=arial, sans-serif]2: Legal fees can vary AFAIK, anywhere from 1-2% of purchase price, €1500-3000?[/font]

[font=arial, sans-serif]3- VAT, only applicable to new homes, so NA in my case. [/font]

[font=arial, sans-serif]4- property tax (LPT) ~€250 annually [/font]

[font=arial, sans-serif]5- surveyor costs ~€400[/font]

[font=arial, sans-serif]6- I think mortgage insurance is applicable for deposits of less than 20% of purchase price and amounts to maybe €250 p/a for €140k mortgage if over 20% deposit no mortgage insurance needed?[/font]

[font=arial, sans-serif]7- Home insurance, €500 p/a?[/font]

[font=arial, sans-serif]8- ongoing maintenance, €1000 p/a estimate, 3 bed two bath small semi detached? [/font]

[font=arial, sans-serif]Anything else I am missing from initial costs? [/font]

[font=arial, sans-serif]Then there is the taxes from rental income and USC. [/font]

[font=arial, sans-serif]Taxes are 20% up to €33,800, over this its 40%.[/font]


[font=arial, sans-serif]USC p/a is;[/font]

[font=arial, sans-serif]Standard rate of USC (2017)[/font]
[font=arial, sans-serif]Rate Income band[/font]
[font=arial, sans-serif]0.5% Up to €12,012[/font]
[font=arial, sans-serif]2.5% From €12,012.01 to €18,772[/font]
[font=arial, sans-serif]5%         From €18,772.01 to €70,044[/font]
[font=arial, sans-serif]8%         From €70,044.01 to €100,000[/font]
[font=arial, sans-serif]8%         PAYE income over €100,000[/font]
[font=arial, sans-serif]11% Self-employed income over €100,000[/font]

[font=arial, sans-serif]***Lets take a rental income of €13,000 which would make the USC somewhere around €70p/a. [/font]

[font=arial, sans-serif]Tax at 20% is 2,600 at €13,000 which isn't taking any deductions into account. Is there an estimate of what deductions I can expect over the course of the year? [/font]

[font=arial, sans-serif]Without deductions, annually;[/font]

[font=arial, sans-serif]250 LPT[/font]
[font=arial, sans-serif]500 insurance[/font]
[font=arial, sans-serif]1000 maintenance[/font]
[font=arial, sans-serif]70 USC[/font]

[font=arial, sans-serif]Total approx €1800. [/font]

[font=arial, sans-serif]13,000-2600 = 10,400 - 1800 = 8600. [/font]

[font=arial, sans-serif]So that almost 40% reduction but not including deductions so maybe 30% overall.[/font]
[font=arial, sans-serif]The start of this post is from my research factual but towards the end*** there are estimates.[/font]
[font=arial, sans-serif]Would love to see some cold hard figures to make a proper investment decision and some experienced input.[/font]

[font=arial, sans-serif]Thanks all........[/font]

Denny_Crane

The use of the $ sign makes me think US/Canadian investor. Bear in mind that Ireland really is the wild west when it comes to things many developed countries take for granted like credit referencing. Irish forum so it makes sense you're asking about Irish property, just don't limit yourself unless you've a very good reason for doing so.

foggy_lad

as you will be non resident have you deducted agents fees?

newacc2015

OP how much do you earn? If you earn any less than about €75k, a bank wont give you a non-resident mortgage

Denny_Crane

Denny_Crane wrote: »

Bear in mind that Ireland really is the wild west when it comes to things many developed countries take for granted like credit referencing.

Not questioning the accuracy of your post in any way so please do not take offence.

But in what way is credit referencing in Ireland the wild west?

MrMorooka

Correct me i f I'm wrong, but if you're a non-resident landlord, your tenants are required to withhold 20% of the rent and send it to Revenue themselves on your behalf. That's a complication you should be aware of.

Denny_Crane

Deleted User wrote: »

Not questioning the accuracy of your post in any way so please do not take offence.

But in what way is credit referencing in Ireland the wild west?

Wild west in relation to a few things not just credit referencing. I don't want to turn this thread, as it seems almost every single one does eventually into a political rant so we'll take credit referencing specifically.

In the US and to a lesser extent the UK if you don't pay your rent this can be recorded against your credit score. Poor credit score can lead to problems with many employers and with, of course, doing it all over again to another landlord, who are able to check your credit score. Ireland has extremely limited access to credit checks and IIRC it's only banks that can record anything against your credit.

As for accuracy please do question away! I'm always happy to be put right if I'm wrong, not only for my but the OP's benefit aswell.

murphaph

GGTrek wrote: »

The only tax you avoid as a non resident individual landlord in Ireland is PRSI. That's all. You don't pay it because PRSI are social contributions.

You loose on the other side any personal or family or married allowance which for Irish residents would be like this: the first  X amount of income is not taxed.

As an individual owner, the only bank in Ireland that will entertain open a bank account for a non-resident is Bank of Ireland if you present yourself in person at one of their big branches in Dublin. Any other Irish Bank will refuse.

Just a couple of points. Yes, PRSI is indeed the only tax you escape as a non-resident but it's not entirely correct to say you lose all tax credits as a non-resident. You are entitled to these reliefs (obviously not the PAYE relief) pro-rata as a percentage of your total worldwide income and if the Irish rental income is over 75% of total worldwide income you are entitled to the credits in full, of you are an Irish or other EU citizen. I personally claim these pro-rata credits in this way in ROS every year without issue. It was Revenue themselves who put me on to the fact you can claim these credits.

I wouldn't worry about opening an Irish bank account if you already have a SEPA one. I don't have an Irish one any more. I get by just fine with my German account these days. It was a bit rocky at the start but it's fine now. My German bank allows me to open up sub-accounts for each tenant with ease online.

If the OP happens to be in Germany he should know that Germany does not tax rental income derived in most EU countries, including Ireland.

b4bmm

MrMorooka wrote: »

Correct me i f I'm wrong, but if you're a non-resident landlord, your tenants are required to withhold 20% of the rent and send it to Revenue themselves on your behalf. That's a complication you should be aware of.

This is one way to do it or you can get a local to sort it out for you if you have someone you trust. They get issued a separate PPS number for the tax return in a situation like this as far as I'm aware.

foggy_lad wrote: »

as you will be non resident have you deducted agents fees?

Agent fees, real estate agents or what agent do you mean and what fees would they be?

newacc2015 wrote: »

OP how much do you earn? If you earn any less than about €75k, a bank wont give you a non-resident mortgage

Shouldn't be an issue.

Denny_Crane wrote: »

The use of the $ sign makes me think US/Canadian investor. Bear in mind that Ireland really is the wild west when it comes to things many developed countries take for granted like credit referencing. Irish forum so it makes sense you're asking about Irish property, just don't limit yourself unless you've a very good reason for doing so.

Where would you suggest investing as opposed to Ireland and why?

Denny_Crane

I think some quote tags might have got confused in the above.

Investing in property locally would be what I'd be more comfortable doing. However I've no basis for that other than my hebegebees!

b4bmm

murphaph wrote: »

GGTrek wrote: »

The only tax you avoid as a non resident individual landlord in Ireland is PRSI. That's all. You don't pay it because PRSI are social contributions.

You loose on the other side any personal or family or married allowance which for Irish residents would be like this: the first  X amount of income is not taxed.

As an individual owner, the only bank in Ireland that will entertain open a bank account for a non-resident is Bank of Ireland if you present yourself in person at one of their big branches in Dublin. Any other Irish Bank will refuse.

Just a couple of points. Yes, PRSI is indeed the only tax you escape as a non-resident but it's not entirely correct to say you lose all tax credits as a non-resident. You are entitled to these reliefs (obviously not the PAYE relief) pro-rata as a percentage of your total worldwide income and if the Irish rental income is over 75% of total worldwide income you are entitled to the credits in full, of you are an Irish or other EU citizen. I personally claim these pro-rata credits in this way in ROS every year without issue. It was Revenue themselves who put me on to the fact you can claim these credits.

I wouldn't worry about opening an Irish bank account if you already have a SEPA one. I don't have an Irish one any more. I get by just fine with my German account these days. It was a bit rocky at the start but it's fine now. My German bank allows me to open up sub-accounts for each tenant with ease online.

If the OP happens to be in Germany he should know that Germany does not tax rental income derived in most EU countries, including Ireland.

Could you expand more on your first paragraph with an example and some figures so I understand it clearly?
I already have an Irish bank account so I should be able to bypass the fact that I will need a tax agent or have to get a local I know to collect the rent, its something I would have to check out a bit more but this shouldn't be an issue for me.

Rental income would need to be declared and a tax return competed in the country it is earned on property is that not correct, so I would think in most countries with a double Taxation Agreement that it wouldn't be taxed twice, tax issue are not something I'm fully up to speed on, maybe you know better?
I have been in touch with an accountant but am waiting to hear back.

b4bmm

Denny_Crane wrote: »

I think some quote tags might have got confused in the above.

Investing in property locally would be what I'd be more comfortable doing. However I've no basis for that other than my hebegebees!

Returns would be much better in Ireland from what I see if chosen carefully, but this is why I want to get a complete and accurate picture of all the costs involved so I can make sure I'm not missing something.

Henry Ford III

Where are you resident OP? If there's a double tax treaty you may get credit for any Irish income tax paid.

Denny_Crane

b4bmm wrote: »

Returns would be much better in Ireland from what I see if chosen carefully, but this is why I want to get a complete and accurate picture of all the costs involved so I can make sure I'm not missing something.

Just be sure to factor in potential voids is my point really.

b4bmm

Henry Ford III wrote: »

Where are you resident OP? If there's a double tax treaty you may get credit for any Irish income tax paid.

Yes there is a DTA in place.

Denny_Crane

Denny_Crane wrote: »

Wild west in relation to a few things not just credit referencing. I don't want to turn this thread, as it seems almost every single one does eventually into a political rant so we'll take credit referencing specifically.

In the US and to a lesser extent the UK if you don't pay your rent this can be recorded against your credit score. Poor credit score can lead to problems with many employers and with, of course, doing it all over again to another landlord, who are able to check your credit score. Ireland has extremely limited access to credit checks and IIRC it's only banks that can record anything against your credit.

As for accuracy please do question away! I'm always happy to be put right if I'm wrong, not only for my but the OP's benefit aswell.

Not the wild west so, glad you acknowledge that.

murphaph

b4bmm wrote: »

Could you expand more on your first paragraph with an example and some figures so I understand it clearly?
I already have an Irish bank account so I should be able to bypass the fact that I will need a tax agent or have to get a local I know to collect the rent, its something I would have to check out a bit more but this shouldn't be an issue for me.

You need an agent if you are non-resident, or the tenant must deduct the 20% at source. It's a silly rule, but there you go.

To clarify the other thing by example (assumes you are an EU citizen) with made up figures:
-You have total worldwide income of 100k
-Your Irish rental income is 50k of that
-You are single
-The single tax credit is 1k

->You can claim 50% of the 1k credit (€500) when computing your tax liability.

If your Irish rental income was 75k or more of that 100k, you could claim 100% of the 1k credit.

For most people , myself included, the benefit is small as I have normal earned income and rental income from Germany, but better the couple of hundred quid a year in my pocket than Revenue's.

marsbar1

I didn't know you could claim any tax credit against rental income unless you are tax resident in Ireland?

murphaph

marsbar1 wrote: »

I didn't know you could claim any tax credit against rental income unless you are tax resident in Ireland?

Is that a question or a statement?

http://www.irishstatutebook.ie/eli/1997/act/39/section/1032/enacted/en/html#sec1032

embraer170

murphaph wrote: »

If the OP happens to be in Germany he should know that Germany does not tax rental income derived in most EU countries, including Ireland.

Could you you expand on that?

I would have imagined that someone resident in Germany has a full tax liability on all their worldwide income including rental (minus credits, where there is an tax treaty agreement).

Denny_Crane

Deleted User wrote: »

Not the wild west so, glad you acknowledge that.

I'm not sure how you got an acknowledgement of that from my post but to clarify in terms of property investment Ireland is worse than the wild west. There is almost no effective way of screening tenants it is extremely difficult to get problem tenants out. A analysis based purely on RoI would fail to take account of the climate for landlords.

<mod snip>

athtrasna

Mod note

Please post on topic or not at all

marsbar1

murphaph wrote: »

Is that a question or a statement?

http://www.irishstatutebook.ie/eli/1997/act/39/section/1032/enacted/en/html#sec1032

That says:
1032.—(1) Except where otherwise provided by this section, an individual not resident in the State shall not be entitled to any of the allowances, deductions, reliefs or reductions under the provisions specified in the Table to section 458 .

Irish tax seems to be very hard to get straight concrete info

murphaph

embraer170 wrote: »

Could you you expand on that?

I would have imagined that someone resident in Germany has a full tax liability on all their worldwide income including rental (minus credits, where there is an tax treaty agreement).

There's an exception for rental income (and a few other things involving leasing) generated in most (I believe for example not Finland) EU countries, including Ireland. It is neither taxed in Germany, nor does it increase the rate of taxation on your other taxable income (Progressionsvorbehalt).

murphaph

marsbar1 wrote: »

That says:
1032.—(1) Except where otherwise provided by this section, an individual not resident in the State shall not be entitled to any of the allowances, deductions, reliefs or reductions under the provisions specified in the Table to section 458 .

Irish tax seems to be very hard to get straight concrete info

Read (2) which says the bit you quoted does not apply to Irish or EU citizens!

marsbar1

OK. So as a UK citizen I am (until Brexit), an EU citizen then and I can claim this relief on my tax return? Going by your example I can claim 500 euro for the year? (I have only one house)

murphaph

marsbar1 wrote: »

OK. So as a UK citizen I am (until Brexit), an EU citizen then and I can claim this relief on my tax return? Going by your example I can claim 500 euro for the year? (I have only one house)

Yes, but be aware the credits are not huge to begin with and the PAYE credit is obviously not available to a non-resident. If you have a normal salaried job in the UK and just one rental property in Ireland, you'll not be getting much back but it's no extra work when doing the tax return so I do it.