"Tax Implications of Setting Up a Limited Company for Property Leasing and Renovations"

ourware

**"Tax Implications of Setting Up a Limited Company for Property Leasing and Renovations"**

I'm in the process of planning to set up a limited company with my mother to then go and lease her large commercial property and for me to lend funds to the newly formed LTD and renovate the property.

Afterward, we plan to sublet the property to multiple tenants. I've sought advice from accountants on this matter, and I understand that the income received by the new limited company won't be considered trading income, therefore subject to a 25% tax rate. Additionally, any accumulated funds within the company after 18 months might incur a 20% Close Company surcharge if not distributed.

I have two specific questions:

1. Is my understanding correct that the 25% tax rate applies after accounting for salary and expenses?

2. If my PAYE job salary is €25,000, and I receive €14,000 from the newly formed company, does the additional €14,000 simply become part of my total earnings (€39,000) and, consequently, be liable for the 20% tax rate?

I'd appreciate insights and advice from anyone with experience in similar situations or knowledge of tax regulations. Thank you!"

DFB-D

Your accountant will need to brief you on the max deductible salary you can draw before it is considered a distribution.

ourware

@DFB-D Thank you for the response I am familiar with what you are saying I believe it could be in the region of 15% under the pretence of "property management" but ultimately any figure beyond that is considered a distribution and therefore a dividend that then is Taxed at Dividend Withholding Tax at 25%?

Question, is this Dividend taxed separately to your PAYE salary? I don't believe that the remaining Sum is then added to your PAYE income & taxed again at the Marginal Rate of 20% Is it the case that there is a DWT credit that is applied?

My Mother no longer has a PAYE salary & all the income she would receive from the newly formed company is simply interpreted as salary.

She is currently receiving rental income from property that is simply in Her name along with her pension & it is all accepted as salary.