06/12/22

IRELAND: Landlords living overseas face tighter tax rules on rental income.

As published on irishtimes.com, Tuesday 6 December, 2022.

Irish landlords based overseas face financial penalties as the Revenue Commissioners tighten rules around rent collection and tax declarations.

The new requirements will not apply to overseas investment funds that have been active in acquiring much of Ireland’s build-to-rent stock in recent years as they are treated differently to individual small-scale landlords under Irish tax law.

Until now, Revenue has adopted a relaxed approach to rules that require landlords either to appoint collection agents in Ireland if they are based overseas or have their tenants deduct 20 per cent of the rent and return it to Revenue as a payment towards tax liabilities.

But in an update to its Tax and Duty Manual, Revenue has warned that landlords must be fully compliant with the rules from this year or face financial penalties. Landlords will typically file their 2022 tax return next autumn.

The rules will not apply to non-resident landlords whose rental income comes from local authorities under the Housing Assistance Payment (Hap) as the councils already send a fifth of the rent to Revenue.

The rigorous application of the rules will come as an unwelcome shock to many Irish living abroad and other non-corporate overseas landlords, according to experts at Rentax, a new rent collection agency service attached to tax advisory group Taxback.com.

“Many people are ‘overseas landlords’ because they have emigrated temporarily or permanently and have chosen to hold on to their Irish property. Sometimes it’s because the property is still in negative equity and sometimes it’s just to retain a connection with home,” said Marian Ryan, Taxback.com’s consumer tax manager, who is also manager at Rentax.

“To date, for the most part, overseas landlords filed their own tax returns for rental income – and Revenue has disregarded the need to appoint a local collection agent or insist that the tenant withhold 20 per cent of the rent. However, when filing their tax return next year, overseas landlords will have to be fully compliant with Revenue’s rules here and will suffer penalties if they are not.”

Revenue has allowed some wriggle room this year, although landlords filing returns were obliged in a new question to state whether tax was withheld by their tenant or whether it was a collection agent who was filling the form. Rentax says landlords were able to say tenants had withheld tax even this was not the case but they needed also to contact Revenue and let them know that they were aware of the new obligations and would be putting arrangements in place to ensure compliance with the new regime.

“Relying on a tenant to withhold a portion of the landlord’s rent and complete the necessary tax forms can be problematic,” Ms Ryan said. “It can be difficult for a landlord to know if a tenant has properly handled – and met – the tax obligations here, and indeed if the tenant has passed on the correct portion of the rent to the Revenue Commissioners.

“Such an arrangement can therefore be risky for landlords as they face penalties and interest if the right tax isn’t paid. Tenants, too, may be reluctant to take on this responsibility on behalf of a landlord.”