I currently own two properties, one of which is my primary place of residence. Due to family commitments, I am going to have to relocate outside of the European Union.
Therefore, I intend to rent both properties out in their entirety. As the rent I currently receive on the property I am now renting out is taxed at a rate commensurate to my income in Ireland, when I am no longer earning an income in Ireland (ie I will have no taxable income in Ireland) how, or what percentage of tax is charged on the rental income on the property(ies)?
Income from renting out a property in Ireland as a non-resident landlord is taxable in Ireland and must be declared to Revenue. Payment into a bank account in the landlord’s name is treated as payment directly to the non-resident landlord, even if the bank account is within Ireland.
If you are a non-resident landlord, to pay tax on your Irish rental income you have two options:
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- engage the services of a collection agent (ie management company, estate agent etc)
- have your tenant withhold 20 per cent of the rent due and submit it to Revenue.
On July 1st, 2023, a new non-resident landlord withholding tax (NLWT) system came into operation. It requires tenants or collection agents to record tax withheld and pay it directly to Revenue using ROS. The tax is then credited to the landlord using a pre-populated entry in their own personal tax returns.
What this means for non-resident landlords:
- Non-resident landlords will be required to file an income tax return.
- A credit will be available to the non-resident landlord for the tax that has been withheld and paid directly to Revenue through the new online system.
What this means for tenants and collection agents:
- Collection agents/tenants are required to withhold and remit 20 per cent of the gross rental payment to Revenue via the NLWT system on ROS by making a rental notification.
- They must submit the rental notification and pay the accompanying tax withheld to Revenue within 21 days of making the rental payment to the non-resident landlord.
- The level of tax payable on the rental income depends on the amount of the rental income and what other sources of Irish income the taxpayer has.
- The rental income may fall into the lower or higher income tax bracket. Rental income is added to a person’s total Irish income for the year from all sources.
- The rental income is liable to income tax, universal social charge (USC) and PRSI. At the top rates of tax, the rental income can be liable to tax at 52 per cent or even 55 per cent (income tax 40 per cent, USC 8 per cent (or 11 per cent, where non-PAYE income exceeds €100,000).
- For a lower-rate taxpayer, the rates may be 28.5 per cent or lower (income tax 20 per cent, USC 0 per cent to 4.5 per cent).
- A non-resident landlord will be exempt from PRSI which is charged to Irish landlords at 4 per cent.
Suzanne O’Neill is a tax partner at RSM Ireland
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