New tax rules to come into effect for 20,000 overseas landlords this weekend

Revenue are set to launch a new system this weekend which is aimed at tightening the tax rules for up to 20,000 private landlords based overseas.

The new non-resident landlord withholding tax (NLWT) platform will require tenants or collection agents to withhold a portion of rent from their landlord each month and send it directly to Revenue through the portal. The rules will not apply to rented property owned by investment funds.

Currently, those who rent out a property in Ireland but are do not reside here must declare the rental income to Revenue and pay a standard rate of 20 per cent tax.

This can be done through an Irish based collection agent, such as an estate agent, solicitor or person nominated to act on the landlords behalf. The collection agent receives rent from tenants and files an annual tax return on behalf of the landlord.

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Alternatively, non-resident landlords can ask their tenants to withhold 20 per cent of rent and submit the withheld tax to Revenue by completing a Form R185 once a year with their personal tax return. In this case, a non-resident landlord will then also submit an income tax return at the end of the year.

Under the Finance Act 2022, however, a new system will come into effect from July 1st.

Accessing the NLWT platform through the Revenue Online Service or myAccount, collection agents and tenants will withhold 20 per cent of rent payments and pay this directly to Revenue as a Rental Notification each month.

Collection agents and tenants will no longer file returns with Revenue relating to the non-resident landlord’s rental income and it will be left to the landlord to file an annual Income Tax Return to reclaim any withheld credits they are entitled to.

Revenue have said that there are approximately 20,000 non-resident landlords receiving rental income in respect of properties located in Ireland.

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A spokesperson said that the new system should lead to “better compliance and customer service in this area”.

“The information provided through the RN will allow Revenue to identify the non-Irish resident landlord and correctly allocate a withholding tax payment to the relevant landlord. The information will also assist Revenue in pursuing any issue of noncompliance,” they said.

Siobhán O’Moore, tax director with professional services firm Mazars, said that while the new system might encourage compliance in the long term, introducing it within a short time frame and in the middle of the year is “going to cause a lot of headaches”.

“[Revenue] only released guidance in June and, now, it’s coming on stream on 1st July. They’re not giving an awful lot of time for people to get stuff into play,” she said.

“I think the next couple of years is probably going to be a bit of a nightmare because people won’t be used to it. The tenant who only had to submit one return once a year now has to go in 12 times a year to Revenue. For someone that’s only having to engage with Revenue because of being a tenant, it can be quite stressful for them,” she added.