New rules for landlords who are living abroad

This week Revenue have released details of changes they are making in relation to how non-resident landlords receive rents. 

Please note these changes are due to take effect quite quickly from 1 July 2023, when use of a new online system called NLWT becomes operational.

 

Existing System for non-resident Landlords

Until now, non-resident landlords were supposed to follow 1 of 2 options:

1. Appoint a collection agent in Ireland to collect rents on your behalf, with no deduction or withholding of tax.
2. Your tenant directly deducts 20% of your monthly rent and gives it to Revenue.

Revenue offered some level of flexibility around the above, so long as tax returns were being filed, and the correct tax was being paid.

We are now advised that Revenue flexibility is withdrawn from 01 July 2023, and strict implementation of the above will be required.

 

New Non-Resident Landlord Withholding Tax (NLWT) System

The new NLWT system will enable tenants or collection agents to make Rental Notifications (RN) when making payments to a non-resident landlord. This notification and accompanying payment, needs to be submitted within 21 days of paying the rent to the non-resident landlord.

The system is available to the tax agent, the collection agent, the landlord and the tenant. Landlords will be able to claim any withheld credits on their annual tax return.

You are required to give your collection agent or tenant your rental property’s Local Property Tax ID number and PPS number to allow them to use the new system.

 

What do I need to do if I live abroad and rent out a property in Ireland?

First of all, you will need to decide if you are going to strictly implement the existing system or switch to using the Non-Resident Landlord Withholding Tax (NLWT) System.

No matter which option you choose you will need to decide whether you are going to appoint a collection agent, or have your tenant deduct the tax (this may not always be practical).

 

Option 1 - Collection Agents

A collection agent is an Irish resident who collects the rent on your behalf. They may be an estate agent, or property management company, or an individual you nominate.

What will the collection agent have to do?

• Under the existing system, a collection agent can be nominated using Form NRL1, and that collection agent collects rent and has no withholding requirement. The collection agent will be accountable for the annual tax return and the payment of tax.
• If using the Non-Resident Landlord Withholding Tax (NLWT) System, in advance of receiving rent, collections agents will need to log into the NWLT system to report a rental payment. They will then need to deduct and withhold standard rate income tax from rents. They will no longer be responsible for filing tax returns in respect of those lettings.

 

Option 2 - Tenants

If you do not engage a collection agent, you may have your tenant withhold the tax due from the rent.

What will the tenant have to do?

• Using a strict implementation of the existing system, the tenant needs to withhold 20% of gross periodic rents, and pay it to Revenue. Form R185 documents this step and a copy of this form is given to both Revenue and the landlord. 
• If implementing the online system your tenant needs to use the new NLWT system on their MyAccount portal to report a rental payment, and also to deduct 20% of the total rent due and pay it to Revenue. There will be new functionality added to MyAccount to allow tenants use this system.

 

Filing the tax return

Under the old system, there was an onus to file tax returns with the collection agent or tenant. If you implement the new system you will be responsible for filing your tax returns, whether you are an individual or trade through a company.

Please contact us if can be of assistance when filing tax returns. 

 

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The changes outlined above are significant for non-resident landlords. This new system is a substantial change for non-resident landlords to familiarise themselves with. Even if the existing system is used, flexibility is withdrawn from 01 July 2023 and everyone must adhere strictly to the system.

 

 

Date published 12 Jun 2023 | Last updated 28 Jun 2023

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.