Wednesday, 27th April 2011
Paying rent to a non-resident landlord
Question: I'm just about to move into rented accommodation and I will be paying €1,000 a month. My new landlord lives in Australia. I've been told that I have to pay part of the rent to Revenue and that I am liable if I don't do this. Is this correct and how do I do this?
Answer: It is correct. If your landlord lives outside Ireland and you pay rent directly to them or to their bank account located in Ireland or abroad, you must deduct tax at the standard rate (20% in 2010) from the gross amount that you pay. This deduction is tax payable to Revenue from your landlord's income.
This means that you should deduct €200 from your monthly rent (?1,000 x 20% = €200). You pay your landlord the remaining €800 per month. The amount due to Revenue is the €200 per month that you deducted from the gross rent of €1,000.
You must account to Revenue for the tax you deduct from the gross rent. This means that you must pay the deducted tax to Revenue.
If you pay tax under PAYE, you can account for it by reducing your tax credits and Standard Rate Cut-Off Point. You can notify your local Revenue Office and ask them to arrange this. Alternatively, you can make a tax return (Form 12) and pay the retained amount to Revenue.
If you pay tax under self-assessment, you should include the details of your rent on your annual return (Form 11). A notice of assessment will then issue to you, showing the reduced credit.
If you fail to deduct tax from rent you pay to a landlord living outside Ireland, this means that you (and not the landlord) will be liable for any tax which should have been deducted. At the end of the year, you must give a completed Form R185 to the landlord to show that the tax has been accounted for to Revenue. The landlord can then claim this amount as credit on their annual Tax Return.
Further information is available from the Citizens Information Centre below.
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