Tax laws constantly change in a landlord’s world, but what does this mean for you as a non-resident corporate landlord in Ireland?
Vital info for non-resident corporate landlords beginning 1 January 2022
Before the start of 2022, non-resident corporate landlords in Ireland were required to pay income tax at a rate of 20% on their rental earnings. Now, from 1 January 2022, the Finance Act 2021 requires non-resident corporate landlords to pay a corporation tax on their rental profits at a rate of 25%.
The BIG change for a non-resident corporate landlord in Ireland: In place of a 20% income tax is a corporation tax of 25%.
A non-resident corporate landlord should register for corporation tax with effect from 1 January 2022. In many but not all circumstances, your registration for income tax should be cancelled. However, if you have other Irish income tax liabilities, you may not need to cancel your income tax registration.
Please note: The tax deductibility of expenses related to rental properties will not change.
Non resident landlords Ireland and the Finance Act 2021?
Finance Act 2021 of Ireland was signed on 21 December 2021. This act covers many aspects, but an important one includes tax provisions to provide support to companies as their businesses continue to encounter unprecedented challenges, mainly due to Covid-19.
Finance Act 2021 transfers non-resident corporate landlords into the Irish corporation tax system, whereas before these landlords were only part of the corporation tax system if they traded in Ireland through a branch or an agency.
Under this new act, a capital gains tax is no longer applied to chargeable gains for non-resident corporate landlords, but instead corporate landlords are subject to corporation tax on their chargeable gains.
Find the full Finance Act 2021.
Taxation of non-resident landlords and how these new changes will be integrated?
In order to help non-resident corporate landlords with the transition from income tax to corporation tax, Revenue will allow rental losses and capital allowances from the income tax system to be carried through to the corporation tax system.
Also, if a non-resident corporate landlord no longer owns a property for which it previously retained capital allowances before 1 January 2022, the balance or charge will be adjusted, taxed or deducted, at the previous rate of 20% rather than the new rate of 25%.
If a non-resident corporate landlord paid a preliminary income tax for 2022, this may be transferred to a preliminary corporation tax, but an official request submitted to the Irish Tax Authorities is required. For non-resident corporate landlords with an accounting period ending between 1 January 2002 and 30 June 2002, you have until 23 June 2022 to pay a preliminary corporation tax if the payment is submitted through Revenue Online Service (ROS).
If a collection agent is registered for income tax in relation to a corporate non-resident landlord, this agent must also register for corporation tax under a new PPS number for the collection. When a collection agent is used, the tax reference number should be the same as the non-resident landlord’s tax reference number. When both landlord and collection agent are registered for corporation tax, the same pay and file rules (as in the income tax regime) apply.
If a collection agent fails to submit an annual corporation tax return, to file any other obligatory form, or to pay a tax liability on behalf of a non-resident corporate landlord, this collection agent will be responsible for any penalties, surcharges, or interest accrued.
Additional changes for non-resident corporate landlords in Ireland
- Interest Limitation Rules
- Entering the corporation tax regime
Ireland introduced the Interest Limitation Rules as part of Finance Act 2021 and these rules bring certain changes to non-resident corporate landlords. Put in simple terms, Interest Limitation Rules limit the rate of interest deductions and limit the amount of allowable net borrowing costs to a maximum of 30% for international companies.
Learn more about Interest Limitation Rules.
What does it mean to be part of the corporation tax regime?
For more guidance, refer to the Irish Tax and Duty Manual.
Non-resident corporate landlords are now taxed by accounting periods (corporation tax regime) rather than years of assessment (income tax regime). A new accounting period for tax purposes will begin for corporate landlords starting 1 January 2022.
The key takeaway from this blog is that where a non resident is earning rental income in Ireland taxation on profits will increase from 20% to 25%. The new amendment will also result in non resident Irish companies being chargeable for the disposal of Irish property. These charges will fall under the umbrella of the current corporation tax system. Whilst the rate of tax on such gains will remain the same (i.e 33%), these companies will now be obligated to file and pay under the corporate tax system.
See our post on how to avoid 20% tax deductions on Irish rent as a non-resident landlord and our guide to tax requirements for non-residential landlords.
Non resident corporate landlords in Ireland and who to go to for advice?
It goes without saying that taxation no matter what the sphere can be a very complex and difficult area, this one of the reasons why you should consult with expert financial planners.
Here at SCK accountants we have a team of financial experts who are dedicated to mitigating our clients tax burdens.
We can help you!
If you have further questions or need some guidance, please contact us. [insert link to company contact info] We are here to help and to provide answers about the new non-resident corporate landlord tax rules and any other questions you may have regarding this development. We also have a guide for expats looking to rent out their homes in Ireland.