As of 1st July 2023, non-resident landlords in Ireland will encounter a new way for processing the tax on their rental income. This is due to the introduction of the Non-Resident Landlord Withholding Tax (NLWT) system. This guide aims to help you understand what these changes entail, their advantages and disadvantages, and the alternative options available. References for this guide include the revenue guidance available on the Revenue website and the updated Tax & Duty Manual, accessible here.
Key Points of the NLWT System
- The NLWT system brings a significant shift in the process of paying the 20% tax on rental income to Revenue. In the past, this tax was withheld by the tenant or handled by a Collection Agent appointed by the landlord.
- However, starting 1st July 2023, the tax can be directly paid to Revenue, either by the tenant or by the Collection Agent, via the new withholding tax platform. The non resident landlords will have visibility of tax payments made on their behalf through the platform.
- Importantly, where the NLWT system is operated:
- Tenants will no longer have to report this tax in their personal income tax return.
- Collection Agents will not be tasked with filing income tax returns for the rental income, rather the rental income would be reported in the normal way in the non resident landlords income tax return
- Non-resident landlords will be responsible for filing their personal income tax returns (and can appoint their collection agent, if the collection agent is a professional service provider, to do this on their behalf). The non resident landlords will be eligible to claim a credit for the tax withheld and paid on their behalf under the new system.
Pros of the NLWT System
- Streamlined tax administration & transparency: The NLWT system simplifies tax administration and eases the tax process for landlords. Landlords can login and see what tax has been paid on their behalf in real time.
- Enhanced tax compliance: By directing the tax payment straight to Revenue, there’s likely to be an improvement in tax compliance.
Cons of the NLWT System
- Transition to new system: Tenants and Collection Agents will have to get accustomed to the new withholding tax platform. Increased administrative workload for tenants or collection agents in making payments and submitting rental notifications through the system
- The 20% withholding tax may represent a cashflow obstacle for many non-resident landlords, particularly those who have borrowings on their property. In majority of cases, the taxes owing by the non resident landlord will be less than 20% of the gross rent, due to the availability of allowable expense deductions (learn more here), meaning that by the time the landlord files their tax return they will likely have overpaid on their taxes and will be due a tax refund from the revenue.
Non-resident landlords will need to decide whether they want their tenants to withhold and pay the 20% tax to Revenue under the new NLWT system, or whether they would like to appoint a collection agent instead – the collection agent can be a trusted friend or family member or a professional services provider, as long as they are resident in Ireland This decision will depend on individual landlord’s circumstances and preferences.
How SCKGroup Can Help
We aim to guide you through this new system, help you understand what it means for you, and assist with the filing of your personal income tax returns. We’re dedicated to simplifying your transition to the NLWT system and ensuring you’re fully compliant with the new rules.
For non-resident landlords whose tenants already withhold the 20% tax or those who have appointed a Collection Agent, no immediate action is required. Further information will be provided by Revenue shortly, and an updated Tax and Duty Manual will be published.
However, all other non-resident landlords should evaluate their options and decide their next course of action. Whether you prefer your tenant or a Collection Agent to manage the NLWT, we at SCKGroup are ready to support you in making this decision and managing your obligations under the new system.
Navigating the tax landscape as a non-resident landlord can be complex, but we’re here to help. For more details about our services, visit our website or get in touch with us today.
The implementation of the NLWT system marks a significant shift in the way non-resident landlords’ tax affairs are handled. Although it might seem like an added responsibility at first glance, it also offers an opportunity to streamline tax administration, ensuring a more efficient and transparent process.
However, landlords will need to navigate this change carefully, making well-informed decisions to ensure full compliance. This is where professional services, such as those offered by SCKGroup, can be invaluable.
Navigating Your Options
As a non-resident landlord, you now need to decide who should withhold and remit the 20% tax to Revenue under the new NLWT system – your tenant or a Collection Agent.
Should you wish to involve your tenant in this process, it’s essential to communicate the changes clearly and provide them with guidance on using the new withholding tax platform. It’s worth noting, however, that involving your tenant in your tax affairs might not be ideal for every landlord-tenant relationship.
Alternatively, a Collection Agent can handle this tax withholding and remittance on your behalf, allowing you to avoid involving your tenant in your tax affairs. A Collection Agent can be particularly helpful if you have multiple properties, ensuring all tax-related matters are handled efficiently.
The Advantage of Professional Assistance
Engaging a professional tax and property management firm like SCKGroup can greatly simplify your transition to the NLWT system. With a team of experienced professionals, we understand the complexities of tax regulations and can help ensure you comply with all requirements.
Additionally, we can provide comprehensive property letting & management services, offering a one-stop solution for your needs. With our assistance, you won’t need to worry about tax withholding and remittance or navigating the new tax platform. We will manage these aspects, giving you more time to focus on other areas of your life and business.
Embracing the Change
Change is often met with hesitation, and the introduction of the NLWT system is no different. It presents a new set of responsibilities and processes for non-resident landlords. However, with the right guidance and assistance, you can navigate these changes successfully.
The NLWT system is an opportunity to streamline your tax affairs, improve transparency, and ensure more accurate and timely tax compliance. As with any change, it’s crucial to understand the new system, consider your options, and make informed decisions.
The NLWT system marks a significant step forward in tax administration for non-resident landlords. With its introduction, landlords, tenants, and Collection Agents will need to adapt to new roles and responsibilities.
At SCKGroup, we’re committed to helping you understand these changes and navigate this new landscape effectively. Whether you need assistance understanding the NLWT system, help with filing your personal income tax returns, or require a reliable Collection Agent, we have you covered.
In conclusion, adapting to the NLWT system is a major move towards promoting transparency, simplifying tax compliance, and ensuring you, as a non-resident landlord, can handle your tax affairs effectively. SCKGroup is committed to assisting you navigate these changes. Contact us today to ensure your transition to the NLWT system is seamless, efficient, and compliant.