Non-Resident Corporate Landlords in Ireland - Introduction
The Finance Act 2021 brought significant changes to the tax liability of non-resident companies renting out property in Ireland.
This article examines the impact of these changes on non-resident corporate landlords, provides guidance on the new tax regime, and discusses the steps non-Irish resident corporate landlords must take under the new legislation.
Tax position before 2022
Prior to the changes, non-resident corporate landlords were not subject to Irish corporation tax on Irish source rental income. An exception being where connected to a branch, agency, or permanent establishment in Ireland.
Instead, they paid Irish income tax at a 20% rate on taxable rental income.
To collect taxes from non-resident landlords, tenants had to deduct withholding tax (20%) on rent payments, with an exception for landlords who appointed an Irish collection agent.
In this case, the agent took responsibility for filing and paying relevant Irish taxes on the letting.
Tax position from 1 January 2022 onwards
Starting in January 2022, non-resident corporate landlords now face a 25% Irish corporation tax rate on rental income, a 5% increase from before.
Additionally, new tax filing requirements were introduced for landlords and Irish collection agents.
Collection agents must register for corporation tax under a separate tax reference number for each landlord, file the corporation tax return, and pay any due taxes.
Tenants must still deduct withholding tax on rent payments to non-resident landlords, unless an Irish collection agent is appointed.
Expenses
Although the treatment of expenses for landlords remains generally the same, some differences may arise under the corporate tax regime.
For example, interest deductions may now be restricted by deemed distribution rules or the new EU Anti-Tax Avoidance Directive interest limitation rule.
Transitional rules will also apply, allowing for the carry forward of unused losses or excess capital allowances and ensuring that no benefit or loss occurs from the rate change from 20% to 25% concerning balancing allowances and charges after 1 January 2022.
Capital Gains on sale
The effective capital gains tax (CGT) rate for non-resident landlords selling (or otherwise disposing of) Irish property remains at 33%.
However, landlords now face corporation tax instead of CGT on property disposals, which are included in the corporation tax pay and file regime.
The tax rules on development land disposals remain unchanged, subject to the CGT pay and file requirements.
Non-Resident Corporate Landlords in Ireland - Tax returns
The corporation tax regime applies to profits or income earned from 1 January 2022.
Thus, regardless of a landlord’s financial year-end date, a new accounting period is deemed to begin on 1 January 2022. This means that landlords without a 31 December 2022 year-end date will likely have two corporation tax returns to file for income earned in 2022.
Corporation tax returns must be filed by the 23rd of the ninth month after the end of the relevant accounting period. For example, for accounting periods ending on 31 December 2022, the filing due date is 23 September 2023.
The corporation tax liability must be paid in preliminary tax instalments during the accounting period, with a final instalment due on or before the corporation tax return filing date.
Non-Resident Corporate Landlords in Ireland - Conclusion
The year 2022 will mark the first tax year in which non-resident corporate landlords are subject to the corporation tax regime.
Landlords will need to seek timely advice regarding their tax liability and their filing obligations to ensure compliance with the new system of tax.
If you have any queries about the new Non-Resident Corporate Landlords in Ireland regime, or Irish tax matters more generally, then please do not hesitate to get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article