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%) from the gross amount which you pay. This deduction is not your tax relief, it is tax payable to Revenue from your landlord’s income.
For example, your landlord lives in Northern Ireland and your rental agreement is for €1,000 rent per month. Firstly, calculate the amount of tax to be deducted (€1000 x 20% = €200). Now deduct the tax due from the gross rent due (€1000 – €200 = €800). Your monthly rent paid to your landlord is €800 per month.
This does not mean you have cheaper rent – as you have to get that money to Revenue.
This can be done in two ways:
- At the end of the year, complete a form 12 tax return and submit to Revenue. By including the non-resident landlord, this will calculate the amount you owe revenue for rent held back from the non-resident landlord
- The above option will probably result in one big bill for 12 months of withheld rent – so the best money planning option is to ask Revenue to adjust your tax credits – so they will take the €200 out of your pay packet each month.
Even in the second option, you will still have to submit a Form 12 – though it won’t have this underpayment . If you pay tax by self-assessment, you can account for the tax you deduct in your annual self-assessment Tax Return Form 11 which you send to Revenue.
If you do not deduct tax from Rent paid to non-resident landlords, Revenue will hold you responsible and will look to collect this from you – so do make sure you set this up correctly.
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