Am I entitled to claim PAYE relief on rental income if I didn't work in Ireland?

Hello all,
I have a question pertaining to tax reliefs for non-resident landlords.

I have received a tax bill from revenue for 2010. I have spoken with revenue and they've given me 8 weeks to sort it, so I'll be getting an accountant next week as I'm a bit confused and obviously my own return was in some way(s) incorrect.

I earned 11700 in gross rent which translated to 8321 taxable rental income.

I did not work in Ireland at all in 2010 as I was travelling and I started a new job in Germany (where I have remained since) and earned just 2744 gross that year, which was taxed at standard German rates.

Total income in 2010: 11065

I had no other income in 2010 form any sources.

I have been assessed for the following:
11065 @ 20% = 2313
less 1830 personal credit = 383 income tax due.

PRSI:
11065 @ 3% =332

Total liability:
715

I think I made at least one big error. I don't think I should have included the 2744 of German income on the form as it was already taxed here in Germany. I misread that part (this is the first "non-resident" return I've done). Is this correct? Should I resubmit without this German income and explain the fact that it has already been taxed here?

Secondly, do I have no right to a PAYE relief? I presume not as I did not have any PAYE emploxment in Ireland in 2010 and I would only be entitled to the single person credit of 1830?

Wrt PRSI, what is the trigger point for PRSI for the tax year 2010? Is it 3% of everything or is there a minimum amount before it is triggered?

Thanks for any tips. I want to keep out of trouble with the revenue-property is registered with PRTB etc. and none of my previous returns were questioned. I probably should have gotten an accountant in the first place for this one, but we live and learn. Will be speaking to one next week, but wanted to get my head around it first if I can.

You are not entitled to the PAYE deduction. If you've done the returns incorrectly then submit them again with a covering letter. Not sure if you're also due to pay the new universial social charge. And don't forget to pay the NPPR and new househould charge. There's a nasty sting to those.

Cheers Bronte, thought as much wrt. PAYE credit. I've been in touch with Revenue and they are grand-have given me 8 weeks to get back to them. I'm waiting for something to be sent out (has to be got from their archives) and then it'll be off to an accountant-it's too complicated now for me.

I've already paid my 300 notes for this year to Fingal-God knows what that'll climb to over the coming years. The USC will be interesting-I know from Revenue that you can claim exemption from PRSI if you are non-resident, but have found no details about USC in this regard. Like I said....time for an accountant!

That's good you've contracted revenue. If that was a phone call I'd follow up with an email or letter. Better to only trust things like this to ink.

And you are right to hire an accountant. It's getting very complicated. I presume you are PRTB registered. The revenue website should have info on the Universal social charge for landlords, this came in about a year or so ago.

Hi, yes it was a phone conversation. Will call them again and get it in writing. I'm PRTB registered etc., in fact it's due for "renewal" this year as it's been let for 4 years this Autumn.

well the accountant reckons I owe the assessed figure minus the tax paid to Germany on my PAYE type income at the end of 2010.

I accepted this as correct but then I read the Form 11E helpsheet (revenue sent me Form 11E and said this was the most appropriate form to use for 2011) and it has confused me again because it states:

"514 A PAYE tax credit may be claimed by employees and non-proprietary directors who pay tax under the PAYE system. In addition, individuals in receipt of an Irish social welfare pension, a social security pension received form another EU Member State by an Irish resident, and, Irish residents who work abroad and pay tax under a PAYE type system, qualify for the PAYE tax credit."

Now, I did pay (some) tax under a PAYE type system in 2010, so the only question is to whether or not I was an Irish resident in that tax year. If I got the PAYE tax credit it would leave me with zero tax liability for 2010.

I spent less than 183 days in Ireland in 2010 but I believe I satisfied the 280 day test:

"if you spend 280 days or more in Ireland over a period of two consecutive years you will be regarded as Irish resident for the second year. However, if you spend a total of 30 days or fewer in Ireland in either of those years, those days will not be counted for the purpose of the '280 day' test."

I spent > 280 days in Ireland between 2009 and 2010 and I spent more than 30 days in Ireland in each year, so I believe I was resident for tax purposes, thus being entitled to claim the PAYE relief as I paid some tax under a PAYE type system in Germany at the end of 2010. Am I missing something?


SECONDLY and with respect to tax year 2011:
What is the difference between resident and ordinarily resident when it comes to tax?

I was certainly not resident in Ireland under either the 183 day or 280 day tests BUT I believe one remains "ordinarily resident" in Ireland for three years after leaving Ireland. I would therefore have been "ordinarily resident" in Ireland for the tax year 2011 BUT I don't understand the difference between "resident" and "ordinarily resident" here. Can I claim the PAYE credit (according to section 514 above) just by being "ordinarily resident" or must one be "resident"?

I will query this again with my accountant but I'm interested in other knowledgable peoples' opinions too as we're all only human and anyone can make a mistake, especially with tax!

You'll only get the PAYE credit to the extent that it covers the PAYE on your Sch E income (in this case German income). Therefore you will only get a PAYE credit of €549 (€2,744 x 20%)

Hi DB74,
thanks for the response. A €549 tax credit would reduce my liability down to €165 instead of €715 so I'd be very pleased even if they just gave me that. Could you point me towards something that backs that up?

I actually thought the various allowed tax credits were applied to all due taxes after calculating the tax due before reliefs/credits. I thought that once you qualified for the PAYE tax credit, that you got the full 1830 (in 2010) credit.

Indeed, RES1 states:
"Non-resident individuals resident in an EU Member State whose income within the charge to Irish tax is 75% or greater of their total worldwide income may be entitled to the full amount of allowances and tax credits."

My Irish income in 2010 amounted to exactly 75.1% of my worldwide income, so I think this applies to me as I was non-resident (but still ordinarily resident IMO) and as I was residing in another EU member state. I see it says "may" in there, so I've asked Revenue to clarify.

I'm actually looking forward to the day where my residence status is clear cut and I just have to send Revenue a flat 20% of profits! It'll be simpler anyway.


edit: I see what you mean from http://www.revenue.ie/en/tax/it/credits/paye-employee-credit.html. PAYE credit may not exceed 20% of PAYE derived income as you said. It would still be great if they accepted this.

http://www.revenue.ie/en/tax/it/credits/paye-employee-credit.html

edit --- just saw your edit!!

Hi all,
quick update for anyone interested:
I wrote a detailed letter to Revenue outlining the reasons why I believe I am entitled to the partial PAYE tax credit for 2010 and failing that, for at least a credit for income tax paid in Germany in the same year.

I got a short (1 line!) and unsigned email (?) response, despite Revenue having my mother's postal address for all correspondence. They dismissed my claim for a PAYE credit because (according to them) I had no PAYE income but rather just Irish rental income and "Foreign Interest Income" (not what I indicated on my Form 11).

I was ****ed off with this and my dear old mother was great and took a day off work and went to Revenue in Tallaght and sat there until she got satisfaction for me. The guy she (eventually) got to speak to could not explain the email response and conceded that "the computer must have mis-read my form 11" and "nobody read my letter properly". He stated that I should be liable for at most app. €200 in income tax (as opposed to the €714 Revenue initially demanded). He said he'd send the file back "upstairs" and that I should receive a new adjusted demand to take account of the actual facts.

Three cheers for murphaph's mother.

Updated demad received today: €332 instead of €714. It's worth fighting it if you are in the right! They calculated my income tax liability as nil after reliefs and so I only had to pay PRSI @3%.

I have another question about that but it's not related to this one so I'll start a new thread on the matter. Thanks all.