Foreign rental income

[fallon]

Hi

I recently purchased a property in Turkey financed by increasing my home mortgagefrom 90k to 200k as I had sufficient equity.The property has guaranteed rental income and all expenses will be paid by the management company.Will I be able to claim the interest on my incremental mortgage of 110k against my rental income and are there any other expenses I can legitimately claim against my rental income?

 

[asdfg]

As far as I'm aware no, you can only claim mortgage interest relief against the rental income on the property being rented. You can claim wear & tear on capital allowances over 5 years and certain other expenses. You should get a breakdown from the management company as to the expenses they paid on your behalf. You then decide whether they are capital expenses or fall into the certain other expenses that a allowable category. Tax on Rental profit has to be remitted to the Irish revenue each year by 31st October for the preceeding tax year.

You have to pay tax on profit from foreign rental income to the Irish Revenue.
When you sell the property you have to pay tax on the gain less expenses (Capital Gains Tax)
You will/may also be liable to pay tax to the Turkish tax authorities.

I have tried to condense the situation here. If you need a more detailed explanation do a search on AAM using rental income as a serch.

Hope this makes sense, if not post again

 

[DonKing]

Just to correct a couple of errors in asdfg's post...

You're allowed to deduct the cost of your Fixtures and Fittings against your rental Income over 8 years(12.5% per year) rather than over 5 years.

Does Turkey have a double taxation agreement with Ireland? If it does then the way it goes is as follows.

First you pay all your tax due in Turkey. I presume you have checked all your tax liabilities in Turkey. Right? (I don't think you could deduct the mortgage interest form your tax liability in Turkey. I know you can't do it in Hungary)

You then calculate your tax due in Ireland (similiar to Irish property taxes ie. deduct expenses, interest on loan to purchase/renovate and 12.5% for wer&tear on F&F). You can then deduct the tax already paid in Turkey from your tax due in Ireland and pay the balance in Ireland, if any.

With regards to the management fee charged by your Turkish agent, I would say that you just deduct this from your rent when you are calculataing your tax due in Ireland.

 

[RainyDay]

You can then deduct the tax already paid in Turkey from your tax due in Ireland and pay the balance in Ireland, if any.

Hi Don - Didn't we discuss this on another thread? The existence of a double-tax treaty does not necessarily mean that you simply deduct what you've paid in Turkey from your tax due.

You may be right of course, but I've a funny feeling that you don't really know if this is how the Ireland/Turkey DTA works (if it even exists).

 

[DonKing]

RainyDay,

Yes you're right, I don't know if there is a double taxation agreement in Turkey. I actually asked if there was an agreement with Turkey in my post.

I take your point that just because there is a double taxation agreement it may not mean that you can automatically deduct the foreign tax paid in the foreign country against your tax liability in Ireland. If I get the time I might check it out.

 

[ClubMan]

According to [broken link removed] there is currently no double taxation treatment in force between Ireland and Turkey:

New treaties with Argentina, Egypt, Kuwait, Malta, Morocco, Singapore, Tunisia, Turkey and Ukraine are being negotiated. Existing treaties with Cyprus, France and Italy are in the process of re-negotiation.

 

[DonKing]

The following is taken from IT70 Rental Income guide available on revenue.ie.
I know it is general, but I would imagine it would cover most countries even if there is no double taxation agreement.

How are foreign rents taxed?
In general, income from foreign property is computed on the full amount of the income arising, irrespective of whether the income has or will be received in the State. In the case of foreign rental income this income is charged under Case III of Schedule D and the same deductions and allowances are available as if the income had been received in the State. Deductions are also normally available in respect of such income for sums in respect of foreign tax paid. This income should be included in an individual’s tax return on the Foreign Income panel.