Moved abroad for good - should we hold on to former PPR in Ireland?

[Green in Wien]

Age: 41

Spouse’s/Partner's age: 39



Annual gross income from employment or profession: n/a, mapping from gross to net is complicated for me due to working for an international organisation.

Annual gross income of wife: €0



Monthly take-home pay: €11,300



Type of employment: e.g. Civil Servant for an international organisation in Vienna



In general are you:

(a) spending more than you earn, or

(b) saving?



Rough estimate of value of home: €1.4m

Amount outstanding on your mortgage: €1.25m

What interest rate are you paying? 1.3% weighted average across three tranches (variable €300k, fixed 5 years €650k, €300k fixed 25 years), all amortising with 29 years remaining. Cost €4,300 a month.



Other borrowings – car loans/personal loans etc: none



Do you pay off your full credit card balance each month? Yes.



Savings and investments: Wife has a preserved pension from previous public sector employment in Ireland as do I. No shares, ETFs, etc. We have €45k in cash and no personal loans. Despite the high income we save only €1.5k a month from salary. Mortgage is high as is general cost of living.



Do you have a pension scheme? Yes, it’s final-value DB scheme which is very good.



Do you own any investment or other property? Yes, one former PPR in Dublin. Value about €600k, mortgage €210k with 22 years remaining.



Ages of children: 11, 6, 4



Life insurance: Joint cover €350k, sole cover (me) €100k. Work also has generous (but compulsory) death-in-service benefits and spouse’s pension.



What specific question do you have or what issues are of concern to you?

We came to Austria for job in 2016 and its turned into something permanent. It pays well and lets us live on one income, which we weren’t able to in Ireland. My wife wants to return to work at some stage here, but it won’t be soon. But on one income we live very comfortably and are very lucky.



My question is: should we hang on to the house in Dublin?

Pros:

• The property is very profitable. Rent is €2,200 and mortgage is just over €1,100. Over the last 5 years costs have averaged about €400 per month and in that I include everything: repair, LPT, maintenance, insurance, agent, one-time repainting, fixing roof, even a void period in between lets.
• We hope to come back to Ireland some day. Also one or more of our kids might go to college in Dublin. It will be much simpler to just move into a house we already know and own and then look for something else to buy. Also, letting kids live in it rent-free during college or after would be a pretty good use of our wealth.
• Due to this being our only Irish income we don’t pay any income tax on the rent, LPT is our only liability. It’s crazy that we pay so little, but I don’t make policy.
• House is in an area of very high rental demand. From what I can see it’s next to impossible to build new houses in Dublin so the value of our own property looks good.

Cons:

• Being a landlord at a distance is a pain. We have an agent but certain things just cost more and take longer when you are trying to direct them from a distance.
• We bought for €370k in 2012 so there is a big unrealised CGT liability on the property. The longer we leave it the bigger it gets, even if house prices don’t go up.
• We are in positive equity but still carrying a massive mortgage in Austria. Much of it is fixed long term, and is pretty affordable on my salary, but it would be nice psychologically to get our borrowings down a bit quicker.
• We’ve had good tenants so far. But I’ve heard the horror stories and we keep a year’s mortgage payment in cash in case a tenant goes rogue or we have a long void.

 

[Mcivor]

Age: 41

Spouse’s/Partner's age: 39



Annual gross income from employment or profession: n/a, mapping from gross to net is complicated for me due to working for an international organisation.

Annual gross income of wife: €0



Monthly take-home pay: €11,300



Type of employment: e.g. Civil Servant for an international organisation in Vienna



In general are you:

(a) spending more than you earn, or

(b) saving?



Rough estimate of value of home: €1.4m

Amount outstanding on your mortgage: €1.25m

What interest rate are you paying? 1.3% weighted average across three tranches (variable €300k, fixed 5 years €650k, €300k fixed 25 years), all amortising with 29 years remaining. Cost €4,300 a month.



Other borrowings – car loans/personal loans etc: none



Do you pay off your full credit card balance each month? Yes.



Savings and investments: Wife has a preserved pension from previous public sector employment in Ireland as do I. No shares, ETFs, etc. We have €45k in cash and no personal loans. Despite the high income we save only €1.5k a month from salary. Mortgage is high as is general cost of living.



Do you have a pension scheme? Yes, it’s final-value DB scheme which is very good.



Do you own any investment or other property? Yes, one former PPR in Dublin. Value about €600k, mortgage €210k with 22 years remaining.



Ages of children: 11, 6, 4



Life insurance: Joint cover €350k, sole cover (me) €100k. Work also has generous (but compulsory) death-in-service benefits and spouse’s pension.



What specific question do you have or what issues are of concern to you?

We came to Austria for job in 2016 and its turned into something permanent. It pays well and lets us live on one income, which we weren’t able to in Ireland. My wife wants to return to work at some stage here, but it won’t be soon. But on one income we live very comfortably and are very lucky.



My question is: should we hang on to the house in Dublin?

Pros:

• The property is very profitable. Rent is €2,200 and mortgage is just over €1,100. Over the last 5 years costs have averaged about €400 per month and in that I include everything: repair, LPT, maintenance, insurance, agent, one-time repainting, fixing roof, even a void period in between lets.
• We hope to come back to Ireland some day. Also one or more of our kids might go to college in Dublin. It will be much simpler to just move into a house we already know and own and then look for something else to buy. Also, letting kids live in it rent-free during college or after would be a pretty good use of our wealth.
• Due to this being our only Irish income we don’t pay any income tax on the rent, LPT is our only liability. It’s crazy that we pay so little, but I don’t make policy.
• House is in an area of very high rental demand. From what I can see it’s next to impossible to build new houses in Dublin so the value of our own property looks good.

Cons:

• Being a landlord at a distance is a pain. We have an agent but certain things just cost more and take longer when you are trying to direct them from a distance.
• We bought for €370k in 2012 so there is a big unrealised CGT liability on the property. The longer we leave it the bigger it gets, even if house prices don’t go up.
• We are in positive equity but still carrying a massive mortgage in Austria. Much of it is fixed long term, and is pretty affordable on my salary, but it would be nice psychologically to get our borrowings down a bit quicker.
• We’ve had good tenants so far. But I’ve heard the horror stories and we keep a year’s mortgage payment in cash in case a tenant goes rogue or we have a long void.

I think your point about no tax being due on the rental income is incorrect. As far as I'm aware non residents landlord are subject to 20% tax that managing agent or tenants withhold at source from the rental income.

 

[RedOnion]

The property is very profitable. Rent is €2,200 and mortgage is just over €1,100. Over the last 5 years costs have averaged about €400 per month and in that I include everything: repair, LPT, maintenance, insurance, agent, one-time repainting, fixing roof, even a void period in between lets.

It's not that profitable. The gross yield is a shockingly low 4.4%
You've 400k equity tied up in it, and probably earning about 4% on that equity after interest & expenses?

And you don't pay any income tax on the rent in Austria? That's really the only thing making it any way attractive.

If you didn't already own it, you definitely wouldn't be going to buy it as an investment!

I'd sell it. Pay down some of your mortgage abroad to a more sensible level. Your mortgage repayment is almost 40% of net pay.

If you need a base in Dublin later (in 6+ years?) then buy something suitable for that purpose when you need it.


Edit: the above is assuming no additional tax arises in Austria on the sale of your former PPR in Ireland, and taking the funds to Austria. You will need to take advice on the treatments in Austria, particularly as you appear to be non-domiciled.
If you keep the Irish House, if house prices stay stable you are increasing your Irish CGT liability by c. 9k per year.

 

[jpd]

4% is a lot better than a bank deposit

 

[RedOnion]

4% is a lot better than a bank deposit

Ah yes. Cause he's borrowing 1.25m for free....

 

[noproblem]

Taking home €2600.00 per week, debt of €1,460,000.00 and savings of only €45k. Possibly 3 children for Uni coming up quicker than you might imagine. I would certainly be selling No 2 house and paying down some of the debt, and taking out good health insurance, if not already done . Also, I doubt if €45,000.00 would keep your lifestyle afloat if something went wrong and these things do happen.

 

[presidenttttt]

Hi OP,

Congrats on what seems to be a great income and DB pension.

Yield isn’t the only metric of value on your rental so I am not negative on your rentals, whatever the tax rate. The property is “washing its face” and will continue to do so even if rent drops a little, which it won’t. And then there are the options it provides your family, and you when you return. The main negative, a sizeable one, is it isn’t liquid should you run into cash flow issues for whatever reason.

Numbeo website suggests Vienna is cheaper than Dublin. With the limited information available it sounds like you may be a victim of lifestyle creep. Not clear how many kids you have but your monthly outgoings sound insane(net after mortgages). I would suggest it can be an eye opening exercise to list all your outgoings. You may be able to cut back a lot, without really noticing it, by identifying the outgoings. We did this recently and it was surprisingly how it highlights pointless subs and promoted getting new utility suppliers and shopping around. Perhaps you disagree that your lifestyle maybe excessive. With one income I’m guessing there should be no child care so I am thinking outgoings should be reduced easily by 4 figures not 3!

I would then put the resulting savings into cash to the point of having 6 months cash available, then direct everything to debt repayment.

You don’t say how big your employer life cover is, but it sounds like the combined life cover not cover all debt? Given the single income I’d want to ensure all debt paid off if you kicked the bucket.

Lastly, is there any vacancies,

 

[Green in Wien]

Thanks for the replies.

We did this recently and it was surprisingly how it highlights pointless subs and promoted getting new utility suppliers and shopping around. Perhaps you disagree that your lifestyle maybe excessive.

It's a fair point. We had a few very tight years when kids were young and we were still in Dublin and we are taking a conscious decision to enjoy life now. You live life here among people on similar kind of money and that sets expectations a bit.

You don’t say how big your employer life cover is, but it sounds like the combined life cover not cover all debt? Given the single income I’d want to ensure all debt paid off if you kicked the bucket.

Lastly, is there any vacancies,

The Irish are over quota as it is! I should have stated there is compulsory health insurance which covers 80% of most routine medical treatment and all for emergencies. For life, basically if I fell over my wife would get something like a €3k pension, and existing life cover would pay off Irish mortgage in full and Austrian mortgage down to €1m or so. But we might be quite under-covered here, you are right.

It's not that profitable. The gross yield is a shockingly low 4.4%
You've 400k equity tied up in it, and probably earning about 4% on that equity after interest & expenses?

And you don't pay any income tax on the rent in Austria? That's really the only thing making it any way attractive.

If you didn't already own it, you definitely wouldn't be going to buy it as an investment!

Of course - but we are where we are! I've taken tax advice and advised that no tax is due here once a return is made in Ireland. Otherwise I agree it would make no sense without the tax advantage.

I'd sell it. Pay down some of your mortgage abroad to a more sensible level. Your mortgage repayment is almost 40% of net pay.

I know it's a very high mortgage payment but my job here is bulletproof and about 70% of the mortgage payment is capital as the rate is so low. This month we'll pay off capital of €3k on the Austrian mortgage and €700 on the Irish one. So capital repayments of €3,700 on a gross income of €13,500 across wages and rental income. This is over a quarter.

I we sold the Dublin property we could put max €350k off the mortgage here in Austria which would be a chunk of mortgage averaging 1.2%. So we'd be down a gross €2,200 on the Dublin property (net €1,800) a month and would only save €350 on the Austrian mortgage. This reduces risk a bit it's true. Every tenancy can go bad but we use an agent and tenants are young and on good career tracks (I've checked their LinkedIn profiles!) We are building up a CGT liability of only about €250 a month - see below. So selling off the Irish property and paying down the mortgage would see us down over a grand a month in income.

If you need a base in Dublin later (in 6+ years?) then buy something suitable for that purpose when you need it.

I've suggested this to my wife - basically we sell and use all the equity for a 2-bed apartment or something. This way we'd have no Irish mortgage and a hedge against Dublin property prices. But she kind of sees it as holding on the house or nothing else in Dublin. The other advantage to holding on to the Dublin property is that we can move in and live there as a family of five if we move home. From what I read, getting a mortgage from abroad from an Irish bank in advance of moving home is difficult, and renting elsewhere for 6 months or a year before buying again sounds like a pain.

If you keep the Irish House, if house prices stay stable you are increasing your Irish CGT liability by c. 9k per year.

When I worked it out it seemed lower. Unrealised gain is €230k. If we sold tomorrow we'd pay 5/9*230k*33%=€42k I think. In a year's time that's 6/10*230k*33%=€45k, no? So about €3k incrementally a year, and reducing over time.

 

[RedOnion]

When I worked it out it seemed lower. Unrealised gain is €230k. If we sold tomorrow we'd pay 5/9*230k*33%=€42k I think. In a year's time that's 6/10*230k*33%=€45k, no? So about €3k incrementally a year, and reducing over time.

Ah yes, sorry I was comparing 5/9 and 6/9ths. My bad.

I still don't understand how you're paying income tax on the rent here. You're not incorrectly claiming full Irish tax credits are you?

Other than that, it looks like you've already made up your mind.

 

[_OkGo_]

letting kids live in it rent-free during college or after would be a pretty good use of our wealth.

Not really, buying an appropriate type of accommodation for them at the time might be a good use of your wealth but using a €600k property is not a good way of doing this unless you want to let them live in it with other students and risk all the headaches that come with student rentals

House is in an area of very high rental demand

This does not tie in with the rent that you are receiving. Either the house is overvalued or you are seriously under market rent. You should be discussing this with your agent

Due to this being our only Irish income we don’t pay any income tax on the rent,

Are you absolutely certain of this? It would be worth confirming this again and probably with an accountancy firm that operate in both countries just for the peace of mind that you are not accruing a big tax bill

The property is very profitable. Rent is €2,200 and mortgage is just over €1,100. Over the last 5 years costs have averaged about €400 per month and in that I include everything: repair, LPT, maintenance, insurance, agent, one-time repainting, fixing roof, even a void period in between lets.

As already pointed out by RedOnion, it is not "very profitable" although it is profitable. After costs and interest, you are probably around €15k gross profit. But you also need to include the cost of your current PPR. You are carrying €400k @1.3% or €5.2k of additional interest because of the Irish property so really your rental is netting you €10k/annum if you are correct that you have no tax liability.

I we sold the Dublin property we could put max €350k off the mortgage here in Austria which would be a chunk of mortgage averaging 1.2%. So we'd be down a gross €2,200 on the Dublin property (net €1,800) a month and would only save €350 on the Austrian mortgage.

This is wrong, you would be down the ~€10k/annum as above or €7k if you want to factor in your CGT so it is not as big a drop as you are predicting. You have excluded the cost of the Irish mortgage in your "net €1800" figure which I'm assuming is 3.1% of the €210k balance


Regardless of what the costs/profit is, it certainly seems like you have your mind made up. You want to keep a "foot in the door" on the off chance that you decide to move home so you won't be selling it any time soon. But in your position, I would not use it for student accommodation and I would get absolute clarity on your tax situation regarding the rental income.

 

[Nutso]

Another vote here for checking your tax liability in Ireland. Tax is generally due on income from property in the country that the property is in, therefore there should be tax due in Ireland. As someone else mentioned, as a non-resident landlord, this would be 20% which should be deducted by the tenants and returned to Revenue each month or another option is to have someone in the country collect the rent for you and complete the tax return. I can't see how there could not be a liability on this.

 

[elcato]

This from the OP suggests he is refering to Austrian tax when saying no tax is due. His agent is probably witholding the 20% ?

I've taken tax advice and advised that no tax is due here once a return is made in Ireland.

 

[Green in Wien]

I still don't understand how you're paying income tax on the rent here. You're not incorrectly claiming full Irish tax credits are you?

My advice was as follows. You get personal tax credits in Ireland if more than 75% of your global earnings are taxable in Ireland. My earnings aren't taxable anywhere as they are from employment from an international organisation. My wife has no earnings. Therefore all of our worldwide income is taxable in Ireland so we get a personal tax credit of €3,300. The rental profit has never been above €16500 so the 20% tax is fully covered by the tax credit of €3,300.

Am I doing this wrong? If so I think we need to rectify it and it puts a bit of a dent in the numbers.

As far as I'm aware non residents landlord are subject to 20% tax that managing agent or tenants withhold at source from the rental income.

Either way we need to start getting the tenants or agent to deduct the 20% and we claim back anything if eligible. Thanks to all for pointing this out.

This does not tie in with the rent that you are receiving. Either the house is overvalued or you are seriously under market rent. You should be discussing this with your agent

We might get €2,500 on open market tomorrow (5% yield). That's normal for that part of Dublin for a house. We are in an RPZ and are happy with tenants so aren't aggressively pushing this. We'll probably put it up €50 a year next few years.

using a €600k property is not a good way of doing this unless you want to let them live in it with other students and risk all the headaches that come with student rentals

Our thinking is as follows. We have three kids. It's a fair assumption that one will go to college in Dublin, possibly more, starting as early as eight years time. House is located accessible to DCU, TCD and TUD and my wife and I would probably visit a bit (me teleworking) also to keep an eye on her parents as they age. We could sell now of course and keep the €350k equity for the rest of the decade and buy again of course. But I feel like we'd end up buying a pretty similar property.

You are carrying €400k @1.3% or €5.2k of additional interest because of the Irish property so really your rental is netting you €10k/annum if you are correct that you have no tax liability.

Thanks for putting it this way. The main question is whether the reward is worth the risk of having so much debt, even if it's cheaper than we'd ever borrow in Ireland.

Regardless of what the costs/profit is, it certainly seems like you have your mind made up.

I've gone back and forth over the years on this. When we lost tenants we very nearly sold up. At the moment I'm inclined to keep it but my wife wants a second opinion and is reading your replies.

Thanks once again to all.

 

[RedOnion]

My earnings aren't taxable anywhere as they are from employment from an international organisation.

You're not paying income tax, anywhere?
That sounds very unusual.

Are you an official with an EU Institution, and your salary is exempt from national taxation?

 

[Thirsty]

Therefore all of our worldwide income is taxable in Ireland so we get a personal tax credit of €3,300. The rental profit has never been above €16500 so the 20% tax is fully covered by the tax credit of €3,300.

I'm no expert on tax, but this doesn't quite add up to me.

If your entire income is taxable in Ireland, then you should be paying Irish income tax on your salary as well as the rental income?

 

[Green in Wien]

You're not paying income tax, anywhere?
That sounds very unusual.

Are you an official with an EU Institution, and your salary is exempt from national taxation?

It's a UN body and salaries are exempt from national taxation except if you're a US citizen where it gets very complex.

I think it's the same for EU staff.

If your entire income is taxable in Ireland, then you should be paying Irish income tax on your salary as well as the rental income?

Maybe this wasn't clear. My wage income isn't chargeable to tax in Ireland or Austria as I work for an international organisation.

So the professional advice I got was that this income could be disregarded when calculating entitlement to tax credits in Ireland.

But I'm having doubts now that I look it up. The Revenue tax manual says:

Section 1032(3) provides that a non-resident individual -  who is resident of another Member State of the European Union, and  whose Irish taxable income comprises 75% or more of his/her total income from all sources including income which is not subject to Irish tax (i.e. worldwide income), is entitled, without any apportionment, to personal credits, reliefs and deductions.

Clearly my "total income" includes my wage income here in Austria. Although you could make a case that it's not relevant as it is not chargeable to tax anywhere.

I don't think there's any doubt for my wife though, as 100% of her income is in Ireland she should get the personal tax credit.

 

[Thirsty]

Appreciate we've wandered off your original question; and, as I say I'm no tax expert.

But if I were in your shoes, I would want a letter from Revenue (via your tax adviser) that the approach being taken is correct and you are not deliquent with tax payments in Ireland.

It wouldn't be the first time people have been caught out with incorrect advice. The non-resident bank account scandal comes to mind for one.

 

[RedOnion]

It's a UN body and salaries are exempt from national taxation except if you're a US citizen where it gets very complex.

I think it's the same for EU staff.

It's a bit different, and explains why you've no Austrian tax on the rental income.

There is an agreement between the UN and Austria which exempts all your foreign income from Austrian Tax, if you meet the criteria (it would also apply to your household, so your wife would be exempt from Austrian tax on it also).

I think you've been incorrectly claiming the full Irish credit for yourself but it's a niche area given where your salary is coming from, and comes down to the wording in legislation rather than a guide.

Definitely worth getting clarification on it.

 

[dnablaska]

We hope to come back to Ireland some day.

Earning a tax free salary of €11k + benefits, how realistic is it that you will return to Ireland assuming you have a long-term secure contract in your organisation. It might be worth calculating the gross salary you would need and see if that is in line with the market.

With the youngest child 6 when you moved to Austria (and I assume at least one born there), will Dublin actually be the most logical choice for college?

 

[Green in Wien]

Earning a tax free salary of €11k + benefits, how realistic is it that you will return to Ireland assuming you have a long-term secure contract in your organisation.

Probably on retirement. Maybe before if the right thing came up in Dublin, but probably not until the kids are grown up or nearly grown up, so over a decade away.

With the youngest child 6 when you moved to Austria (and I assume at least one born there), will Dublin actually be the most logical choice for college?

It's pretty likely. The kids aren't in any way culturally Austrian and are in an international school system which tends not to direct kids to the local third-level system. The UK is not really an option anymore due to full fees after Brexit.


Most of my older Irish colleagues here had kids that went or go to college in Ireland. So I think one of the three kids going to college in Dublin is likely, two possible, all three unlikely.