Moving abroad and house renting income tax

Hey everyone,

I'm considering moving abroad for a while and renting my house during that time.

If my house rental income is my only income in Ireland during that time, how would that be taxed?

Say, for example, I'm getting 2000 EUR per month, what would I need to consider?

Thanks in advance!

Income tax: You'll be liable to income tax in Ireland on the rental income from your Irish property.

If the rent is paid directly to you, because you will be non-resident the tenant will be obliged to withold 20% of the gross rent and remit it to the Revenue Commissioners. You then engage with the Revenue Commissioners to finalise your liability and you get credit for the 20% remitted by the tenant. If your liablity is less than that you can get a refund.

You can avoid this by appointing an agent who is resident in Ireland to receive the rent on your behalf, and I would reccommend this — you really don't want to be involving your tenant in your tax administration. (Your tenant won't want this either.) The agent could be a professional — an estate agent, for example, who does this for a fee as part of a property management service — or it could be an obliging family member. The only requirement is that they be resident in Ireland.

You may, of course, also be liable to tax on the Irish rental income in the country in which you are resident — that depends on the laws of that country. If you are, there may be a Double Taxation Agreement between Ireland and that country which gives you relief from paying two lots of income tax on the same income. Obviously, all that depends on what country you are moving to.

Capital gains tax: While you're away, the property will not be your principal private residence. When you eventually sell or dispose of the property, it may not be wholly exempt from capital gains tax. If, say, you have owned it for 20 years and you were abroad for 3 years of that, then 17/20ths of any gain will be exempt from CGT and 3/20ths will be subject to CGT.

It's actually a bit more complicated than that, since there are some reliefs available if you go abroad in connection with your employment. Plus, if you sell the house while still abroad, or within 12 months of returning, for the last 12 months of the period of ownership it will be treated as having been your principal private residence even though it wasn't. So look into this before you make any definite commitments about going abroad, and see if you can arrange matters to minimise or eliminate any CGT liability.

@TomEdison Thank you for the detailed reply.

To clarify, I've owned the property for 4 years, I'll be moving to the US and I'll be using a local agent (a company) to handle our rental. This said, to clarify, if I don't plan on selling the property, I'd be liable for 33% CGT on the gross rental income?

What would my net look like if I need to pay 20% to the agent and my rental is 2000 EUR/month?

You really need to discuss all this with an accountant or similar professional who can explain all this to you. There are too many variables involved for anyone to give you comprehensive guidance here, especially as you appear confused on the distinction between income tax (payable on the rental income) and CGT (payable on the ultimate sale or disposal of the property.)

These links above will be very useful.

Are you moving in relation to your work? This will make a difference in relation to CGT.

Also inform yourself of how CGT is calculated - it does not look at a point in time valuation, only the purchase and disposal.

T McGibney said:

You really need to discuss all this with an accountant or similar professional who can explain all this to you.

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I second this.

From personal experience I attest that short spells abroad turn into long ones.

People tend to focus on the income tax element and less on the CGT aspect. If you are sitting on an uncrystallised capital gain you can be in a scenario where the net rent per annum is lower than the amount the CGT bill is rising by.

Of course the CGT will disappear if you return to Ireland and occupy the house again as your PPR but this may not be practical or feasible.

Dr Strangelove said:

Of course the CGT will disappear if you return to Ireland and occupy the house again as your PPR

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I don't think that this is correct.

ClubMan said:

I don't think that this is correct

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I don't think that is absolutely correct either. If the property is reoccupied as PPR on return and remains a PPR forever, CGT liability will never crystalise. If sold at some stage, any period of time it was not a PPR would result in a proportion of the gain being reckonable for CGT.

gonesp said:

This said, to clarify, if I don't plan on selling the property, I'd be liable for 33% CGT on the gross rental income?

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No. You'll be liable for income tax on the net rental income. If you've no other Irish-source income you won't be in the higher tax brackets, so it's at the 20% rate.

If you don't appoint an agent and the withholding obligation applies, the withholding is 20% of the gross so the amount withheld will probably exceed your liability, so you'll be in the position f applying for a refund.

You may not plan on selling the property now, but someday — possibly long after your return to Ireland — you probably will dispose of it, and at that point the question of CGT will arise and the fact that it wasn't your PPR for the entirety of your period of ownership will be relevant. The only way you avoid this is by staying in the house until you die.

"Of course the CGT will disappear if you return to Ireland and occupy the house again as your PPR"

Untrue, except in rare circumstances.

T McGibney said:

Untrue, except in rare circumstances.

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OP is presumably planning to move abroad for work.

Revenue state that you can claim PPR relief on CGT once you occupy it as well as in the following circumstances.

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Absences considered as living in the property​

You will be considered to have lived in your property where:

• you could not live in the property because your employer required you to live elsewhere (up to a four-year maximum.)
• you had a job, all the duties of which were performed outside the Republic of Ireland

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OP is talking about moving abroad for work and if they reoccupy the house any CGT gain will be nil.

This is hardly “rare” - Ireland’s several hundred diplomats make use of this provision as they go on postings abroad throughout their career.

Rare in the context of the median taxpayer.

This isn't a difficult concept.

"OP is presumably planning to move abroad for work."

This scenario on its own is insufficient to earn PPR exemption for the period of absence abroad.