Schedule D Case III Assessment

[valc]

Can foreign rental income from differnet countries be aggregated to give overall net sum taxable in Ireland (net of foreign tax paid in double tax treaty countries) - or is rental income from different properties and countries to be treated individually when calculating a potential Irish tax liability?


Tnx

valc

 

[Ham Slicer]

Can foreign rental income from differnet countries be aggregated to give overall net sum taxable in Ireland

Net of expenses not net of foreign tax.

So, profit France 50K tax paid 10K, profit Spain 40K tax paid 8K. You return Case III 90K and claim Double taxation relief of 18K. You don't return 72K rents.

I think that's what you're asking.

 

[valc]

Thanks Ham Slicer.
That answers my question!

 

[Ham Slicer]

It's worth noting that if a DTA didn't exist it would be the 72K figure you would use with no double tax claim.

 

[diroche]

Hi,

I might be wrong, but I thought you would have to declare the full profit of 90k and you only get a credit for tax paid if that country has a double tax treaty with ireland?

I am completing a form 11 at the moment - do I need to declare which country the property is in in order to get the tax credit?

 

[Ham Slicer]

Hi,

I might be wrong, but I thought you would have to declare the full profit of 90k and you only get a credit for tax paid if that country has a double tax treaty with ireland?

I am completing a form 11 at the moment - do I need to declare which country the property is in in order to get the tax credit?

Read my first reply - that's exactly what I said.

 

[diroche]

Sorry,

I should have been more specific - I was referring to this quote:

It's worth noting that if a DTA didn't exist it would be the 72K figure you would use with no double tax claim.

I have a rental property in turkey (no double tax treaty). Is this how it works:
Rental Profit: 10,000
Turkish Tax: 2,500
Profit to include on Irish tax return: 7,500

do I have to declare anywhere in the tax return form12 if I am claiming a deduction for foreign tax paid (and whether the country is treaty or non-treaty)?

 

[Pegasus]

Net of expenses not net of foreign tax.

So, profit France 50K tax paid 10K, profit Spain 40K tax paid 8K. You return Case III 90K and claim Double taxation relief of 18K. Quote]


If the irish tax on the french rent would have been 7k and on the spanish 14k I think you can only claim 7k on the french and 8k on the spanish - total 15k. ie. you can't offset the extra french tax against the spanish bit.

 

[diroche]

i have been researching the irish tax relief avaiable on foreign rental income tax paid under a double tax agreement and I found the following document on the revenues website:
[broken link removed]

i looks to be a complicated calculation and is different from the advice on some threads that say you get relief on the full amount of foreign tax paid under double tax agreements (up to the max of your actual irish tax charge).

has anyone any experience of how the calculation works, or a simplified version of the revenues calculation (for just rental income)? i am completing my form12 and am worried about underpaying my tax if i claim tax relief on the full amount of foreign income.

any advice appreciated...

 

[asdfg]

I was under the impression that you first calc the return due in the foreign country and pay the tax accordingly. You then calc the tax due as though the property was an Irish property deducting amounts allowed under Irish law and calc the tax accordingly. You then deduct the tax paid in the foreign country assuming a double tax agreement exists and pay the balance to Irish revenue.

 

[jpd]

No, it more complex than that. The calculation is explained in detail inb the above brochure, along with an example. If you go through the different steps, it appears almost simple and logical.

The Revenue on-line does all the calculations for you.

Note that

Foreign tax incurred on one source is not available for set-off against another source

on page 4.

 

[Ham Slicer]

I was under the impression that you first calc the return due in the foreign country and pay the tax accordingly. You then calc the tax due as though the property was an Irish property deducting amounts allowed under Irish law and calc the tax accordingly. You then deduct the tax paid in the foreign country assuming a double tax agreement exists and pay the balance to Irish revenue.

Calculate the tax in both countries. Whichever gives the highest liability is what you'll be paying.

So liability in Ireland 10K. Liability in Germany 15K. You pay 15K in Germany and get credit in Ireland to reduce Irish bill to NIL - 5K excess is not refundable.

Alternatively pay 10K in Ireland. This is given as credit in Germany and you still have to pay another 5K.

So in each case 15K is payable.

 

[diroche]

The Revenue on-line does all the calculations for you.

But how do you declare if your foreign tax paid is treaty/nontreaty since the tax treatment is different?
ROS Form11 lets you input the foreign tax, but has nowhere to state whether it is treaty or not treaty

 

[Ham Slicer]

But how do you declare if your foreign tax paid is treaty/nontreaty since the tax treatment is different?
ROS Form11 lets you input the foreign tax, but has nowhere to state whether it is treaty or not treaty

If it's non treaty it's not deductable anyway so there is no problem.

 

[diroche]

If it's non treaty it's not deductable anyway so there is no problem.

So for non-treaty I would just show my 'Net Profit on Foreign Rental Property' as 72k after deducting the 18k non-treaty tax as an expense from the 100k gross income?

 

[Ham Slicer]

So for non-treaty I would just show my 'Net Profit on Foreign Rental Property' as 72k after deducting the 18k non-treaty tax as an expense from the 100k gross income?

Well... 18K from rental profit, not gross rents - 82K

I really think you need proper professional advice.