Tax implications of property investment 2013

Hi

I recently acquired an investment property in Ireland and am renting it out for a gross annual rent of eur 16,200 or 9%. I’m looking at the tax implications of getting further investment properties in Ireland due mainly to the good (gross) rental yields and also the possibility of capital appreciation in the medium term. I’ve been working outside of Ireland / EU for a number of years and am not concerned with my tax position in my new country as a result of possible investments in Ireland.

If someone could read through the below assumptions / questions and advise if anything is incorrect or perhaps left out that would be great.


· My gross rental income can be reduced by management charges / legal charges / letting costs / advertising costs / renovation costs / plumber electrician costs / etc
· I’ll pay 20% on net income up to eur 32,800 and 41% on anything over it
· I’m not entitled to any tax credits as I’m a non tax resident
· USC for 2013 is 2% to eur 10,036, 4% between eur 10,027 to eur 16,016, 7% over eur 16,017
o Is this calculated on gross or net rental income (and also are capital allowances deductible in finding your net income?)
o As I pay USC, PRSI isn’t applicable to me?
· Property tax – if you have a few properties in total (but not individually) amounting to over eur 1m do you pay property tax at 0.18% overall or do you pay 0.18% on eur 1m and 0.25% on the balance over eur 1m?
o I believe property tax is not tax deductible to estimate your net rental income?
· Household charges are abolished from 1 Jan 2013 and Non-Principle Private resident charges abolished from 1 Jan 2014
o These are not tax deductible
· PRTB still applies at eur 90 per tenancy (after 01/01/11) and is not an annual charge
o This is tax deductible

Thanks

Eoghan

As you're non-resident this blogpost may answer some of your questions: http://mcgibney.ie/2012/12/24/irish-property-living-abroad-what-to-do-about-tax/

Most of your assumptions are correct and you appear to have researched this well. USC applies on income before capital allowances.

Note that there has been no official mention anywhere in relation to the deductibility of the Local Property Tax (LPT) against taxable rental income, but based on the precedents that the NPPR and Household Charge were non-deductible (at least according to Revenue, although their view was disputed in some quarters), there is a general assumption out there that a similar treatment will apply to the LPT.

The LPT is charged per property, not cumulatively.

Thanks for that Tommy
Its a nice blog and had I found it earlier it would have saved me a fair bit of researching around on the internet!

Property Value 100000
Personal Investment 25000
Bank Loan 75000
Loan duration 25yrs
Standard Variable Rate 5.05%
Monthly Payment/Yearly Payment 436
Monthly Rental Income 800
Monthly Profit before losses/Yearly P.B.L 364

Rental Income yearly (allow for 1 month void) 8800

i was confused with some of the figures above. this is a long winded set of figures but an attempt to make it as clear as possible for someone in my situatin who is considering purchasing a but to let investment, as deposit rates are so bad. its a buy to let investment. 2 bed apt, worth E100,000. The fees are assumed, albeit with a review of the web for guidance, but am i calculating the taxes, initial and yearly outgoings correctly? i have assumed a rental void of 1 month. AIB rates for buy to let investment taken from website.

Property Value 100000
Personal Investment 25000
Bank Loan 75000
Loan duration 25yrs
Standard Variable Rate 5.05%
Monthly Payment 436
Monthly Rental Income 800

Rental Income yearly (allow for 1 month void) 8800

Initial Outgoings
Ber Survey 300
Building Survey 450
Legal Fee - purchase 1500
Stamp Duty (1% upto E1m) 1000

Yearly Outgoings
Insurance 650
Management Fee 650
Letting Costs/Management Agent 750
Maintenance Costs (painting,plumb,elec,roof) 150

Tax on rental income@(20% upto 32800) =(.2%(8800-(650+650+750+150)))=1320
Property tax (0.18% upto E1m) 180
USC = 0.2% of 8800 =176
PRTB 200
NPPR 90
Sum of Annual Taxes 1966

am i correct in saying that the yearly rent (8800) - mortgage yearly payment (5232) - taxes (1966) = a yearly loss of 598 for this property?

the above is calculated as a non resident landlord

Revenue allow me to apportion my single tax credit under S1032 Taxes Consolidated Act 1997. They themselves suggested I could do this (in writing) as I am an Irish citizen and my total worldwide income is not subject to Irish income tax.

Basically they apportion your Irish credits according to the ratio of your Irish sourced income to your total worldwide income. I believe also that if your Irish income forms 75% or more of your total worldwide income, then Revenue allow the full tax credit(s).

Simple example:
Total world wide income: 100k
Total Irish rental income (profit) : 10k
Single credit 1830 @ 10% = €183 tax credit.