The expected changes promised to streamline the system appear to commence from 1 July 2023. The changes seem to impose a higher administrative burden on tenants, collection agents and non-resident landlords rather than the simplification promised.
A non-resident landlord is an individual or company not resident in Ireland but rents out a property (commercial or residential) in Ireland.
The Finance Act 2022 introduced changes to the obligations of tenants and collection agents of non-resident landlords. The amendment depends on a Ministerial order (which, as we write this, is pending) with the introduction of a new Non-resident Landlord Withholding tax platform. Revenue recently issued correspondence about the changes outlined in the Finance Act 2022 and issued a Revenue Guidance Manual on 6 June 2023. The new platform is due to be accessible through ROS or myAccount from 24 June 2023.
Previous obligations for non-resident landlords
Previously, non-resident landlords were obligated to file a separate return via a collection agent to account for their rental income. However, as long as the non-resident landlord filed their tax return, Revenue generally ignored the requirement for the collection agent to file a tax return.
Since 2019, Revenue has been enforcing the non-resident landlord's obligation. At present, non-resident landlords are required to appoint a resident responsible person who takes on obligations regarding their taxes in Ireland called a collection agent (i.e. an estate agent, a management company, a solicitor or someone they have nominated to act on their behalf). The collection agent was responsible for collecting the rent and filing the non-resident landlord's return for the rental income on their behalf.
Alternatively, if the non-resident landlord chooses not to engage the services of a collection agent, their tenant was required to deduct 20% of the total rent due and complete Form R185, which was submitted to Revenue, and the remaining 80% of the rent was paid to the landlord.
It is important to note that the previous obligations still stand until the ministerial order is signed, which is expected to be 1 July 2023.
Potential changes from 1 July 2023
A Non-Resident Landlord Withholding Tax (NLWT) system will be introduced, which will be available to the collection agent, the landlord and the tenant. It enables tenants or collection agents to make Rental Notifications (RNs) when making payments to a non-resident landlord. The tenant/collection agent will withhold 20% of the rent owed to a landlord and return this amount to Revenue using the NLWT system.
How to file
The NLWT links will be accessible in ROS from 24 June 2023. Tenants who are not registered on ROS will have full access to the NLWT system via myAccount.
Revenue guidance suggests that the RN for a tenant who would not usually prepare financial statements (individuals) should be made within seven days after the payment and deductions take place.
For those who collect rent as an intermediary (collection agents) for non-resident landlords, this should be on/before the 1st day of the month following the month in which the rent was collected.
In situations where rent payments are more frequent than monthly, e.g. weekly, Revenue will accept one monthly RN, which should be the accumulated value of all rental payments occurring in that month.
If the property is owned by one or more non-resident landlords or jointly in the case of a married couple, an RN should be made in respect of each individual non-resident landlord. This could mean a tenant or collection agent will need to file multiple RNs for each rental payment.
After the first RN submission has been completed, it will be possible for tenants/collection agents to set up repeat RNs. A repeat RN creates an instruction to generate an RN monthly, including an instruction to remit the deduction from the tenant/collection agent's bank account.
In the case of residential properties, both collection agents and tenants must know the Local Property Tax (LPT) property ID of the property being rented, and the landlord is obliged to provide the LPT ID to enable them to complete an RN.
Each individual needs to understand their new obligations, which are outlined below.
Non-resident landlords should note they will be responsible for filing their tax returns under their own tax reference number and must register for taxes if they haven't to date. The non-resident landlord will be required to file an Irish tax return containing details of their Irish rental income (and any other taxable income). The Irish tax return will also contain details of the tax credit due in respect of payments withheld from them under NWLT.
The non-resident landlord is required to provide the following details to their tenant/collection agent in order to make RNs:
The residence status of the landlord.
Non-resident landlord's name and address.
The LPT ID for the rental property.
The non-resident landlord's Tax Reference Number (TRN) and tax type (IT, CT or VAT).
Phone number or email address of the non-resident landlord.
Collection agents for non-residential landlord tax
Collection agents acting on behalf of non-resident landlords will no longer be designated as chargeable persons. They will not be responsible for filing a tax return for the non-resident landlord from 1 July 2023. Collection agents remain the chargeable person and will be required to submit tax returns for the period to 30 June 2023. From 1 July 2023, the collection agent must begin to file RNs on behalf of the non-resident landlord via the NLWT system.
If the collection agent doesn't remit 20%, the agent is still chargeable and assessable for the income of the non-resident landlord.
Tenants of non-residential landlords
The tenant will have access to the new NLWT platform, where they will withhold and remit 20% of the rental payment to Revenue. Tenants paying directly to a non-resident landlord will no longer be designated chargeable persons. They will not be responsible for accounting for the withheld amount on their tax return from 1 July 2023. As is the case with collection agents, the tenant remains the chargeable person and is responsible for filing tax returns for the period to 30 June 2023.
The NLWT system is due to be in place from 1 July 2023. However, until we see the portal, we do not know if this will further burden taxpayers or simplify what is currently a challenging system. We understand that further guidance to the NLWT system should be issued in the Revenue manual in July 2023.
If you have any questions about the above, or if you would like to discuss this topic further, please get in touch with a member of the Mazars private client tax team below:
Mazars was delighted to participate in the 2023 annual tax advisors survey with the Business Plus, which was published in November. Frank Green, Head of Tax, responds to editor Nick Mulcahy’s questions.