The Consequences of Letting your Property when you have Emigrated
In the past number of years an increasing number of homeowners have left the country and many have opted to let their home whilst abroad. The homeowner may have appointed a Letting Agent to manage the property and thought that this would be sufficient to deal with all matters affecting the property, but this may not be the case.
People who have let their properties in such circumstances should be aware of the following;-
- Tax: Income received from rent is taxable in the Republic of Ireland and indeed may be taxable in the country that the owner is currently residing depending on that country’s tax laws. If however the owner of the property was living between Ireland and another country any rental income they receive may only be taxable in Ireland if they are deemed to be ordinarily resident here. For example if you spend 183 days or more in Ireland between the 1st January and the 31st December in a given year you are deemed to be resident for tax purposes and if you spend 280 days in a consecutive two year period you are deemed to be tax resident for the second year. This could be broken down as 150 days in year one and 130 days in year two. Trying to determine how many days a person was resident can become quite complex even though it appears to be straightforward and the property owner may also incur a tax liability in the country that they have travelled to depending on that country’s tax laws.
- For Landlords who are not resident in Ireland specific rules apply: A Landlord must notify a Tenant that they are not resident and then the Tenant must withhold 20% of the rent monies and pass them to the Revenue Commissioners. Letting Agents will help avoid this practice and they should notify the Revenue Commissioners that they are collecting the rents on behalf of a non-resident Landlord.
- Another key consideration relates to the Capital Gains Tax exemption where a property owner was selling their family home. If a person was abroad and renting out their family home they will now have to make a Capital Gains Tax Return on the portion of any increase in value whilst the property was being rented.
- Mortgage Interest relief is another key consideration. This is not to be used where a property owner’s family home is being let and the property owner should notify his/her financial institution. However in spite of this restriction, Landlords are able to take a deduction of 75% of their mortgage interest against their rental income arriving at their tax rents in a given tax year. For this deduction to be permitted the letting agreement must be first registered with the Private Residential Tenancies Board.
Other charges such as Non Principal Private Residential, Local Property Tax, Household Charge and Water Charges may still affect the property and these should all be looked at in turn as liability for most if not all of these charges will almost certainly exist.
A Landlord must also be certain that they have the appropriate insurance where the property is being let.
It is also a requirement under the 2004 Residential Tenancies Act that a residential letting agreement must be registered with the Private Residential Tenancies Board and a failure to do so will result in penalties.
Letting property is not a straightforward process and numerous complications can arise.