20 November 2007

Other

Rent Relief

Ciarán Cuffe asked the Tánaiste and Minister for Finance if, with regard to the rent relief scheme and the requirement for tenants to deduct 20% of the gross rent payable directly to their landlord's bank account when their landlord is non-resident, he will clarify the number of cases where rent relief has been withheld from tenants through the failure to deduct tax; the number of these cases that have been appealed to the Revenue Commissioners; the number of non-resident landlords engaged in tenancies here and if he will make a statement on the matter.

Tánaiste and Minister for Finance (Mr. Cowen):

I am informed by the Revenue Commissioners that where rents are paid directly to a person who is resident outside the State, the tenant is obliged to deduct income tax at the standard rate of 20% from the rental payment and to give the landlord a certificate of the tax deducted. Direct payments include a situation where rent is paid into a bank account in the name of the non-resident landlord. The tenant is then required to make a return and pay to Revenue the tax that he or she has deducted from the rent. The landlord is entitled to a credit for the tax deducted by the tenant against his or her final rental income tax liability and is obliged to pay any additional tax that may be due.

The tenant is not responsible for discharging the landlord’s liability to tax on rental income. Instead, the withholding of tax on rental income by tenants of non-resident landlords is primarily a control measure. It is designed to promote greater compliance in this area having regard to the obvious risk factors associated with non-resident taxpayers. Where it applies, it provides in a very direct manner, valuable information for Revenue which might otherwise be difficult to obtain.

Where rent is paid to an Irish agent of a non-resident landlord, such as an Irish-based estate agent acting on behalf of the non-resident landlord, the tenant is not required to deduct income tax from the rent payable. In such cases, the non-resident landlord is chargeable to tax in the name of the Irish agent.

With regard to the question of reviewing this arrangement, I should point out the operation and impact of the assessment and collection of taxes are monitored and/or subject to review on an ongoing basis as part of the normal work of my Department and the Revenue Commissioners.

I am also informed by the Revenue Commissioners that they do not have complete information on the number of tenants who pay rent to non-resident landlords and the number of non-resident landlords engaged in tenancies here. According to the annual returns of income for non-PAYE taxpayers for the year 2005, the latest year for which information is available, gross rents of €1.1 million were payable to non-resident landlords by 113 taxpayers. The amount of income tax that may have been withheld by tenants is not separately identified. Revenue does not have similar information for PAYE taxpayers. Following an amendment to the return of income (Form 11) for the year 2006, non-resident landlords when completing a return of income will have to indicate the amount of income tax that was withheld from rents paid by their Irish tenants and the PPSN(s) of tenants who deducted tax from rent payments. Likewise, the return of income for PAYE taxpayers (Form 12) for 2006 has also been amended to request details of the gross rent paid to non-resident landlords in 2006. This information will be available early in 2008.

Inclusion of this information on Tax Returns for 2006 and subsequent years will enable data to be collected, which should result in more information becoming available in due course on the number of non-resident landlords engaged in tenancies in this jurisdiction.

The Revenue Commissioners have informed me that they are not aware of any situation where a rent credit relief claim has been refused on the grounds of failure on the part of the tenant to deduct tax from rent payable to a non resident landlord. On the question of the number of appeals, it follows that, as there have been no refusals, there are no appeals.

If the Deputy has information that Rent Relief has been withheld because of a failure to deduct tax, he should supply details to the Revenue Commissioners who will investigate the matter further.