We are continuing our series of posts about what you need to know when it comes to your taxes. These posts are based on real world questions that we’ve been asked by clients. So, if you need help with anything specific, send us an email and let us know!
This week’s focuses on a question we have been asked on a few occasions by our non-resident clients who have a property that they rent in Ireland. The questions relates to a charge to PRSI on the net rental profit. Are they liable to pay this or not?
The answer to the question is No. Non-resident landlords are not liable to PRSI on the net rental profits. Irish resident landlords that have a rental profit, and are liable to file an Income Tax return form 11, under self-assessment, are liable to pay PRSI under class S. A typical example of this would be a self-employed individual who also has rental income or someone who has income from investments only.
For example – Jack Tyrell, an Irish resident self-employed sports journalist, had a trading profit of €30,000 in 2017 and a net profit on a rental property of €8,000. Total income for PRSI purposes is €38,000 and the rate of PRSI on that total is 4% which is a total of €1,520. This will be collected as part of Jack’s tax liability for 2017 and will need to be paid by the 14th of November 2018, assuming paying and filing on-line through ROS. The benefit of paying this for Jack is that, provided he has paid sufficient PRSI over his working lifetime, he will then become entitled to the State pension as well as other state benefits. He will be paying PRSI under Class S.
Taking this example further and let’s assume that Jack’s brother Noel, who has been living in Singapore for the last 10 years, has a rental property in Ireland and is lucky enough to be renting a small bedsit, the size of a walk-in wardrobe, in Dublin. Though not beyond the bounds of possibility, he gets €2500 per month or €30000 per annum from the fortunate tenants and out of that has deductible rental expenses of €10000 to leave him with a profit of €20000. If he was Irish resident he would pay PRSI on that at 4% which comes to €800. However, as he is non-resident, Noel has no PRSI liability. The downside of this for Noel is that he will not have paid a PRSI contribution for that year so this would hamper entitlement to state benefits when called upon. Noel would pay USC on the profit which is of no benefit to him as this is just additional tax. Noel will have a requirement to file an Irish tax return, form 11 and pay Income tax and USC on the rental profit. If the rental profit was less than €13000 then Noel would have no charge to USC for 2017.
If you file your own Income Tax return, never a wise move, then there is a box to be ticked to claim exemption from PRSI.
What if I already paid PRSI on the rental profit in error?
If you, as a non-resident landlord, paid PRSI in error on your Irish rental income then all is not lost. It would be possible to go as far back as the 2014 tax year and request amended assessments for that year and subsequent tax years. Based on a rental profit of €10000 per annum from 2014 to 2017 that would be a €400 PRSI charge and that over 4 years would be a PRSI overpayment of €1600.
Department of Social Protecion
Although Revenue act as the collecting agent it is the Department of Social Protection that has responsibility for managing the PRSI records of taxpayers. Please see the link attached to this Departments website under the heading “Who does not pay Class S PRSI” and you will see that one of the categories is “people classified by Revenue as non residents who hold solely unearned income”
We just want to clarify the point here that we are talking about non-residents who only have rental or other investment income in the State so that they do not have any employment or self-employment income, which would be called earned income. If they have earned income as well as unearned income then different PRSI rules apply.
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