Tax is one of the main advantages for a non-resident purchasing a buy-to-let over a resident. Taxes are lower for a non-resident, in most cases. A non-resident will pay tax at 20% on the first €44,000 of rental profit. Whereas a resident will pay tax of up to 52%, assuming their lower rate band is used from a trade or employment income. I’ll introduce you to Sheikh Abdul Murphy [SAM] and his wife Melania, who want to buy a property in Ireland. I’ll go through
- Background
- Buy in joint names
- Pre-letting Expenses
- Non-Resident Landlord Withholding Tax
- Selling the property
- Other Issues
Background
Sam’s father was a Murphy from out Macroom direction and he emigrated to Abu Dhabi in the 1970s. He sent his youngest son, Abdul, to study medicine in Cork in the late 1990s. Since then, young Sam has been the doctor to the local royal family. You could say he’s doing well. Sam married Melania in 2006, and they have two boys, Hector and James. He would love Hector to follow in his footsteps and go to UCC to study medicine too.
Sam and Melania have decided to buy a property near UCC. They will rent this for a few years until Hector starts his studies. A house is their preferred option, so if they visited or it was vacant, it would be big enough for them all. Melania does lots of research and she finds a lovely house in Glasheen with a guide price of €450,000. A trip to Cork is organised, and they meet with Jimmy O’Leary, the auctioneer, who shows them the property. It is the Summer of 2024. The location is ideal, but it needs a bit of work before it is suitable for rent. They shake hands on it at €460,000. Stamp Duty of 1% and legal fees come to €7,000.
Buy in Joint Names
Jim Cadogan is the solicitor helping the Murphys to buy the property. He advises them to buy in joint names. Jim knows a thing or two about tax, and from a legal and tax point of view, he thinks it’s the best option. But why is that? I won’t get into the legals too much, as that isn’t my area of expertise. But, if anything should happen to Melania or Sam, the property would transfer to the other spouse on death.
From a tax perspective, buying in joint names will save money as Melania would get a personal tax credit. Plus, there can be smaller savings with a reduction in USC costs, too. The plan is to rent the property from the start of 2025. Jimmy O’Leary has a lovely family in mind at a monthly rent of €2,500. Jimmy would look after the rental for them, and his fee is 7.5% plus VAT every month.
Tax computation
The tax computation for each in 2025 would look like this
| Amount € | SAM € | Melania € | |
| Gross Rental Income | 30,000 | 15,000 | 15,000 |
| Less Expenses | |||
| Letting Agents Fees | (2,768) | (1,384) | (1,384) |
| Insurance & Tax return | (1,400) | (700) | (700) |
| Rental Profit | 25,832 | 12,916 | 12,916 |
| Tax @ 20% | 5,166 | 2,583 | 2,583 |
| Personal Tax Credit | (2,000) | (2,000) | |
| RPRIR | (800) | (400) | (400) |
| Net Tax liability | 2,366 | 2,183 | 183 |
| Effective Tax Rate | 9.16% |
Melania would get the full single person’s tax credit here as she has no other income. If all the income is in Sam’s name, he would get a small personal tax credit, which depends on his worldwide income. Let’s say he earns €400,000 in Abu Dhabi. His total worldwide income is that and the rental profit of €25,832. His Irish tax credit would be €121 [€2,000 x €25,832/€425,832].
In the above scenario, there is no USC cost as both have a rental profit of less than €13,000.
Sam’s name only
If buying the house in Sam’s name only, his tax liability and effective tax rate is higher.
| Amount € | |
| Gross Rental Income | 30,000 |
| Less Expenses | |
| Letting Agents Fees | (2,768) |
| Insurance & Tax return | (1,400) |
| Rental Profit | 25,832 |
| Tax @ 20% | 5,166 |
| Personal Tax Credit | (121) |
| RPRIR | (800) |
| Add USC | 337 |
| Net Tax liability | 4,582 |
| Effective Tax Rate | 17.74% |
Pre-letting Expenses
The Murphys can get a deduction for pre-letting expenses. This relief is in place up to the 31st of December 2027. From 1 January 2023, the cap on allowable pre-letting expenses is €10,000 per vacant premises. Once the property is vacant for 6 months before the first letting, this deduction is possible. Jimmy confirms the property has been vacant since the end of May 2024. They spend €20,000 on doing up the property to get it up to standard for letting. The breakdown of this is
| Painting | €2,000 |
| Plumbing & rewiring | €7,000 |
| Bathroom refurbishment | €5,000 |
| Furniture & White Goods | €6,000 |
| Total | €20,000 |
To get a deduction for pre-letting costs, it has to be a type of expense that you get a deduction for against your rent. In general, you can’t get a deduction for most pre-letting costs. There are a few minor costs that are deductible. Normal repair-type costs would be a deductible expense. Looking at the list, the painting and plumbing, and rewiring costs would be repairs. In light of this, €9,000 will become an allowable deduction in their 2025 rental computation.
Clawback
Beware of a clawback. Revenue just love the clawbacks! This is a carrot and stick approach. The carrot is the relief in the first place. The stick is the clawback. If the Murphys stop letting the property within four years of the first letting, the relief is withdrawn. This could arise
- On the sale of the property or on
- A change of use from rented residential property. Like AIRBNB.
As such, to avoid the clawback, the Murphys must keep renting the property until the end of January 2029. If they stopped renting it in January 2028, the relief of €9,000 given would be a rental profit in 2028.
Capital Allowances
The Murphys will get a deduction for the Furniture and white goods, like the kitchen appliances and TVs. But not in full in the first year. These are assets and you get a capital allowance over 8 years at 12.5% per year.
| Cost | €6,000 |
| Capital Allowances rate | 12.5% |
| Wear & Tear 2025 | €750 |
| Closing tax written down value 31.12.25 | €5,250 |
Enhancement Expenditure
I would classify the bathroom refurbishment as enhancement expenditure. There is a new bathroom with a new bath and shower, new tiles, and radiators. This isn’t a repair as they didn’t repair the existing bathroom but replaced it. They won’t get a deduction for this cost against the rental income, nor will they get capital allowances. If they ever sell the property, they will get a deduction, and it will help reduce any Capital Gains Tax payable.
Non-Resident Landlord Withholding Tax [NLWT]
The NLWT system came into play on the 1st of July 2023. For our non-resident clients, we provided the collection agent services from 1 January 2024. Most letting agents will provide the collection agent service to you. If they don’t, then your choice is to find one that does or use our service. This is a new system and is the law, so you must follow the rules.
The basics are that 20% of your monthly gross rents gets paid to Revenue. This is through a monthly Revenue notification. You are confirming to Revenue
- The rent you got in the previous month
- The date you received the rent
- The property you got the rent for
- Details of the property, like the LPT ID and Eircode
So, in February 2025, Jimmy would make a rental notification on ROS for the Murphys. Assuming the property is in joint names, he would make two rental notifications. One each for Sam and Melania. Rent of €1,250 each, and he would process the NLWT payment of €250 for both of them. At the end of 2025, they will both have paid €3,000 in NLWT or €6,000 in total. They will get a credit for this against their tax liability when filing their 2025 tax returns in 2026. Both will be due tax refunds.
2025 Numbers
| Amount € | SAM € | Melania € | |
| Gross Rental Income | 30,000 | 15,000 | 15,000 |
| Less Expenses | |||
| Letting Agents Fees | (2,768) | (1,384) | (1,384) |
| Insurance & Tax return | (1,400) | (700) | (700) |
| Pre-letting expenses | (9,000) | (4,500) | (4,500) |
| Rental Profit | 16,832 | 8,416 | 8,416 |
| Tax @ 20% | 3,366 | 1,683 | 1,683 |
| Personal Tax Credit | (1,683) | (1,683) | |
| RPRIR | (400) | (400) | (0) |
| Net Tax liability | 1,283 | 1,283 | 0 |
| NLWT Paid | (6,000) | (3,000) | (3,000) |
| Tax refund | (4,717) | (1,717) | (3,000) |
| Effective Tax Rate | 7.62% |
Sell the Property
They decided to sell the property in 2034. Young Hector has finished medicine at UCC, and they have fallen in love with Greece. Santorini has caught Melania’s eye. She has set her sights on a plush villa over there. The property sells for €550,000. When you sell an asset here, you will pay Capital Gains Tax [CGT] on the increase in the asset value. The CGT rate is 33%. Legal, auctioneering, and accountancy fees on sale come to €12,000. The CGT liability is as follows
| Sales Proceeds | €550,000 |
| Less Legal, Auctioneers, Accountancy | (€12,000) |
| Net Proceeds | €538,000 |
| Less Cost | (€460,000) |
| Less Legal & Stamp Duty | (€7,000) |
| Less Enhancement Expenditure [Bathroom] | (€5,000) |
| Gain | €66,000 |
| Less Personal Exemptions | (€2,540) |
| Taxable Gain | €63,460 |
| CGT Payable @ 33% | €20,942 |
If they sell the property in the first 11 months of 2034, they will pay the CGT by the 15th of December 2034. They must file a 2034 CGT return by the 31st of October 2035.
Other Issues
Other issues include Double Taxation Relief and PRSI. As the property is located in Ireland, Ireland has primary taxing rights over the rental income and taxes on the sale of the property. That doesn’t mean you have no tax obligations in your country of residence. You’ll likely need to return the rents and gains in your home country. However, to eliminate double taxation, you should get a credit for any Irish tax paid against Income Tax liability in your country of residence. Likewise with CGT. If you pay CGT on your worldwide gains in your country of residence, you shouldn’t pay any further CGT there once the CGT rate is lower than in Ireland. You’ll need the help of your local tax advisor to run the numbers for you.
As you are a non-resident landlord, you aren’t liable to PRSI on the rental income here. The current PRSI rate here is 4.1%, which resident landlords will have to pay.
A non-resident purchasing a buy-to-let will need good help and advice. Navigating the taxes can be tricky. Make sure to get quality advice that works for your circumstances before you buy.
If you need help to look after the taxes on your rental property, start here
