Michael McGrath (Cork South Central, Fianna Fail)
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I am advised by Revenue that the system referred to by the Deputy, whereby tenants deduct and remit to Revenue withholding tax at the standard rate of income tax (currently 20%) from rental payments to a landlord who lives outside the State, has been in operation for many years. However, some changes were introduced in last year’s Finance Act.

The relevant legislation provides that tenants of a non-resident landlord – and other parties paying rent directly to a non-resident landlord, such as local authorities - are required to deduct and remit to Revenue withholding tax from payments made directly to that non-resident person. This includes payment into a bank account in the landlord’s name, even if the bank account is within the State. Where a tenant makes rental payments to a resident person acting on behalf of a non-resident landlord, known as a “collection agent”, there is no obligation on the tenants to operate withholding tax.

The withholding tax to be deducted is 20% of the gross rental payments, with no account taken of any expenses such as allowable interest or any other costs. The tenant (or other person making a direct payment) must also provide the non-resident landlord with a certificate of the tax deducted on the Form R185 (Certificate of Income Tax Deducted).

Finance Act 2022 amended the existing withholding tax system for those making payments directly to non-resident landlords, requiring them to provide Revenue with certain information regarding the landlord, the rental property, and the rental payment. As part of this new system, instead of completing a Form R185, tenants of non-resident landlords will complete a “rental notification” (RN) and remit the tax deducted online using ROS or MyAccount, using the new “non-resident landlord withholding tax” (NLWT) system.

The non-resident landlord who does not have a collection agent is required to file an Irish income tax return. S/he is taxable on the rental profit arising from the property; that is, rental income after deduction of allowable expenses. S/he may also be entitled to a proportion of personal allowances. When filing her/his income tax return, a non-resident landlord can claim the tax deducted by the tenants, recorded on the form R185, against her/his Irish tax liability. Credit for tax deducted from rents is confined to the tax actually deducted and remitted to Revenue.

Finance Act 2022 also amended the requirements for collection agents acting for such landlords. Collection agents for a non-resident person are assessable and chargeable to tax for the income of that person, which means they are required to file a tax return and pay the tax due on that income. Under the new provisions, a collection agent will not be chargeable and assessable for such income, provided that the agent deducts and remits to Revenue withholding tax (also at 20%) from rental payments and provides information on the landlord and the tenancy. Collections agents will also complete the new RN and remit the withholding tax online.

These new provisions are not yet operational because they are subject to a commencement order. The new system is scheduled to be launched on 1 July 2023.

Revenue carries out full testing of all applications and systems it releases for use by the public, and the NLWT system has received extensive testing prior to the planned launch date. Because NLWT is a change to the process of withholding arrangements for non-resident landlords, Revenue has also implemented a change management and communications plan for the various stakeholders that could benefit from the planned changes. Revenue has engaged with practitioner bodies and software groups who support public sector bodies about the changes, and has highlighted the support and test facilities available.