Mary Healy, senior representations manager and Lorraine Sheegar, tax manager, Irish Tax Institute

Non-Resident Landlord Withholding Tax Regime

Tax administration in respect of payments of rent to non-resident landlords has been a hot topic for practitioners and accountants over the past two years. The current legislation provides that either the tenant must withhold and remit tax (at 20%) on rent paid to the landlord or the landlord must appoint an Irish resident ‘collection agent’ who is the assessable person in respect of the landlord’s rent and must file the annual income tax return and pay the related tax due.

Over recent years, Revenue has placed greater emphasis on adherence to the legislative requirements. Typically, many non-resident landlords may not rely on a tenant to withhold tax and the landlord may have filed a tax return in their personal capacity for their rental income, but this practice was not compliant.

Finance Act 2022 provides for a new administrative regime for rent paid to non-Irish resident landlords

Section 92 of Finance Act 2022 provides for a new administrative regime for rent paid to non-Irish resident landlords. Revenue has been working on the design of the regime including the ROS and myAccount online portals, which are expected to go live from 1 July 2023.

Collection agents (and tenants who withhold and remit tax) will use the online system to record and remit tax withheld on rental payments and to supply information as outlined in the legislation. The system will include scope for bulk uploads of rental payments, and a record and visibility for the landlord of tax withheld to be credited to the landlord and pre-populated in the landlord’s tax return.

If the collection agent complies with the requirements of the regime, they will no longer be the assessable person in respect of the rent. The landlord can file their tax returns in their personal capacity for their rental income.

Foreign retirement lump sums

Revenue has published a new Taxation of Foreign Retirement Lump Sums Tax and Duty Manual (TDM) to reflect the introduction of section 200A TCA 1997 in Finance Act 2022.

Section 200A TCA 1997 applies to tax-resident individuals who are paid a lump-sum payment from a foreign pension arrangement, as defined, on or after 1 January 2023, and sets a lifetime tax-free limit of €200,000. This lifetime limit applies to a single lump sum or, where more than one lump sum is paid to an individual over time, to the aggregate value of those lump sums and/or lump sum or sums received under existing pension lump-sum rules (under section 790AA TCA 1997).

The tax treatment of foreign pension lump sums is now covered under section 200A TCA 1997

Amounts paid in excess of this tax-free limit are chargeable to tax under Case III of Schedule D in two stages. The portion between €200,000 and €500,000 is taxed at the standard rate of tax, while any portion above is taxed at the higher rate. Any lump-sum amount in excess of €500,000 is also chargeable to USC.

The new TDM also notes that Revenue’s Precedent 28, issued on 30 July 1987, stated: ‘Tax-free lump sums in commutation of foreign pensions were not taxable in Ireland should the individual come to reside in the country following their retirement.’ It states that Revenue treats this precedent as having lapsed,  in common with most precedents over five years old. The tax treatment of foreign pension lump sums is now covered under section 200A TCA 1997.

Revenue also confirmed that while section 200A TCA 1997 does not apply retrospectively,  taxpayers can claim the benefit of the section with respect to lump-sum payments drawn down from foreign pension arrangements prior to 1 January 2023.

The Department of Finance is looking to reform the personal tax system

Consultations and reviews

In early March, the Department of Finance launched a consultation on the personal tax system to gather suggestions for its reform, while broadly maintaining the exchequer yield, and feedback on its competitiveness and progressivity.

At the end of March, a feedback statement on the transposition of the EU Minimum Tax directive (the Pillar Two directive) was published. This outlined possible draft legislative approaches to key elements of the global anti-base erosion rules and possible approaches in respect of the Qualified Domestic Top-up Tax and administrative requirements such as registration, self-assessment, filing of returns, payments and record-keeping.

The department also launched a public consultation on the bank levy and a review of the funds sector, which will look at a range of issues including the regimes for Section 110 entities, real estate investment trusts and Irish real estate funds. The review team will also examine international contexts, effects on employment and the economy and the wider taxation regime for funds, life assurance policies and other related investment products.

Some parts of the Windsor Framework will become applicable in a gradual way

Last year’s Commission on Taxation and Welfare Report recommended that a working group should be established to review and propose changes to the taxation of funds, life assurance policies and other investment products, with the goals of simplification and harmonisation.

Windsor Framework arrangements

In February, the European Commission and the UK government reached political agreement in principle on the Windsor Framework, which constitutes a comprehensive set of joint solutions aimed at addressing, in a definitive way, the practical challenges faced by citizens and businesses in Northern Ireland.

The joint solutions cover, among other matters, new arrangements on customs, agri-food, medicines, VAT and excise and entered into force on 25 March. Certain parts will become applicable in a gradual way; for example, the new and expanded trusted trader scheme for freight will start applying on 30 September 2023, provided that the relevant safeguards are in place.

On 30 May, the European Council adopted three regulations aimed at implementing the joint solutions regarding public, animal and plant health issues, medicines and certain steel products, designed to make it easier to move a range of goods from Great Britain into Northern Ireland if they are destined for final consumption there. At the same time, safeguards will be put in place to prevent such goods from entering the EU’s single market and to ensure the protection of public, animal and plant health, as well as consumer interests in the EU.

As regards sanitary and phytosanitary measures and medicines, the new arrangements will start to apply gradually once the EU has received appropriate written guarantees from the UK about the implementation of the agreed safeguards.

While every effort has been made to ensure the accuracy of this information, no responsibility for loss or distress occasioned to any person acting or refraining from acting as a result of the material contained in this email can be accepted by the Irish Tax Institute, the designer, authors, contributors or publishers. Professional advice should always be sought for your particular circumstances before acting on any tax issue.