Should I shop him? Non-resi landlord "no" to withholding tax

[Libero]

Here’s the story: I viewed a nice apartment in Dublin, told the letting agent I’d take it and the agent got back to me saying that the landlord (who’s very fussy about tenants) agreed. I provided all the necessary references and paid the security deposit. All that’s left to do now is sign the lease agreement.

However, along the way, the agent mentioned that the landlord lives abroad. And I noticed on another piece of documentation that he’d given an address in that country, even though the bank account for rent payments is in Ireland. So I mentioned to the agent, having done all the above, that I’d have to withhold tax at the standard rate from the monthly rental payments. I didn’t think this would be a problem since the standard form lease agreement says that the tenant “shall” do just that.

But the agent didn’t like the sound of that. She said she’d have to check with her client, the landlord. I explained politely to her that Revenue’s attitude is pretty strict: they can come after any tenant who fails to withhold tax, even if the tenant had no reason to believe his or her landlord was non-resident. In addition, I have a professional qualification and can’t afford to be on the wrong side of a Revenue demand for not observing a legal obligation.

So the landlord knew what he was doing when he quickly gave the non-answer of “I’ll look after my own tax affairs”. He’s now reflecting on his position over the weekend, knowing full well that I’ve given notice in my present accommodation.

What should I do?

Obviously, I’m looking again for somewhere to live, in case the landlord says no.

But what should I do about him if that’s his considered response? I could give in, but I don’t want to live under the shadow, however remote, of stumping up twice for the tax he owes.

I could twist his arm by threatening to shop him to Revenue. Even if he’s never rented the place before (I don’t think he has), he’d be on their radar and could expect hassle if he tries to rent it to anyone else without declaring the rental income. But even if it worked, issuing that threat would hardly make for a good start to the landlord-tenant relationship.

Should I go nuclear on the letting agency for holding the hand of a tax-dodging landlord? Ask them to nominate a PR agency to take media queries? Tell her to expect a Revenue attention? Even by Pin standards of standing up for oneself, that might be a bit over the top against an agent who can only take instructions.

I’m just raging that if the letting falls through because a well-off (or over-leveraged) absentee landlord wants to dodge tax owed to this Republic, I’ll be left to find a place to live at short notice (even if it’s a renters’ market out there).

Thoughts appreciated…

[The_Unwelcome_Guest]

@Libero

Should I go nuclear on the letting agency for holding the hand of a tax-dodging landlord? Ask them to nominate a PR agency to take media queries?

Ask her who her boss is… It’s her that should be sorting this out with the Landlord, present it as a fait accompli and tell them to take a hike otherwise…

[sharper]

Firstly don’t rent the place, the attitude of the agent and landlord are obviously not conducive to a pleasant tenancy for you.

Secondly, absolutely report the both of them. The reason agents and landlords get away with this crap is because of the attitude of Irish people in not “going nuclear” on this sort of thing.

[flash]

I explained politely to her that Revenue’s attitude is pretty strict: they can come after any tenant who fails to withhold tax, even if the tenant had no reason to believe his or her landlord was non-resident.

Seriously. How is any tenant supposed to keep tabs on the residential status of their landlord?

I’d like to see the courts try to enforce that.

[BeTheHokey]

Could you agree to pay the agent the rent, then it’s her problem.

[T-B-M]

Don’t touch it with a barge pole.

While it might be a pain in the a$$ looking for another place at short notice - at least you won’t end up carrying the can for somebody else’s tax liability. Can you extend your current place for a month or 2 ?

Report the EA and Landlord to the revenue - gombeenism needs to be stamped out in this country.

[mr_anderson]

Ive always been seriously in favour of a tenant registration scheme, where they provide information on the property and landlord.
Rent relief on their incomes would then be granted on the basis of this information.
If the landlord proves to be dodgy, then the tenants should be entitled to a cut of any proceeds which the revenue commissioners make from the information, say 20%.

There are so many benefits,such as

1. The apartment, if sold, is subject to Capital Gains Tax.
2. Revenue generated by future income tax, as the landlord cannot hide future income.
3. Renevue generated fines & penalties from previous non-disclosure.
4. Tenant benefits.

[Orwellgeorge]

Report them. This is the system we have and your part in it is necessary.

[2Pack]

This could be quite messy . It is a Revenue Investigation just waiting to happen.

The Agent can ‘indemnify’ you in full against any actions by the revenue if they are satisfied that there is no intent to defraud the Revenue .

If they refuse to do so then it may be wise not to rent the place.

[spqr64]

@T-B-M

Don’t touch it with a barge pole.

While it might be a pain in the a$$ looking for another place at short notice - at least you won’t end up carrying the can for somebody else’s tax liability. Can you extend your current place for a month or 2 ?

Report the EA and Landlord to the revenue - gombeenism needs to be stamped out in this country.

Agreed, its time for people to stand up and put an end to this type of thing.

[alex_a]

This is one of the wierdest tenancy laws I’ve heard. Despite the fact that it is Law I have to agree with the Landlord - he sorts out his own tax affairs. You are all presuming that because he doesn’t want to do this that he won’t pay his taxes. My view would be that he wants to make sure his taxes are paid. A number of tenants are not going to submit a landlord’s taxes - they’d just pocket the money. And it would probably be impossible to get this money back.

I personally would have a huge problem with a stranger being responsible for making sure my taxes are paid.

[flash]

Come on. Many here are renters. How many of us know whether our landlord became “non-resident” in the last year or two? I don’t. The address of my landlord is on the lease (which is in Ireland), but that could be his “home” for less than 180 days per annum. How should I know? I’m not going to hire a private investigator to find out.

[JiggetyJig]

I’ve never even seen my landlord (been renting the same place for 2 years)! Supposedly he lives in Dublin!

But now that I think about it - my previous landlord skipped to Canada for the last few months we were renting so I dealt with his Dad for any issues. Was I supposed to be witholding tax for my landlord while he was in Canada???
This seems crazy!

[igy]

@JiggetyJig

I’ve never even seen my landlord (been renting the same place for 2 years)! Supposedly he lives in Dublin!

But now that I think about it - my previous landlord skipped to Canada for the last few months we were renting so I dealt with his Dad for any issues. Was I supposed to be witholding tax for my landlord while he was in Canada???
This seems crazy!

Only if he was legally resident outside the state, he may not have been gone long enough for that to be the case.

[Blue_Horseshoe]

@spqr64

@T-B-M

Don’t touch it with a barge pole.

While it might be a pain in the a$$ looking for another place at short notice - at least you won’t end up carrying the can for somebody else’s tax liability. Can you extend your current place for a month or 2 ?

Report the EA and Landlord to the revenue - gombeenism needs to be stamped out in this country.

Agreed, its time for people to stand up and put an end to this type of thing.

Agree wholeheartedly. Inform Revenue and The Private Residential Tenancies Board. Let the head office of the EA in question know you are doing this also.

Blue Horseshoe

[triplerotor]

this is a crazy piece of regulation… not sure if its even law.

The 20% is to be deducted by the renter or by an agent resident in Ireland, if you are paying the agent you are not required to do the 20% retention which you should be glad of because it will save you the hassle of submitting it to revenue (monthly) and the associated form filling. if the owner does not fulfill his obligations to revenue they will go after the agent not you.

Its crazy because it forces non resident landlords to use a local agent even if they dont otherwise need one. They have the option to nominate anyone else as an agent like a family member but most people would not like to put someone on the spot like that.

I´m sure it violates all sorts of EU rules where the landlord is resident in the EU but thats Ireland for ya.

[flash]

ombudsman.gov.ie/en/Publications/AnnualReports/AnnualReportoftheOmbudsman1998/Name,3399,en.htm

Whereas I was pleased with the ultimate outcome in this case, it does raise the general issue of whether it is reasonable to expect ordinary residential tenants to act as tax collectors in the case of non-resident landlords. I appreciate that the provision may have validity in the case of lettings to commercial or business organisations. **But is it reasonable to expect a residential tenant, who may be elderly or have little experience of tax affairs, to be either aware of, or have the capacity to manage, this type of requirement? Indeed, tenants may not even be aware that the landlord’s “usual place of abode is outside the State” (which is the technical term used in the law). **These are questions which might be considered in any review of the current legislation.

[TonyT]

i had this experience - at the end of a 4 year tenancy. i got my tax relief backdated from the revenue and they are now pursuing the landlord.
its a ridiculous rule about the non-resident thing, but the law will only come down on one side - the tenants. i got this advice from threshold, the private tenancies board AND the revenue commision.

anyway, its a bit off the point. for your case - dont get invloved unless the landlord agrees to be upfront and above board from day one.

[Libero]

@BeTheHokey

Could you agree to pay the agent the rent, then it’s her problem.

I forgot to mention that I suggested that, but didn’t get a reply on it.

I’d say the letting agency would be happy to take the business and act as agent after the letting is concluded and accept payment of rent gross. But the landlord must not be keen to use an Irish-based agent or it would already be in place.

Other posters have questioned the existence of the obligation to withhold tax paid to a non-resident landlord. Does anyone know the statutory basis for this obligation?
Because it’s crystal clear that it is an obligation from Revenue’s point of view. Apart from the Ombudmans case posted above, see here (revenue.ie/en/tax/it/leaflets/it70.html#section17) and note the threat in bold.

As to the fairness of the obligation… well, it’s a two-way street. I think withholding taxes are common in the case of non-resident business activity because it would otherwise be easy for them to do business in the state, run up a liability to tax, and then forget about paying it since they’re beyond the reach of Revenue in a way a resident is not.
Then again, it’s mighty unfair for Revenue to imply that they’ll come after a tenant for failure to withhold tax, even where that tenant had no reason to believe his/her landlord was non-resident or was lied to on that point.

In my own situation, it’s pretty clear that the landlord is non-resident; neither he nor the agent have claimed otherwise. I’m certain I’m not going to budge, so either the landlord changes his mind or faces the consequences.

[grumpy]

Is is the law, in all it’s clarity

Section 1041 Rents payable to non-residents

(1) Section 1034 shall not apply to-

(a) tax on profits or gains chargeable to tax under Case V of Schedule D, or

(b) tax on any of the profits or gains chargeable under Case IV of Schedule D which arise under the terms of a lease, but to a person other than the lessor, or which otherwise arise out of any disposition or contract such that if they arose to the person making it they would be chargeable under Case V of Schedule D,

where payment is made (whether in the State or elsewhere) directly to a person whose usual place of abode is outside the State; but section 238 shall apply in relation to the payment as it applies to other payments, being annual payments charged with tax under Schedule D and not payable out of profits or gains brought into charge to tax.

(2) Where by virtue of subsection (1) the tax chargeable for any year of assessment on a person’s profits or gains chargeable to tax under either or both of the Cases referred to in that subsection would but for this subsection be greater than the tax which would be chargeable on such profits or gains but for subsection (1), then, on a claim in that behalf being made, relief shall be given from the excess, whether by repayment or otherwise.

Section 238 Annual payments not payable out of taxed income

(1) In this section, “the inspector” means such inspector as the Revenue Commissioners may direct.

(2) On payment of any annuity or other annual payment (apart from yearly interest of money) charged with tax under Schedule D, or of any royalty or other sum paid in respect of the user of a patent, not payable or not wholly payable out of profits or gains brought into charge, the person by or through whom any such payment is made shall deduct out of such payment a sum representing the amount of the income tax on such payment at the standard rate of tax in force at the time of the payment.

You dont need the agreement of the landlord, it’s obligatory, but as noted above, if you pay the agent, you are in the clear.