WHAT IS IT?
The Local Property Tax or LPT is a self assessed tax payable by an individual on the market value of his/her “residential property or properties” located in Ireland.
WHAT DOES THAT MEAN?
It means the LPT is a self assessed tax. You are responsible for valuing your own property, filing your tax return and making the relevant payment.
WHAT’S MEANT BY “Residential Property?”
A “residential property” is any building (or part of a building) which is used or is suitable for use as a residence. It includes the driveway, yard, garden, garages, sheds and any other land associated with the property up to one acre in area.
HOW IS THE PROPERTY VALUED?
Because the LPT is a self assessed tax the property owner must decide on the market value of the property. Once the market valuation has been made it will hold for LPT purposes until the end of 2016 regardless of any improvements or renovations to the property or indeed any changes to the property market.
Revenue will not be valuing individual properties. Instead they will provide guidance to assist the property owners in valuing their own property. The LPT information guide uses the following resources as suggestions on how to honestly value your property:
If in doubt, it is advisable to get a valuation from an independent Auctioneer, Valuer or Estate Agent.
CAN THE VALUATION BE CHALLENGED?
There is a presumption of honesty with this new tax. An exact valuation will not be required unless the property is valued at €1 million or more. However, Revenue will challenge cases where it is obvious that an undervaluation has occurred in which case they can raise an assessment on the undervaluation.
If such a situation arises, the tax payer can appeal the assessment to the Appeal Commissioners.
HOW IS LPT CALCULATED?
The amount of LPT depends on the property value.
Property values are organised into bands. The first band is for property values between €0 and €100,000. After that all values are in €50,000 bands. Where the property has a value of in excess of €1m an exact valuation is required.
Once the property owner has identified the band in which his/her property falls into, the LPT will be calculated automatically when filing on line via ROS (Revenue on line System).
It is not necessary to ask your Accountant / Tax Adviser to calculate this tax as there is a ready-reckoner provided to assist those completing their Returns.
But just in case you want to know how to calculate the tax liability, it’s computed as follows:
Again, please make sure you have an exact valuation if your property is worth €1m or over.
WHO HAS TO PAY THE LPT?
The simple answer is the owner of the property on the date the LPT falls due.
The filing date for 2013 is 1st May 2013. For 2014 onwards it will be 1st November.
If you are in the process of selling your property but still haven’t sold it by 1st May 2013 then you will be considered the “liable person” for 2013 even if the property is sold before the end of the year.
The following individuals are liable to pay the LPT:
If two or more people own a residential property they are both liable for the LPT. It is essential that they agree who should file the return and pay the relevant tax. If neither owner pays the LPT then Revenue can collect the tax from either party.
ARE THERE ANY EXEMPTIONS?
There are a number of exemptions including:
HOW DO WE PAY THE LPT?
The liable person must complete the tax return and select the preferred payment option.
If you prefer submitting a paper return the due date for both filing and paying is 7th May 2013. In other words you must enclose a cheque, bank draft or postal order with the completed form.
If you wish to submit a return on line there is an extended filing date to 28th May 2013 with the following options:
WHAT IS MEANT BY A “PHASED BASIS”?
A phased basis means:
HOW WILL AN EMPLOYER KNOW TO DEDUCT LPT?
Revenue will advise the employer of the amount to be deducted.
If a payment is deducted from the individual’s salary at source it is not subject to charges or interest.
WHAT HAPPENS IF THE LPT RETURN IS NOT SUBMITTED?
Revenue will pursue the amount by raising a “Notice of Estimate” using a wide range of collection options including:
WILL INTEREST AND PENALTIES APPLY?
Interest and penalties on late payments will apply.
Not submitting an LPT Return could result in a penalty of the amount of the LPT that would have been payable on a correctly completed return up to a maximum of €3,000.00. This penalty could arise even if the individual has actually paid the LPT.
A Tax Clearance Certificate will not be issued to the individual.
If you are obliged to file Income Tax, Corporation Tax or Capital Gains Tax Returns, you will incur a 10% surcharge at the relevant filing dates, if you have not filed your LPT Return and paid the corresponding liability or entered into a payment agreement. The surcharge will be capped at the amount of the LPT liability only in situations where the LPT position is subsequently brought up to date.
WHAT HAPPENS IF I OWN MORE THAN ONE PROPERTY?
Taxpayers who own more than one property are obliged to pay and file on line. They do not have the option of submitting a paper return and accompanying cheque, draft or postal order.
WHAT IF I CAN’T PAY THE LPT?
In certain circumstances an individual can opt to defer the payment of taxes if certain conditions are met.
It is important to remember that a deferral is not an exemption.
The deferred tax will remain as a charge on the property until the property is sold or transferred to another person.
There are four categories of deferral of the LPT:
Revenue will review applications in respect of the first three categories and following its review will grant or deny the deferral application. These deferrals are not restricted to owner occupiers. They can apply to personal representatives of deceased liable persons, individuals who have entered into insolvency agreements under the 2012 Personal Insolvency Act as well as those who have suffered unavoidable and unexpected significant financial loss and cannot pay the LPT without excessive hardship.
The fourth category dealing with the Income Threshold does not involve an approval process. The thresholds are based on gross income providing certain conditions are met. The standard income threshold can be increased if the claimant pays mortgage interest and this category of individuals must be owner occupier i.e. it does not apply to owners of multiple properties.
I STILL HAVE QUESTIONS
If you still have questions, please contact us on 01- 872 8561 or visit the revenue site http://www.revenue.ie
Rental income is calculated on the gross amount of rents receivable. A profit or a loss is calculated separately for each rental source. The rental income which is liable to Income Tax is the aggregate of the profits as reduced by the aggregate of the losses.
When completing an Income Tax Return, rental income from property situated in the Republic of Ireland is chargeable to tax under the provisions of Case V Schedule D while rental income from property situated outside the State is chargeable to tax under the provisions of Case III Schedule D.
It is important to remember that losses from one source cannot be written off against profits from the other. In particular, Irish rental losses cannot be written off against profits from foreign rental properties and vice versa.
The types of rental income liable to Income Tax can be more diverse than you might imagine. The following income is considered to be rental income, taxable under Case V, Schedule D:
For rental expenses to be deductible there are three main rules:
Specific Expenses include:
Please be aware you can never claim a deduction for your own labour. If you carry out repairs or gardening yourself, you cannot include this as a deductible expense against rental income.
The NPPR and Household charges are not allowable expenses against rental income.
Broadly speaking, interest on money borrowed to purchase, improve or repair a rental property is deductible in calculating your rental income for tax purposes, subject to certain conditions.
The allowable deduction for interest accruing on loans used to purchase, improve or repair rented residential property is restricted to 75% of the total interest accruing.
This 75% restriction does not apply to non-residential property. In the case of offices, warehouses, etc. 100% of the interest is allowable against rents receivable.
A further restriction was introduced in 2006. Unless the landlord has complied with the registration and payment requirements of the PRTB (Private Residential Tenancies Board) in relation to each and all tenancies in the rented property then the interest on monies borrowed for the purchase, improvement or repair or rented residential properties will not be an allowable deduction against rents receivable.
If the loan to purchase the rental property includes stamp duty, legal fees, auctioneers’ fees, etc. then the interest on the loan must be apportioned. Only the interest relating to the actual cost of purchase, repair or renovation of the property is allowable.
Interest incurred prior to the first letting is not allowable (pre-letting expense) neither is the interest incurred after the final letting (post letting expense). Interest incurred during a period in which the landlord occupies the property is not allowable.
Wear and tear allowances are available in respect of capital expenditure incurred on fixtures and fittings provided by the landlord for the rented residential property. This includes furniture, showers, kitchen appliances, etc.
The rate is 12½% over eight years.
If an individual rents out a room in his/her sole or main residence as residential accommodation and receives up to €10,000 per annum this amount will be exempt from Income Tax, PRSI and the Universal Social Charge providing conditions are met.
The €10,000 limit includes rent, utility bills, laundry, food, etc.
If the individual receives in excess of €10,000, the Rent-a-Room exemption will NOT apply and the entire rent receivable will be liable to income tax, PRSI and the Universal Social Charge
An individual cannot avail of rent-a-room relief in respect of payments for accommodation in the family home by a child of the landlord under any circumstances. There is no restriction where rent is paid by other family members, for example, nieces and nephews.
The relief does not affect an individual’s entitlement to mortgage interest relief i.e. Tax Relief at Source.
The relief does not affect the individual’s entitlement to Principal Private Residence Relief from capital gains tax on the sale or disposal of the property.
You can opt out of the relief for a year of assessment by making an election on or before the return filing date for the year of assessment concerned.
If your landlord resides outside theRepublicofIrelandand you pay rent directly to them or electronically transfer the money into their bank account either inIrelandor abroad, you must deduct income tax at the standard rate of tax (currently 20%) from the gross rents payable.
Failure to deduct tax may leave the tenant liable for the tax that should have been deducted.
At the end of the year you are obliged to complete a Form R185 showing the tax deducted from the gross rents which you should then give to your landlord. The landlord can then submit this form to the Revenue Commissioners and claim this amount as a credit.
If, on the other hand the non-resident landlord has an agent who is resident in the state, then there is no obligation for the tenant to deduct tax from the rent. Instead the tenant should pay the gross rent to the agent.
The agent is then liable to pay income tax on the rents received from the tenant in the capacity of Collection Agent for the landlord. The agent is then required to register as self employed and submit an annual tax return and account for the tax due.
In general, rental income from property located outsideIrelandis calculated on the full amount of rents receivable, irrespective of whether or not it has or will be remitted intoIreland.
Broadly speaking, the same deductions are available in calculating the taxable rental income as if the rents had been received inIreland.
Income tax on these rental profits is chargeable under Case III of Schedule D.
In the case of an individual who is not domiciled inIreland, the taxable rental income is computed on the full amount of the actual sums received in the State without any deductions or reliefs for expenditure incurred.
Rental losses from the letting of property outside the State cannot be offset against rental income from the letting of property in the State and vice versa. Such losses can only be offset against future rental income from property outside the State.