MGM Tax Pointers - Registering Residential Leases
Landlords should be aware that to facilitate the protection of the rights of tenants, the Residential Tenancies Act 2004 introduced in 2006 that a landlord is required to register the tenancies of all residential dwellings with the Private Residential Tenancies Board (PRTB). The tenancy needs to be registered in order for the landlord to have an entitlement to an interest deduction against rental income on money borrowed for the rented residential premises and since April 2009 only 75% of the interest paid on borrowings is allowed as a rental deduction.
The Revenue's take on this requirement, is that the onus is on the investor to ensure that the tenancies are registered with the PRTB. This can be done either directly by him/her or on his/her behalf by a management company, where a management company is involved. A management company cannot therefore be a tenant as it does not actually occupy the dwelling. The person who is entitled to receive the rent is the investor/landlord, whether or not he/she has authorised an agent to act on his/her behalf. The obligations in relation to the registration of tenancies with the PRTB therefore fall on the investor/landlord. Revenue requires the landlord to provide a written communication from the PRTB confirming registration of a tenancy in order to claim an interest deduction against the rental income.
All new tenancies should be registered within one month of their commencement for a fee of €90. For any late registration of 2011 tenancies, the landlord will have to pay a late registration fee of €180 instead of the normal fee.
Where student accommodation is owned by an educational institution, there is no requirement for that educational institution to register student tenancies with the PRTB. If student accommodation is owned by private persons and is let directly to an educational institution, there is no requirement for that person to register the student tenancies with the PRTB. A private person that owns student accommodation which is let to students but only managed by the educational institution must register those student tenancies with the PRTB.
Since the introduction of this Act, the Revenue are ensuring more that landlords are complying with the necessary conditions in order to be entitled to claim an interest deduction against their tax liability. More information on the registration of a tenancy can be found at www.prtb.ie
Second Property Tax
A new €200 annual charge was introduced on Irish residential property in 2009. It is referred to as the non principal private residence (NPPR) tax. It is payable to the LGCSB NPPR and NOT the local authority. The payment is to be submitted to the local authority where the property is located.
The annual charge does not apply on :-
1. a person's sole or main residence;
2. a residential property that has never been either, sold or used as a residence;
3. mobile homes;
4. granny flats and similar dwellings in which a relative (or a relative of a spouse or partner) lives if it is provided free of rent and if it is located no more than two kilometres from the residence of the owner;
5. in certain circumstances, joint ownership of a property after a divorce/separation agreement;
6. a person who owns a residence but now lives in a nursing home or care centre, or lives with and are cared for, by relatives.
7. discretionary trusts or corporate bodies that are accorded charitable status
8. where a landlord and a Local Authority have a signed contract in place under the Rental Accommodation Scheme for a property, on the liability date i.e. 31st July 2009 and 31st March in 2010 and each subsequent year, the property is exempt from the NPPR charge.
Where a second residential property is co-owned the liability falls on all co-owners, but payment by any one co-owner discharges the liability of all co-owners.
The payment can be paid electronically at www.nppr.ie or a NPPR registration form can be completed and payment sent by credit card, debit card, bank draft, postal order or cheque to the local authority. The NPPR registration form can be accessed for download on the website www.nppr.ie .
A person who does not pay a charge within the relevant two month period (between May and June) is leaving themselves open to prosecution by the Local Authority to whom the payment is due. A late payment fee will also arise if payment is not made. Furthermore, both the €200 charge and any accumulated late payment fee will be a charge against the property concerned.
The Act provides that, if a charge is not paid within a month after the last date for payment, a late payment fee will apply for every month or part of month that the €200 charge remains unpaid. For 2009, this means that the late payment fee will apply to all payments made after 31st October 2009 and for 2010 and 2011 it will apply to all payments after 30th June 2010 and 2011. The late payment fee amounts to €20 per month or part of a month and will continue to roll up as long as the charge remains unpaid and the amount involved can be substantial.
The non payment of the charge and any associated late payment fees will continue to apply for twelve years after the charge or late payment fee concerned became due even were the property in question to be sold. In these circumstances, the owner that originally incurred any outstanding charges and late payment fees would continue to be liable for the outstanding charges and late payment fees in addition to the new owner of the property.
The table below outlines the charge and the corresponding fees for each year that have been incurred for a particular month.