Change to taxation of rental income by non-resident companies

Under the Finance Act 2021, non-Irish resident corporate landlords are now subject to Irish corporation tax at the rate of 25% on rental income from Irish property. The change is effective for accounting periods commencing on or after 1 January 2022, and the result is an increase in the tax rate from 20% to 25% for non-resident corporate landlords. Before this Act, non-resident companies were subject to Income Tax at the standard rate of 20% on rental income which was declared on an annual Form 1 Trusts and Estates return.

However, for accounting periods commencing on or after 1 January 2022, such companies are now chargeable to Corporation Tax under Schedule D Case V in respect of rental income arising in the State. The Act provided for capital allowances and rental losses forward to ensure the benefit of these are not lost while the companies are in the transition from Income Tax to Corporate Tax.

Where Corporation Tax treatment applies, the landlord is now required to register for Income Tax effective from the 1st of January 2022. Normal pay and filing obligations apply to this new registration and if relevant, the Income Tax registration for the company should be ceased on the company’s Revenue record. This is not applicable for all companies and will depend on what other income streams the company has so this should be reviewed depending on the individual circumstances of each company.

If there is a collection in place, then that agent must register for Corporation Tax under the same tax reference number. If preliminary tax has been paid on account for the 2022 tax year, then the Collector General should be contacted to arrange the transfer of this preliminary tax payment from Income Tax to Corporation Tax.

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