English
FrançaisHi,
I had been under the impression that completing tax returns in France for a leaseback property meant no further action was required with the revenue service in Ireland (country of residence).
Having been told that this is not the case, I got in touch with a tax adviser and was told that a hefty bill awaited us for this year's return (and therefore for previous years also I presume).
Keeping on top of all the French bills and receiving an income tax bill of €0 from the French Govt and thinking that was it, we are now told our Irish tax bill is set to be around €6, 000 for the leaseback property for 2015.
I'm now trying to figure out if I am missing something in terms of incurred costs to set against this figure.
Here's what I know/think I know about filing a tax return in Ireland that includes income from an overseas property :
1. Building depreciation is not an admissable expense.
2. Only 75% of the in interest on mortgage repayments is allowed.
3. Land tax (taxe foncière) is not an admissable expense.
4.
Apologies. I submitted the above post before it was completed.
4. You can include the building maintenance fees, though these tend to be quite low for us.
Does anyone know if I am missing something really obvious or if the tax figure of €6, 000 is a true reflection of Irish revenue's take on a foreign property bringing in around €8, 500 per annum?
Thanks.
Hello Goober.
Yes, you must pay tax in Ireland on foreign income if you live in Ireland. But it seems highly unlikely tax your Irish tax liability is EUR6,000 for 2015. Your tax advisor has surely explained how he has arrived at the EUR6,000 with a breakdown of the numbers.
While I make a French Tax return every year before 30 April, I don't pay any French income taxes as my rental income is less than my expenses (including management fee, letting fees, maintenence fees and mortgage interest).
While I am not an accountant, I believe that if I did pay income taxes on my leaseback in France, that this would be also counted as an allowable expense by Irish Revenue.
The way that I have always done it is : Pay an accountant to do my French Tax return. He does that and then gives me what is known by Irish Revenue as a "Case III Calculation" that shows me what I need to report on my Irish Tax return. I complete my Irish Tax return on ros.ie.
As mortgage interest rates are very low in French lenders at the moment, your interest repayments on your loan are also low.
So, yes, I will pay a small amount of income tax, PRSI and USC on my profits. (Even though my profit is paying off mortgage capital, it is still a finacial benefit to me).
I hope my amateur summary makes some sense.
Yes - tax is payable in Ireland on all income no matter where it comes from if you are tax resident here.
There is a double tax agreement between Ireland and France so that the amount you pay in tax in France does not have to be paid again in Ireland. However, the rules for calculation of tax are different in different countries. Therefore you might have a bill of €1,000 in France and pay it, and a bill of €1,500 in Ireland. Then you would have to pay the €500 in Ireland.
See the Irish revenue site which is quite clear:
Foreign Income Tax and Irish liability
I expect the something similar applies to the UK.
You will find much detail on this on the Irish Revenue site:
Foreign Rental Income
You can file this yourself under self-assessment, there is a great deal of detail on what is allowed and what is not allowed. Or get an accountant to do it.
My understanding is that Taxe Fonciere is an allowable expense (this is equivalent to rates or council tax and usually includes the rubbish). The allowable expenses on a foreign property are much the same as the allowable expenses on a rental property in Ireland.
Not sure what you mean by 'building depreciation' - the value of the building comes into play when you sell. This would be a capital loss if the value had gone down, or a capital gain if it increased in value (good luck with that!). That's separate to income tax.
Depreciation is allowable on 'wear and tear' (eg. furniture and fittings) at rate of 12.5% over 8 years.
Nothing is allowable if you are using the property yourself, for those periods that you are using it.
A bill of €0 in France and €6k in Ireland seems incorrect.
The taxation situation was another misleading part of the sales and marketing communication on these properties. It often was (and is) presented that the income tax was low since the allowances under the French revenue rules were generous. No mention was made of the fact that it doesn't matter one jot if they are generous as you are still liable for income tax in your own country of residence!
Two quick questions for which I would be obliged for any views or advice:
1. Is the annual fee of the accountant in France deductable?
2. Where there is no element of usage under a lease, could the lease be classed as commercial and not subject to the 70% rule?
Thanks for any responses to these.
Sorry - I meant to say 75% in the last post.
Any expense related to running your rental including accountancy fee deductable but french accoutant best to ask.
akaik all leaseback schemes consisted of owners signing a 9 to 12 year commercial lease (bail commercial) in order to get the purchase TVA (VAT) "back". Dont think num weeks personal usage allowed had any bearing. However after initial lease or if leaseback failed there is provision for owners to setup a self-manage company and sign leases with that entity or just sign yearly contracts with an entity providing 3 of the 4 required hotel services to retain leaseback/lmnp status to end of 20 year TVA period.
There was also a requirement for 70% of apartments in resort to have lease (commercial/self-manage or yearly) but that requirement has now dropped to 55% of resort apartments to retain "residence de tourisme" status which is required as part of owners leaseback/lmnp status.
Thanks for your helpful comments Macdara.
Hi all.
I'm in the same position as Groober, having just found out that I need to file the foreign rental here in Ireland and will probably face a similar bill.
Before settling on the return, I have a couple of questions:
1. Rent in Kind - I receive an invoice each year for personal time, as per the lease. This is not paid but used in the French computations. Do we need to include this in the Ireland comps, or can the income be just the monies received? What happens in the case where the allowed personal time is not taken up - do you still have to include this 'phantom' rent?
2. Initial expenses - The first rent was recorded in the French accounts in 2008 but the French accountant also included some expenses in 2007 (accountants fees, some mortgage interest). Can these be included in the computations?
Thanks for any help!