The information below outlines upcoming changes in Finance Bill 2021 which will affect non-resident corporate landlords. The Bill is currently passing through the Oireachtas and is due to be signed into law by the president by 25th December 2021.
Section 18 of the Finance Bill 2021 brings companies not resident in Ireland that are in receipt of Irish rental income within the charge to Corporation tax. At the moment these companies are liable to income tax on their Irish rental profits.
This will result in the rate of taxation on such income increasing from 20 per cent to 25 per cent. This change is due to take effect from 1st January 2022.
There will be no change to the tax deductibility of any expenses in relation to the rental property. Provisions have also been made to ensure that rental losses & capital allowances will not be lost on the transition from income tax to corporation tax.
The Bill also amends the payment date for certain affected companies’ preliminary corporation tax for 2022. Those companies whose accounting period ends between 1 January 2022 and 30 June 2022 have until 23rd June 2022 to pay preliminary corporation tax where the payment is made using ROS.
As these non-resident corporate landlords will now be liable to corporation tax, they will also be subject to the new Interest Limitation Rules (ILR) which have been introduced to comply with the EU’s Anti-Tax Avoidance Directives (ATAD). The ILR seek to link a taxpayer’s allowable net borrowing costs directly to its level of earnings. The ILR does this by limiting the maximum tax deduction for net borrowing costs to 30% of earnings before tax and before deductions for net interest expense, depreciation, and amortisation (EBITDA).
If you have any queries, please contact Eddie Murphy, Partner & Head of Tax Services.