Understanding tax in Ireland can be daunting. This guide cuts through the complexity and provides clear, concise tax information relevant to your investments and property management.
We want to simplify your life, so we’ve outlined the top tax terms you need to know.
Below, you’ll find essential information regarding tax terms in Ireland targeted at individual taxpayers and business owners in the following categories:
- Property Owners and Landlords
- Investors
Let’s get straight to it!
Table of Contents
A-Z of Tax Terms for Property Owners and Landlords
As a property owner or landlord in Ireland, your tax liability can be a little more difficult to navigate than non-property owners.
Once you understand the key terms associated with the process, it’s easier to develop a strategy to overcome challenges and proceed with peace of mind.
As a property owner or landlord in Ireland, here are some of the tax terms you should be aware of:
Allowable Expenses
Allowable Expenses refer to costs incurred while renting out a property that can be deducted for tax purposes. To avail of this, property owners and landlords should keep records of all allowable expenses, including maintenance, repairs, and management fees, to potentially reduce taxable rental income.
Buy-to-let mortgage
A buy-to-let mortgage is a mortgage granted on the condition that the property will be rented out.
Property owners and landlords may require buy-to-let mortgages to finance investment properties, ensuring access to rental income and potential capital appreciation.
Capital Gains Tax (CGT)
CGT is a tax on the profit made from selling or disposing of an asset.
Currently, the standard rate of Capital Gains Tax in Ireland is 33% of your chargeable gain.
This is why property owners and landlords should always consider CGT implications when selling investment properties to maintain compliance with tax laws and optimise returns.
Tip: Are you an Irish resident with foreign assets? Find out how Capital Gains Tax works for you here.
Depreciation
Depreciation is the term used to describe the reduction in the value of an asset over time. This can be due to several reasons, but it is often associated with wear and tear or changes in market conditions.
Property owners and landlords may be able to claim certain tax depreciation or ‘wear and tear’ allowances on rental properties, but always speak to an accountant or tax professional before making assumptions about your entitlements.
Exemption for certain rented residential properties
Property owners and landlords in Ireland may be eligible for tax exemptions for specific types of rental properties. This can include rent-a-room relief, which now also includes relief for renting out a self-contained unit attached to your property.
Furnished lettings
Furnished lettings describe rental properties that come with furniture and fittings provided by the landlord.
Property owners and landlords offering furnished lettings may be able to claim wear and tear allowances on furnishings, reducing taxable rental income and enhancing property returns.
Ground rent
In Ireland, if you own a leasehold property, you may be required to pay ground rent to your ground landlord.
Property owners and landlords receiving ground rent should report it as rental income for tax purposes, ensuring compliance with tax laws and accurate financial reporting.
Joint tenancy
In Ireland, joint tenancy usually applies when both parties in a couple sign the tenancy agreement with a local authority or Approved Housing Body (AHB). This means that on the death of a joint tenant, the right to the whole property passes to the survivor. This type of arrangement is common between spouses.
Property owners and landlords should be aware of joint tenancy arrangements for both taxation and legal purposes.
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Kitchen appliances wear and tear
In some cases, an allowance for the depreciation of kitchen appliances (i.e. white goods) in a rental property may be claimed as tax relief. But, it’s important to note that this allowance has certain stipulations that should always be discussed with a dedicated tax consultant or rental property expert.
Lease premium tax
In Ireland, premiums on leases are a complicated topic. For example, you may receive a premium for granting a lease that lasts for less than 50 years, and if so, part of this premium may be treated as income/rent.
Before putting together a lease, seeking professional advice as part of your tax planning strategy and keeping your lease agreement compliant, structured, and optimised is important.
Local Property Tax (LPT)
Local Property Tax (LPT) is a tax on the value of residential and commercial properties. As LPT is self-assessed, property owners in Ireland should ensure they understand their obligations.
These include assessing the market value of your properties accurately and filing LPT returns on time. Additionally, you should stay informed about any updates or changes to LPT regulations to remain compliant with Irish tax laws.
Note: Every Irish property owner must pay Local Property Tax, whether they live in Ireland or abroad.
To calculate your Local Property Tax, use this online calculator.
Mortgage Interest Relief
Mortgage Interest Relief is a tax deduction based on the interest you pay in a tax year on a qualifying mortgage loan.
Due to the announcement of a new temporary Mortgage Interest Tax Credit in Budget 2024, property owners are advised to speak with a professional tax consultant to understand their eligibility for the relief better.
Owner-Occupier
The term ‘owner-occupant’ refers to an individual who owns and occupies a property in Ireland. Owner-Occupier Relief may be available if you’ve spent money purchasing, constructing, converting, or refurbishing a qualifying property to reside in.
Rental income
Rental income refers to any income from renting a property to tenants. Landlords must accurately report rental income for tax and financial reporting purposes, as failure to do so can result in severe legal implications.
Stamp Duty
Stamp Duty taxes certain documents, including property transfers and share transactions. Property owners and landlords must consider it when buying or selling properties.
In Ireland, Stamp Duty rates for residential properties are 1% on the first €1 million and 2% on the excess over €1 million.
Note: This applies to written documents executed (signed, sealed, or both) on or after 8 December 2010.
Vacancy Refurbishment
The Vacancy Refurbishment Grant is financial support that may be available to you if you’re turning a vacant house or building into your permanent home or a rental property.
While a grant of up to €50,000 is available for refurbishments exceeding the standard grant of €50,000, a top-up grant of up to €20,000 may also be available.
To qualify for the grant (or qualify in principle), you must:
- Have proof of ownership or evidence of active negotiations to buy the property (i.e. confirmation of engagement from the estate agent or owner of the property)
- Live in the property as your principal private residence or make it available for rent
- Have proof that the property has been vacant for at least 2 years and that it was built on or before 2007
Wear and Tear Allowance for Furnishing
If you’re a property owner or landlord in Ireland, you may qualify for an allowance that covers the depreciation of fixtures and furnishings in a rental property.
A-Z of Tax Terms for Investors
If you’re a regular investor, you’ll already know that tax compliance is essential for avoiding legal repercussions and optimising your Return on Investment (ROI).
But, as a strategic investor in Ireland, which key tax terms should you know?
Here’s what you need to know:
Annual exemption limit
As an investor, your annual exemption limit refers to the threshold beyond which certain r gains become taxable. Awareness of exemption limits is vital for maintaining compliance with tax laws and optimising tax planning strategies.
In particular, investors should be aware of annual exemption limits when selling investments or developing new tax-efficient investment strategies.
For more information on optimising your tax planning strategies, see the following guides:
- Beginner’s Guide to Tax Planning
- 6 Goals & Objectives of Tax Planning
- The Difference Between Tax Planning, Tax Evasion, and Tax Avoidance
Bond interest
Bond interest refers to the interest earned from bonds or fixed-income securities. Investors receiving taxable bond interest should report it as investment income for tax purposes and to maintain compliance with tax laws.
For more information on government bonds in Ireland, see the Central Bank of Ireland’s website.
Irish Tax is complicated and hard to understand. Our FREE guide demystifies what you can do to save money TODAY. Download the guide now and learn how to keep more money in your pocket.
Capital Acquisitions Tax (CAT)
Capital Acquisitions Tax, or ‘CAT,’ is a tax levied on gifts and inheritances received by individuals. Investors receiving large gifts or inheritances should always consider the CAT implications to maintain accurate financial reporting.
In Ireland, Capital Acquisitions Tax is currently charged at 33% on taxable gifts or inheritances made on or after 5 December 2012 (the rate was formerly 30%).
Dividend Withholding Tax (DWT)
DWT is the term for tax withheld from dividend payments made to investors. While some exceptions apply, DWT is generally withheld at 25% for the year in which the distribution is made.
Exchange-traded funds (ETFs)
ETFs are investment funds traded on stock exchanges that mirror the performance of an existing asset or group of assets. To maintain tax compliance, investors in ETFs need to be aware of how fund distributions and redemptions will impact their tax strategy.
This can be achieved by speaking directly with a tax planning expert who understands the appropriate Irish tax treatment of ETFs.
Exit Tax
Exit Tax is a tax imposed on gains from certain investments upon withdrawal. Investors need to understand Exit Tax implications when redeeming investments, as this will affect their overall investment returns.
Currently, the Exit Tax rate on most Irish fund investments in Ireland is 41%. Still, we recommend speaking with a tax consultant to discuss the specifics of your case, particularly for non-Irish funds. Irish fund investments generally deduct exit tax at source.
Foreign Income
The term ‘foreign income’ describes income earned from sources outside of Ireland. To ensure foreign income is reported accurately, investors are advised to speak directly with Irish tax advisors to clarify their tax liability and optimise their peace of mind.
Gross return on investment
As an investor, your gross return on investment or ‘gross rate of return’ is the total return generated from an investment before taxes and expenses.
Investors well-versed in strategic, accurate, and compliant financial planning can use this figure to assess the overall performance of their investment portfolio.
Holding period for shares
When discussing shares, a holding period is the length of time shares are held before being sold or disposed of.
Investors should consider holding periods when planning investments, and they should also be a key consideration for their tax planning strategy. The right approach can ensure tax-efficient strategies and optimise investment returns.
Investment funds
Investment funds are collective/pooled funds created to gather investors’ capital. Investors may contribute to investment funds to diversify their portfolios or gain exposure to a wide range of assets without the need for direct ownership.
For more information on investment funds established in Ireland, see the Central Bank of Ireland’s website.
Joint Broker Account
A joint brokerage account is an investment account shared by multiple individuals or entities. Investors should understand joint broker account arrangements — including shared ownership — to maintain tax compliance and uphold tax reporting responsibilities.
Key Investor Information Document (KIID)
A KIID is a document providing essential information about investment funds. Usually taking the form of a ‘fact sheet’, KIIDs are designed to help investors understand the key characteristics and risks of the funds they’re investigating, helping inform decision-making.
Listed securities
A listed security is essentially a monetary contract traded on a recognised stock exchange like the New York Stock Exchange (NYSE) or Nasdaq. A listed security may be a stock, bond, or derivative.
Investors trading listed securities are advised to familiarise themselves with the tax implications of these securities for capital gains and dividend income.
Market value of shares
The ‘market value of shares’ refers to the current price at which shares can be bought or sold in the market. Strategic investors should always assess the market values of shares before trading.
For tax planning purposes, it’s advised to continually monitor and update share values as part of your ongoing strategy optimisation.
Net Asset Value (NAV)
NAV is the term used to describe the total value of a fund’s assets minus its liabilities, which is divided by the number of outstanding shares. Investors should monitor the NAVs of investment funds for accurate valuation and performance evaluation.
Offshore funds
Offshore funds are investment funds domiciled in a jurisdiction outside of Ireland. While offshore funds are not illegal, investors must remember that tax obligations must be considered to uphold legal and ethical tax standards.
Because the subject of offshore funds can get complicated—especially in the case of multiple investments—investors are advised to consult with a tax specialist before making assumptions about their liabilities.
Portfolio management
Investors can employ a professional Fund Manager to manage their portfolio for time management, compliance, or diversification purposes.
That said, it’s vital for investors to remember that even under the management of a professional, the tax liabilities associated with your portfolio still fall on your shoulders.
Qualifying Investor Alternative Investment Funds (QIAIF)
An Alternative Investment Fund (AIF) is a type of collective investment where funds are raised from multiple investors in accordance with a specific investment strategy.
In Ireland, a Qualifying Investor AIF (QIAIF) is an AIF authorised by the Central Bank of Ireland. This means the Central Bank can supervise and impose conditions on these funds.
For more information, see the Central Bank of Ireland website.
Real Estate Investment Trust (REIT)
In Ireland, REIT refers to a company that owns and operates income-generating real estate. As part of the REIT system, these companies may be exempt from Corporation Tax (CT) (on income from their property rental business only), as well as chargeable gains made on the disposal of assets (on their property rental business only).
But, this should always be verified with a tax consultant.
Speculative investment
A speculative investment is a high-risk investment with potentially significant gains or losses. Investors should always assess the tax implications of speculative investments, considering potential gains and losses in tax planning strategies and financial health evaluations.
Tax-free savings account
Tax-free savings accounts are accounts that allow individuals to save and invest money without paying taxes on their earnings. Eligible investors may opt for tax-free savings accounts for tax-efficient savings and investments, maximising after-tax returns.
Undistributed income
Undistributed income is the surplus amount remaining when the distributable amount for a tax year exceeds the qualifying distributions allocated for that year.
Venture capital scheme
A venture capital scheme is an investment scheme designed to fund startups and small businesses. If approached correctly and with a keen understanding of tax implications on investments and exits, investors in venture capital schemes may benefit from significant tax incentives and potential returns.
Withholding tax on interest
Withholding tax is the tax withheld by financial institutions from interest payments made to investors. Investors receiving interest income should be aware of withholding tax obligations for compliance purposes and to accurately calculate their net returns on investments.
Yield on investment
As an investor, your yield on investment refers to your Return on Investment (ROI), expressed as a percentage of the initial investment. Investors should always assess investment yields for accurate performance evaluation and tax planning purposes.
Zero-coupon bond
A zero-coupon bond is a debt security that pays no interest but is sold at a discount relative to its face value. Generally, this face value amount is the one the investor will receive when the bond ‘matures’ or comes due.
Still feeling overwhelmed by tax terms? You’re not alone!
Luckily, there’s always support available from Expat Taxes to simplify things.
We’re here to relieve tax compliance and optimisation stress by providing one-on-one tax assistance tailored to your unique situation and tax planning goals. Giving you complete peace of mind and helping you save money, our award-winning tax consultancy team is on hand to help.
Book your consultation today, or find out more about the type of people we work with here.
Irish Tax is complicated and hard to understand. Our FREE guide demystifies what you can do to save money TODAY. Download the guide now and learn how to keep more money in your pocket.
DISCLAIMER: The material in this article is for general information purposes only and does not constitute legal or taxation advice. Specific legal, financial, investment and taxation advice should be sought before acting or refraining from acting. All information and taxation rules are subject to change without notice. Expats Taxes accept no liability whatsoever for any action taken based on the information in this article or any of the articles in our blog series. Expat Taxes Limited does not provide financial planning, investment, or mortgage advice, and this article is provided only for general information. We are not authorised/licensed to provide financial advice and this article should not be considered to constitute advice of this type in any respect.