Local Property Tax is due on all residential properties in the State (with limited exemptions), regardless of whether they are occupied by the owner, rented out or unoccupied. Unlike trading activity, in the case of rental activity, taxable income is the gross rent as reduced by a limited number of specified deductions as set out in section 97 (2) TCA 1997. These are:
- any rent payable by the landlord in the case of a sub-lease;
- the cost to the landlord of any goods provided or services rendered to a tenant;
- the cost of maintenance, repairs, insurance and management of the property;
- the interest paid on borrowed money used to purchase, improve or repair the property (which, in the case of residential property, is restricted to 75% of the interest and is subject to compliance with PRTB registration requirements for all tenancies that existed in relation to the property in the relevant year); and
- payment of local authority rates.
In addition, wear and tear capital allowances are available in respect of the capital expenditure incurred on fixtures and fittings provided by a landlord for the purposes of furnishing rented residential accommodation. These allowances are granted at the rate of 12.5% per annum of the actual cost of the fixtures and fittings over a period of 8 years.
As I have indicated on many previous occasions, the Government has in principle accepted the recommendation of the Thornhill Group (that the Local Property Tax paid in respect of a rented property should be deductible for income tax or corporation tax purposes, in a similar manner to commercial rates) but has not considered the manner or the timing in which this will happen.