What is withholding tax on rent?
Rent paid by tenants to landlords may be subject to withholding tax under either personal income tax (IRS) or corporate income tax (IRC).
In practice, withholding tax on rent is a portion of the total rent receipt that is paid directly to the Tax Authority, acting as an advance payment of IRS or IRC. That portion is held by the Tax Authority and later credited against the landlord’s income tax.
When is withholding tax on rent mandatory?
Withholding tax on rental income (Category F) must be applied at the moment the rent is paid. The rent receipt must state whether the income is subject to withholding tax and, if not, the reason why.
Whether withholding applies depends on the nature of the tenant. In short, if the tenant is an entity (a company, association, foundation or other legal person), or a self-employed professional under the organised accounting regime, they are required to withhold tax when paying rent receipts.
Withholding tax is mandatory in the following situations:
- Where both tenant and landlord are companies or self-employed professionals under the organised accounting regime, the tenant must withhold IRC at a rate of 25% (Article 94(1)(c) and (4) of the CIRC).
- Where the tenant is a company or a self-employed professional under the organised accounting regime but the landlord is a private individual, the tenant must withhold IRS at a rate of 25% (Article 101(1)(e) of the CIRS).
No withholding tax applies in the following situations:
- Where both tenant and landlord are private individuals, the tenant does not withhold anything and pays the full rent to the landlord each month.
- Where the tenant is a private individual and the landlord is a company or a self-employed professional under the organised accounting regime, the tenant does not withhold anything and pays the full rent to the landlord each month.
When can withholding tax on rent be waived?
Withholding tax may be waived in the following situations:
Where the tenant is a company or a self-employed professional under the organised accounting regime and the landlord is a private individual, the IRS withholding may be waived if the landlord does not earn more than €15,000 a year in Category F income (Article 101-B(a) of the CIRS and Article 53 of the CIVA).
