I own a large farm and I currently rent all of my land on a short term basis to a
neighbouring farmer. He recently approached me and asked me to enter into a
longer term lease with him. Are there any tax advantages of entering into a
longer term lease agreement? Please advise me.
Tax rules were amended in recent years in an attempt to encourage farmers to lease their
lands on a long term basis to other active farmers. Land leasing occurs when a land owner
(Lessor) leases his land to another active farmer (Lessee).
I understand that tax measures were introduced in recent years whereby a land owner would
be exempt from income tax on lease rental income to up various exemption limits. The lease
term and the maximum tax exemption limits are as follows:
5 to 7 year lease: up to €18,000 rental income per year;
7 to 10 year lease: up to €22,500 rental income per year;
10 to 15 year lease: up to €30,000 rental income per year;
15 year plus lease: up to €40,000 rental income per year.
The rental income eligible can include income from both land and agricultural entitlements.
The lease must be in writing and stamped by Revenue Commissioners in order for the Lessor
to avail of the enhanced income tax incentives.
The tax reliefs do not apply to leases to a spouse/son/daughter/sibling but are applicable on
leases to a niece or nephew. The rental income up to each threshold is income tax exempt
but the universal social charge (USC) and PRSI still applied on this lease income.