Category: Irish Tax Residency Rules

Foreign Property

July 2, 2013

Most Irish resident individuals will be liable for Irish tax on disposals of assets abroad. If tax is also payable in the country where the property was situated and Ireland has a double taxation agreement with that country then a credit may be allowed against the Irish tax liability for any tax paid in the foreign country.

An important amendment applies from 1st January 2007 onwards which provides that capital gains tax paid in respect of disposals of property in Belgium, Cyprus, France, Germany, Italy, Japan, Luxembourg, the Netherlands, Pakistan and Zambia will now be allowed as a credit against capital gains tax payable on the disposal in Ireland. Prior to this amendment capital gains tax payable in the countries listed was not allowed as a credit against Irish tax but was allowed as a deduction in calculating the Irish tax liability. This gave rise to a certain amount of double taxation.

The gain or loss must always be calculated in Euros. You do not calculate the gain/loss in the foreign currency and then convert to it to Euros. The original cost price of the property is converted to IR£/Euros based on exchange rates at date of purchase. The sale proceeds are also converted to Euros at the time of sale.

Sea Farers Allowance

April 29, 2013

A special deduction is available for seafarers against employment income where they are employed on a seagoing ship. However shipping boats are specifically excluded. The individual must be at sea on a voyage to or from a foreign port for at least 161 days in any tax year. The amount of the special deduction is €6,350 per annum. The special deduction is taken off your employment income in arriving at your taxable income.

PAYE Exclusion Orders

April 29, 2013

For individuals who are employed abroad by an Irish Employer and carry out all the duties of their employment abroad so that they are not resident here for tax purposes an order from the Revenue Commissioners may be obtained allowing the company to pay the individual without operating PAYE thereon. An employer must apply to the Revenue for this treatment in relation to employees concerned.

A PAYE exclusion order may also be available for non-resident pensioners such that they will receive their Irish source pension without the deduction of Irish payroll taxes.

We can provide assistance in obtaining PAYE exclusion orders from Revenue. 

Split Year Treatment

April 29, 2013

This tax treatment applies to people coming to reside here or emigrating during the tax year.

Dealing first with individuals coming to reside here they will normally be regarded as resident here for tax purposes from the date of arrival and liable to pay income tax on all income arising from that date on. They get the benefit of a full year’s tax credits although they may only be resident here for part of the year. This benefit applies provided the person will be tax resident here in the following tax year.

For individuals emigrating during the year the reverse treatment applies. They will be given the benefit of a full year’s tax credits for the year in which they leave. For individuals taxed under the PAYE system this would generally give rise to a tax refund being due. Their PAYE would have been calculated by dividing their tax credits evenly throughout the tax year. However if they emigrate half way during the year they have a half year’s unused tax credits to claim against their earnings up to the date of leaving. This relief only applies provided the person will be non-resident in the following tax year.

For people working here on a short term basis they will likely be due significant tax refunds when they leave, assuming they qualify for this relief.

Cross Border Workers

April 29, 2013

There is a special tax relief available for Cross Border workers e.g. individuals living in the Republic of Ireland and working in Northern Ireland (U.K.). If the foreign employment is the individual’s only source of income then complete exemption from Irish tax may be available. There are a  number of conditions which must be met in order to qualify for this relief.

Foreign Bank Accounts & Foreign Life Policies

April 29, 2013

Foreign Bank Accounts
If you have opened a foreign bank account during the tax return year you must provide the following information to the Revenue:

  • Name & address of deposit holder
  • Date account was opened
  • Amount of opening deposit
  • If applicable the name & address of intermediary who opened account

Foreign Life Policies
For policies issued during the tax return year you must provide the following information:

  • Name & address of person who commenced the foreign life policy
  • Terms of the policy
  • Annual premiums payable
  • Name & address of the person through whom the foreign policy was acquired

Irish Tax Residency- resident – ordinarily resident – domiciled

March 27, 2013

Introduction

If you are Irish born and bred and living and working in Ireland you pay tax in Ireland on your worldwide income and gains. If you do not fall into this category then the rules for deciding Irish tax residency may work to your advantage.

This is very complex and technical area and no decisions should be made on your Irish tax position without seeking specialist advice to consider your own particular circumstances.

The majority of people here in Ireland are ordinarily resident and domiciled here for tax purposes. The meaning of these two terms is vital to an understanding of how the tax rules operate in this area.

Resident
The test as to whether or not you are resident in this country for tax purposes is based on the number of days you spend in the country. If you spend 183 days or more in the Republic of Ireland in any year you are tax resident here. Alternatively if you spend 280 days in aggregate in that tax year and the preceding tax year you are also deemed resident here for tax purposes. Up to 31/12/2008 the days are counted by reference to where you are at the end of each day. If you are here at midnight you are deemed to have been here for the whole of the day. From 1st January 2009 the midnight rule has been abolished. You are considered to be here for a full day where you are in the country for any part of the day.

Ordinarily Resident
You can remain ordinarily resident here for tax purposes although not actually resident in the country. Individuals are deemed to be ordinarily resident here from the commencement of the fourth tax year after they have been resident here for each of the three preceding tax years. On leaving the State you do not cease to be ordinarily resident here until you have been non-resident for three continuous tax years.
This is a very important concept for individuals hoping to avoid liability to Irish tax on disposals of assets by leaving the country. Although not resident here for a period of three years they are treated as being ordinarily resident here so that during that three year period they will still be liable for Irish Capital Gains Tax on the disposal of any assets.

Domicile
The concept of domicile is a legal matter and in effect means your chosen homeland. If you were born and raised in Ireland then you will likely have an Irish domicile. If you emigrate on a permanent basis abroad then you may adopt a new country of domicile. On the other hand if you go abroad to work on a temporary basis albeit for a number of years you will continue to retain your Irish domicile.

Using the Rules to your advantage
The rules outlined above can be used to ones advantage by Irish people returning to work here having been abroad for at least three continuous tax years or Foreign Nationals coming to work in Ireland either on a short or long term temporary basis.

Foreign Nationals coming to work here on a temporary basis, without adopting Ireland as their country of domicile, can avoid liability to Irish tax on foreign income provided it is not brought into this country. This will not be available in relation to income from an employment where that income relates to carrying out the work in Ireland. Special rules apply for the operation of PAYE/PRSI in such circumstances.

Summary

As already mentioned this is a very complex and technical area and the rules and regulations need to be very carefully examined and considered when deciding your position. For the majority of people it is very clear cut in that they will be both ordinarily resident and domiciled here and liable to Irish tax on their worldwide income and gains.
For Irish Immigrants considering a return to this country their tax position should be examined to see if their affairs can be arranged in a way to take advantage of the rules dealing with this area. The same applies to Foreign Nationals coming to Ireland.

We provide more detailed advice on this area by way of consultation and an additional charge will arise for same.