When relocating to Ireland it is common for expats and returning emigrants to ask about the implications of becoming Irish tax resident.
Irish tax residence is determined by reference to the amount of days that an individual spends in Ireland in each tax year. The tax year is the calendar year, January to December.
An individual will be considered Irish tax resident for the year if they are present in Ireland for more than 183 days in a calendar year. There is a secondary test also, referred to as the “look-back” rule which states that an individual is tax resident if they spend 280 days in Ireland in the current calendar year and the previous calendar year, when taken together (with at least 30 days in one year). You will be present in Ireland for a day if you are here for any part of a day. A tax year is from 1 January to 31 December. To avoid Irish tax residence, you need to spend less than 140 days in Ireland in each tax year.
It is possible to elect to be Irish tax resident, even if an individual has not spent the required number of days in the country provided they intend to be tax resident in the following year. This provides entitlement then to full personal tax credits which are not typically available to non-residents. You must inform Revenue in writing if you choose to be tax resident in Ireland in a tax year.
Revenue can provide you with a Letter of Residence. This is to confirm your tax residency to a foreign tax authority with which Ireland has a Double Tax Treaty.
If an individual has been Irish tax resident for three consecutive years they also become “ordinarily” resident in the 4th year. It takes 3 years to acquire ordinary residence and a further 3 years of non-residence to lose it.
Everyone is born with what is referred to as “a domicile of origin”, normally their father’s domicile. Domicile is much more of a permanent concept than residence. Domicile is a complex area of tax legislation and a detailed discussion is beyond the scope of this post. It is possible to change your domicile of origin.
Below is a basic summary of the implications of Irish tax residency:
An Irish resident and domiciled individual is taxable on their worldwide income and gains.
A non-resident person who is Irish domiciled is taxable on worldwide income except income from a trade, profession or employment where all the duties are carried out outside the state. They are also liable to Irish tax on foreign income which exceeds €3,810.
A non-resident, non-ordinarily resident but Irish domiciled individual is liable to Irish tax on Irish source income only e.g. Irish dividends, Irish rental income, Irish Air BnB income.
Non-Irish domiciled individuals are eligible for the “remittance basis” of taxation which means that they are taxed in Ireland on foreign source income to the extent they remit an amount of this income to Ireland. This is notwithstanding the fact that they may be Irish resident and ordinarily resident. This point is likely of interest to expats born abroad to foreign parents who may now be living in Ireland. Irish sources of income remain subject to Irish tax for these individuals.
A non-resident, non-domiciled but ordinarily resident individual is taxable on Irish source income as well as any remittances of foreign income.
If at least 75 percent of your worldwide income is taxable in Ireland, you receive full tax credits on a cumulative basis. If less than 75 percent of your worldwide income is taxable in Ireland, you may receive a portion of tax credits.
It is possible that where an individual is tax resident in two countries for the same tax year, they are liable to tax on the same income. Irish legislation provides a relief referred to as “split-year” residence which essentially means you are not taxed on your employment income to the extent it relates to work completed in the foreign country you are arriving from up to the date of arrival in Ireland. The relief can also apply in the year of departure from Ireland subject to certain conditions.
If you need help with your Irish tax requirements, whether related to property, or other assets, you should seek qualified advice from an Irish tax specialist.