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Irish tax: The implications of being an Irish tax resident

An explanation of the Irish Tax Residence status for Irish nationals living abroad and people relocating to Ireland

Written on 18 February 2020

When relocating to Ireland it is common for expats and returning emigrants to ask about the implications of becoming Irish tax resident. And with good reason as Irish Tax legislation imposes Irish tax on individuals primarily with reference to their residence position.

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.

Ireland tax residence status

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).

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 providing 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.

Ordinary residence

If an individual has been tax resident for three consecutive years they also become “ordinary” resident in the 4th year. It takes 3 years to acquire ordinary residence and 3 years to lose it.

Domicile

Everyone is born with what is referred to as “a domicile of origin”, normally their father’s domicile. 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 but it is always recommended to obtain professional advice in this respect given the complexities and the facts of each particular case need to be reviewed in order to arrive at this position.

What are the implications of Irish tax residency and/or domicile?

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 who is Irish domiciled is taxable on worldwide income expect income from a trade, profession or employment where all the duties are carried on 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 it to Ireland. This is notwithstanding the fact that they may be Irish resident and ordinarily resident. This point is likely of interest to any 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.

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 feel as though you may have gone slightly cross-eyed reading the above, then don’t worry – you are not alone.

Navigating the complexities of tax legislation can be made easier with the help of a local tax professional. If you want to clarify your tax residency position, get advice on your domicile status and understand what your Irish tax obligations are, get in touch today.

It is always advisable to take advice in advance of a change to your residency position.

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