If you’re planning to move to Ireland, it is essential that you’re aware of the tax implications at this point so that you don’t incur hefty and unnecessary tax liabilities and penalties at a later stage.
The first point to draw your attention to is that there is no wealth tax in Ireland.The main taxes are Income Tax, PRSI (Pay Related Social Insurance), USC (Universal Social Charge), C.G.T. (Capital Gains Tax), C.A.T. (Capital Acquisitions Tax), V.A.T. (Value Added Tax) and Stamp Duty.
In your first year, it is most likely that your charge to tax will be limited to Irish source income (i.e. Irish salaries, profits from a business operated in Ireland, rental income from properties situated in Ireland, etc.) and gains (i.e. from the sale of assets located in Ireland).If you have income and gains arising from outside Ireland you will not accrue any liability to Irish tax providing you don’t remit these funds into Ireland.
Individuals who are not “domiciled” in Ireland qualify for the remittance basis of taxation in Ireland.
What does that mean?
An individual who is resident in Ireland (i.e. he/she is physically present in Ireland for 183 days between 1st January and 31st December or he/she spends a combined total of 280 days or more in Ireland in both the current and previous tax year.He/she cannot spend less than 30 days in Ireland during either of those tax years) but not domiciled (i.e. a person is usually considered to be domiciled in the country which is his/her permanent home or in the country of nationality or the country in which the greater part of the individual’s life is spent) is liable to Irish Income Tax as follows:
a)On employment income from an Irish employment.
b)On employment income from a non-Irish employment to the extent that the duties relate to Irish work days and they remit their income relating to non-Irish workdays to Ireland.
c)On investment Income from Irish sources.
d)On investment Income from other countries if remitted into Ireland.
In summary, the remittance basis can mean that an individual who is resident but not domiciled in Ireland can be charged Irish Income Tax on his/her non Irish employment Income relating to duties carried out abroad and his/her foreign investment income ONLY to the extent that this income is brought or remitted into Ireland.
Just to confuse you: if an individual is not resident but ordinarily resident and domiciled in Ireland, he/she is liable to Irish Income tax on his/her world wide income including foreign investment income.Income from an employment, trade or professions that are carried out abroad and any other foreign income up to a limit of €3,810 will not be liable to Irish Income Tax.It is also important to remember that relief may be available under the terms of the Double Taxation Treaty with the relevant country.
What does ordinarily resident mean?
An individual is considered to be ordinarily tax resident in Ireland for the tax year in question if he/she has been Irish resident for each of the preceding tax years.
Once the individual becomes ordinarily tax resident he/she does not cease to become ordinarily tax resident for a tax year unless he/she is considered non resident in Ireland for each of the preceding three tax years.
Getting back to the Remittance basis
For Income Tax purposes only remittances of income are liable to Income Tax.This is important to keep in mind since Income Tax consists of Income Tax at 20% or 41% depending on your salary plus Universal Social Charge up to 7% (although there is a 10% rate for individuals with non PAYE income of over €100,000 per annum) plus PRSI of 4% if you’re self employed.
Remittances of capital funds are liable to Capital Gains Tax which is currently 33%.
What are Capital Funds?
Here are a few examples of what constitutes a capital fund:• Gifts or inheritances. • Proceeds from the disposal of assets prior to arriving in Ireland e.g. the proceeds from the sale of a property. • Proceeds from the sale of non chargeable assets. • Funds that are exempt from Income Tax • Proceeds from the sale of chargeable assets on which no gain arises under Irish Capital Gains Tax legislation. • Employment income which was earned from the performance of duties outside Ireland up to the date of arrival in Ireland. • Deposit Interest received up to 31st December in the year prior to arriving to Ireland. • Dividend Income received up to 31st December in the year prior to moving to Ireland.
What happens if the funds are mixed?
If you are remitting funds consisting of both income and capital, the remittance is deemed to be made out of income first.Only when the income is exhausted will the balance come out of capital.
So what can you do?
Separate the separate bank accounts for (a) foreign sourced income earned after becoming Irish resident and (b) foreign sourced capital income.
Remittances from the foreign sourced capital income will be liable to Capital Gains Tax at 33%.
Remittances of foreign income will be liable to 20%/41% Income Tax + 7%/10% USC + 4% PRSI .
Transfer the interest arising in the “capital” account into an “income” account to ensure you’re taxed correctly.
How to bring money into Ireland tax efficiently
Bring your income and gains into Ireland before you move to Ireland.This way your Income and gains can be brought in tax free.