Expatriate Executive: Ireland

Summary of local taxation situation

In Ireland the taxation of individuals is based on a mixture of the concepts of residence and domicile.

As in many countries, residence is consequent on presence in Ireland for more than half of a tax year, or for 280 days in two consecutive years. An individual's domicile is in the country where he maintains his permanent home, in the country where he regards himself as belonging. Domicile in Ireland is acquired from an Irish-domiciled father, but can be changed to another country by establishing a life there. Resident foreign employees will thus not normally be domiciled in Ireland.

If you are a foreign national and if, prior to your present visit, neither you nor your parents have ever spent more than temporary periods in Ireland, you will be regarded as not Irish domiciled for tax purposes throughout the period of your assignment to Ireland provided you intend to leave Ireland at the end of that period.

Ordinary residence, a distinct concept from residence, is acquired after a continuous period of residence lasting more than three years, and will generally last for three years after normal residence has ceased.

Taxation of an Irish resident begins when residence starts, and ends when it finishes, unless ordinary residence has been established. For a resident individual who is not domiciled, which will be the normal situation for an expatriate, income tax applies only to Irish-source income, plus any foreign income that is remitted (or constructively remitted) to Ireland. However, investment income arising in the UK (but not any other foreign country) does fall under Irish tax, whether remitted or not. Taxable investment income is included wherever it falls in the year of arrival or departure, regardless of the actual dates on which residence began or ceased.

A resident expatriate who spends significant time working out of Ireland may well be able to claim Foreign Income Deduction on the income earned abroad. An expatriate working in Ireland but employed and paid from a foreign country (not the UK) who does not remit the money to Ireland will not be taxed on it in Ireland. Careful thought evidently needs to be given to an expatriate's employment arrangements in order to optimise Irish taxation.

For a director of an Irish company, all income which derives from the directorship is liable to Irish tax, irrespective of residence - the remittance basis does not apply.

Capital acquisitions tax and probate tax have the effect of estate taxes on death, but for a resident expatriate will apply only to assets in Ireland.

If you have a foreign pension plan, it is important that it should be submitted to the Irish tax authorities for approval, so that ongoing contributions by yourself and your employer remain deductible for Irish tax purposes.

If you are an Irish resident individual who derives income from artistic works (such as a book, play, musical composition, painting or sculpture), you may make a submission to the Irish tax authorities seeking a ruling that all income from a particular work is exempt from Irish tax.

NB: The Irish tax rules are considerably more complicated than the above simplified summary, and professional advice on the situation of any particular individual is a necessity.

Offshore Investment Opportunities

It is clear from the above that an resident expatriate working in or from Ireland is in a good position to acquire and maintain offshore assets, as long as income from them is not remitted to Ireland - evidently this excludes assets based in Ireland or the UK.

However, capital gains on the disposal of certain types of non-Irish and non-UK assets that are held in an offshore trust can be remitted to RI tax free by a non-domiciled resident. Therefore if, whilst non-Irish resident, you anticipate that you may sell such assets at a time when you have become Irish-resident, you should transfer the assets to an offshore trust before you become resident.

Likewise, before becoming Irish resident you should consider closing off short-term assets such as bank accounts, because remittances of income are not taxable if in the year of the remittance the source of the income no longer exists.

Generally, for an Irish resident, it is best to keep overseas funds segregated according to their origin (income, capital proceeds etc) in order to take advantage of differential treatment under Irish tax law. Of course, the ideal is to keep all foreign-source income out of Ireland, but that may not always be possible.

www.lowtax.net contains extensive information on the investment, tax and legal regimes in 35 of the main offshore jurisdictions. Further information is available in our Investment Information Providers Section, and the four main types of offshore investment are described in the Guide to Offshore Investment on this site.

NB: The suggestions given above do not constitute investment advice. They are intended only to assist individuals in finding appropriate professional advice, which is essential for anyone planning offshore investment.