Ireland non-domiciled tax

Ireland’s tax regime for non-domiciled individuals

Recent changes in the international tax landscape mean that Ireland is becoming a popular base for high-net-worth individuals. This can be attributed to a number of factors, including Ireland’s special tax regime applicable to non-Irish domiciled individuals who live in Ireland. Other reasons that Ireland is so attractive as a base includes:

• EU/EEA and UK citizens do not require a visa to live or work in Ireland.
• The only English-speaking country in the EU.
• Ease of doing business in a highly open and vibrant economy.
• Strategic geographic location as a gateway to Europe.

Tax residence and domicile

Tax residence refers to an individual’s tax status and the applicability of Irish tax to their financial affairs. If an individual spends over 183 days in Ireland during a calendar year, they will be treated as Irish tax resident for that year. In addition, an individual who spends an aggregated 280 days in Ireland over two calendar years will be treated as tax resident in the second year (provided they spent at least 30 days in Ireland during both years).

As an Irish tax resident, you are subject to Irish tax on worldwide income and gains, wherever arising. However, as noted there exists a special regime which applies to non-Irish domiciled individuals.

Tax domicile is a legal concept which is distinct from nationality. It can be broadly understood as meaning one’s permanent home. A non-domiciled person moving to Ireland would retain that status provided they eventually intend on returning to their country of domicile. In practice it can be difficult to acquire and demonstrate a domicile of ‘choice’. There is no time limit on non-domiciled status in Ireland, provided the non-domiciled individual can demonstrate a continued personal and practical connection to their country of domicile.

Tax advantages of being non-domiciled in Ireland

A tax resident but non-domiciled individual in Ireland is subject to tax on any Irish source income or gains but may apply the remittance basis of taxation to any foreign income. The benefits of this include:

• Foreign income or gains not brought into Ireland (while Irish tax resident) may accumulate tax free.
• Cash acquired prior to obtaining Irish tax residency can be brought into Ireland without incurring additional Irish tax.
• There are no one-off or annual costs of applying the remittance basis of taxation (unlike other jurisdictions where a charge is levied on non-domiciled individuals).
• Where necessary to remit foreign income or gains, Ireland has a wide Double Tax Agreement network which limits the potential for double taxation or tax related cash flow issues.

It should be possible for an individual to structure their affairs in a manner which significantly reduces their overall tax burden where availing of the Irish non-domiciled tax regime.

Common pitfalls

• Using ‘mixed fund’ bank accounts for accumulated wealth and income or gains arising after acquiring Irish tax residence.
• Use of foreign loans or lines of credit for Irish expenditure which may trigger anti-tax avoidance rules.
• Certain investments in offshore funds fall under Ireland’s complex offshore funds tax regime which may not benefit from the remittance basis of taxation.
• Capital acquisition tax (CAT) in Ireland is levied on gifts/inheritances. A non-domiciled individual is subject to the rules in the normal way where they have five consecutive years of Irish tax residency. This can bring gifts and inheritances to non-Irish tax resident individuals within the scope of Irish CAT at 33%.

Saffery has extensive experience advising foreign domiciled individuals on structuring their Irish tax affairs. Please reach out to us if you would like to discuss your circumstances.