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.
• Stable political environment and an internationally respected jurisdiction.
• 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).

Where an individual will not trigger tax residence under either the 183 day test or the 280 day test, it is possible to make a submission to Irish Revenue electing to be tax resident in the current year where it can be demonstrated there is an intention tax residence will be triggered under either the 183 day test or the 280 day test in the following calendar year.

An Irish tax resident is subject to Irish tax on worldwide income and gains, wherever arising. However, as noted below there exists a special regime which applies to non-Irish domiciled individuals who can qualify for the remittance basis of taxation.

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 new domicile (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

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

• Foreign income or gains not brought into Ireland (while Irish tax resident) may accumulate free of Irish taxation.
• 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 benefits received through gifts or inheritance at 33%. A gift or inheritance given or received by a non-domiciled individual is subject to CAT rules in the normal way where they have five consecutive years of Irish tax residency, becoming liable in the sixth year. As such careful tax planning is required in relation to CAT. Tax free thresholds exist depending on the relationship between the beneficiary and disponer. For example, the current lifetime tax free threshold on benefits received by children from their parents is €400,000.

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.