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Income Tax

Ireland's system of taxation on personal income, including tax bands, rates, and credits.

Sections

Overview of Income Tax in Ireland

Income tax in Ireland is a progressive tax, meaning the rate of tax increases as income rises. It is administered by the Revenue Commissioners (commonly referred to as "Revenue"), the national tax authority. Income tax is deducted from earnings through the Pay As You Earn (PAYE) system for employees or paid directly by self-employed individuals.

National Regulations

  1. Residency and Tax Liability:

    • Resident for Tax Purposes: If you spend 183 days or more in Ireland in a tax year (or 280 days over two consecutive years, with at least 30 days in each year), you are considered a tax resident.
    • Domicile: Your domicile (permanent home) also affects your tax liability. Irish residents who are domiciled in Ireland are taxed on their worldwide income, while non-domiciled residents are taxed only on Irish income and foreign income brought into Ireland.
    • Non-Residents: Non-residents are taxed only on income earned in Ireland.

  2. Tax Year:

    • The Irish tax year runs from January 1st to December 31st.

  3. Income Subject to Tax:

    • Employment income
    • Self-employment income
    • Rental income
    • Investment income (e.g., dividends, interest)
    • Certain social welfare payments (though many are exempt)

Income Tax Rates and Bands (2023)

Ireland has two main income tax rates:

  1. 20% (Standard Rate): Applied to income up to a certain threshold.
  2. 40% (Higher Rate): Applied to income above the threshold.

Income Tax Bands (2023):

  • Single Person:
    • 20% on income up to €40,000
    • 40% on income above €40,000
  • Married Couple (One Income):
    • 20% on income up to €49,000
    • 40% on income above €49,000
  • Married Couple (Two Incomes):
    • 20% on income up to €80,000 (maximum, depending on combined earnings)
    • 40% on income above €80,000
  • Single Parent (One-Parent Family Credit):
    • 20% on income up to €44,000
    • 40% on income above €44,000

Tax Credits

Tax credits reduce the amount of tax you owe. Some common tax credits include:

  1. Personal Tax Credit:
    • €1,775 for single individuals
    • €3,550 for married couples
  2. Employee Tax Credit: €1,775 (for PAYE workers)
  3. Single Parent Credit: €1,650
  4. Home Carer Credit: €1,700 (for a spouse caring for children or dependents)
  5. Age Credit: For individuals aged 65 or older, €245 (single) or €490 (married).

Tax credits are subtracted from your gross tax liability to calculate the final amount of tax you owe.

Universal Social Charge (USC)

In addition to income tax, most individuals must pay the Universal Social Charge (USC), which is a separate tax on gross income. The rates for 2023 are:

  • 0.5% on income up to €12,012
  • 2% on income from €12,013 to €22,920
  • 4.5% on income from €22,921 to €70,044
  • 8% on income above €70,044

Exemptions:

  • If your total income is less than €13,000 per year, you are exempt from USC.

Pay Related Social Insurance (PRSI)

PRSI is another deduction from income, used to fund social welfare benefits. The rate depends on your employment status:

  • Employees: 4% of gross income (if earning over €352 per week).
  • Self-Employed: 4% of gross income, with a minimum annual contribution of €500.

Standard Procedures

  1. For Employees (PAYE System):

    • Employers deduct income tax, USC, and PRSI directly from your salary and pay it to Revenue.
    • You must register with Revenue and provide your employer with your Personal Public Service (PPS) number.
    • Revenue issues a Tax Credit Certificate to your employer, outlining your tax credits and rate bands.

  2. For Self-Employed Individuals:

    • Self-employed individuals must file an annual Income Tax Return using the Form 11.
    • Tax is paid in two installments:
      • Preliminary Tax: Due by October 31st of the current tax year (or mid-November if filing online).
      • Balance of Tax: Due by October 31st of the following year.

  3. Filing a Tax Return:

    • Employees may need to file a return if they have additional income (e.g., rental income).
    • Returns are filed online through the Revenue Online Service (ROS).

  4. Claiming Tax Refunds:

    • If you overpay tax, you can claim a refund by submitting a Form 12 or using the myAccount portal on Revenue’s website.

Country-Specific Considerations

  1. Double Taxation Agreements (DTAs):

    • Ireland has agreements with many countries to prevent double taxation. If you are taxed on the same income in another country, you may be eligible for relief.

  2. Special Assignee Relief Programme (SARP):

    • This program provides tax relief for employees assigned to work in Ireland by a foreign employer. Eligible individuals can exclude 30% of their income above €100,000 from tax.

  3. Foreign Income:

    • Non-domiciled residents are taxed only on foreign income brought into Ireland (remittance basis). This can be advantageous for expatriates.

  4. Tax-Free Allowances:

    • Certain expenses, such as contributions to approved pension schemes, are tax-deductible.

  5. Medical Expenses:

    • You can claim tax relief at 20% on qualifying medical expenses not covered by insurance.

  6. Rent Tax Credit (Reintroduced in 2023):

    • Renters can claim a tax credit of up to €500 (€1,000 for married couples) for rent paid on their primary residence.

General Costs

  • Tax Compliance Costs: If you hire an accountant or tax advisor, fees typically range from €200 to €1,000, depending on the complexity of your return.
  • Penalties for Late Filing: Late returns may incur a penalty of 5% to 10% of the tax due, plus daily interest.

Useful Resources

  1. Revenue Website: www.revenue.ie
    • Access tax calculators, forms, and guides.
  2. myAccount Portal: For employees to manage their tax affairs online.
  3. Revenue Online Service (ROS): For self-employed individuals and businesses.

Key Tips

  • Register with Revenue as soon as you start working in Ireland.
  • Keep records of all income, expenses, and tax payments for at least six years.
  • Use the Revenue’s online tools to check your tax credits and claim refunds.
  • Seek professional advice if you have complex tax affairs, such as foreign income or self-employment.

By understanding these regulations and procedures, you can ensure compliance with Ireland’s tax system and potentially reduce your tax liability through available credits and reliefs.