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Tax Residency

Rules determining whether an individual is considered a tax resident in Ireland, impacting their tax obligations.

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Comprehensive Guide to Tax Residency in Ireland

Tax residency in Ireland is a critical concept for individuals and businesses as it determines the extent of their tax obligations in the country. Ireland’s tax residency rules are governed by national legislation, primarily the Taxes Consolidation Act 1997, and are administered by the Revenue Commissioners (commonly referred to as "Revenue"). Below is a detailed guide to understanding tax residency in Ireland, including regulations, procedures, and key considerations.

1. What is Tax Residency in Ireland?

Tax residency determines whether an individual or entity is liable to pay tax on their worldwide income or only on income earned within Ireland. The rules for determining tax residency differ for individuals and companies.

For Individuals

An individual’s tax residency in Ireland is based on the number of days they are physically present in the country during a tax year (which runs from January 1 to December 31). The key rules are:

  • 183-Day Rule: You are considered tax resident in Ireland if you spend 183 days or more in the country during a tax year.
  • 280-Day Rule: You are also considered tax resident if you spend a combined total of 280 days or more in Ireland over two consecutive tax years, with at least 30 days in each year.

Note: A "day" is counted if you are present in Ireland at any time during that day, even for a few hours.

For Companies

A company is considered tax resident in Ireland if:

  • It is incorporated in Ireland, or
  • Its central management and control is exercised in Ireland (e.g., where key decisions are made).

2. Tax Obligations Based on Residency

Your tax residency status determines the scope of your tax liability:

  • Resident and Ordinarily Resident: If you are tax resident and "ordinarily resident" (a status acquired after being resident in Ireland for three consecutive years), you are taxed on your worldwide income.
  • Resident but Not Ordinarily Resident: You are taxed on:
    • Income earned in Ireland.
    • Foreign income remitted (brought into) Ireland.
  • Non-Resident: You are taxed only on income earned in Ireland.

3. Domicile and Its Impact on Taxation

In addition to residency, domicile plays a role in determining tax obligations. Domicile refers to your permanent home or the country you consider your "home base."

  • If you are domiciled in Ireland, you may be subject to tax on your worldwide income.
  • If you are not domiciled in Ireland, you are only taxed on foreign income that is remitted to Ireland.

4. Double Taxation Agreements (DTAs)

Ireland has an extensive network of Double Taxation Agreements (DTAs) with over 70 countries. These agreements are designed to prevent individuals and companies from being taxed twice on the same income in two different jurisdictions. If you are tax resident in Ireland and another country, the relevant DTA will determine where you pay tax.

5. Becoming Tax Resident in Ireland: Procedures

If you are moving to Ireland and expect to become tax resident, here are the steps to follow:

Step 1: Register with Revenue

  • Create an account on Revenue Online Service (ROS) or myAccount (for individuals).
  • Obtain a Personal Public Service (PPS) Number, which is required for tax purposes.

Step 2: Notify Revenue of Your Residency Status

  • If you are moving to Ireland, you may need to complete a Form 12 (for PAYE employees) or a Form 11 (for self-assessed individuals) to declare your residency status.

Step 3: File an Annual Tax Return

  • Tax residents must file an annual tax return by October 31 of the following year (or mid-November if filing online via ROS).
  • Non-residents with Irish income must also file a return.

6. Costs and Tax Rates

Income Tax Rates

Ireland operates a progressive income tax system with two main rates:

  • 20% on income up to €40,000 (for single individuals; thresholds vary for married couples and single parents).
  • 40% on income above this threshold.

Universal Social Charge (USC)

  • A separate charge on income, with rates ranging from 0.5% to 8%, depending on income levels.

Pay-Related Social Insurance (PRSI)

  • Contributions are required for social insurance benefits, typically 4% of income.

7. Special Considerations

Split-Year Treatment

If you move to or leave Ireland during a tax year, you may qualify for split-year treatment, meaning you are only taxed as a resident for the part of the year you were living in Ireland.

Non-Resident Landlord Tax

If you are a non-resident and earn rental income from property in Ireland, you are subject to Irish tax on that income. A local agent may need to deduct tax at source.

Relief for Foreign Income

If you are tax resident in Ireland but earn income abroad, you may be eligible for relief under a DTA or through foreign tax credits.

8. Key Resources

9. Practical Tips

  • Track Your Days: Keep a detailed record of the days you spend in Ireland to determine your residency status accurately.
  • Seek Professional Advice: Tax residency can be complex, especially if you have income or assets in multiple countries. Consult a tax advisor for tailored advice.
  • Stay Compliant: Ensure you file your tax returns on time and pay any taxes due to avoid penalties.

10. Summary

Tax residency in Ireland is determined by the number of days you spend in the country and your domicile status. Residents are generally taxed on worldwide income, while non-residents are taxed only on Irish-sourced income. Ireland’s tax system includes income tax, USC, and PRSI, and the country has numerous DTAs to prevent double taxation. Understanding your residency status and obligations is essential to staying compliant with Irish tax laws.

For further assistance, contact the Revenue Commissioners or consult a qualified tax professional.