Practical tips on Irish tax to get your finances in order before moving to Ireland
Compared to many English-speaking countries, Ireland has comparatively favourable tax regimes for immigrants, but the key to tax efficiency is always good planning to ensure your finances are in order before you arrive in the country.
In our previous blog Tax 101 – a simple tax guide for immigrants to Ireland, we went through the major Irish taxes that IIP investors should be aware of. To help you further understand the tax implications that might accompany a move to Ireland, our Marketing Director, Jay Cheung, spoke to Gabriel Ho, Director of People Services at KPMG for the latest episode of Immigration Insights with Bartra Wealth Advisors. Watch the video for insights on tax-related considerations and actions to take before moving to Ireland.
Residence for Tax Purposes
“As a starting point, consider the amount of time you anticipate spending in Ireland and plan your finances before moving to Ireland. This can significantly impact your Ireland tax position and tax liabilities,” says Gabriel.
The tax liability of an individual in Ireland is determined by whether they are resident in the country and whether they are domiciled in Ireland. According to the Revenue Commissioners, the Irish Tax and Customs agency, your tax residence status depends on the number of days you are present in Ireland during a tax year (the period from 1 January to 31 December). You are resident in Ireland for tax purposes if you are in Ireland for a total of:
- 183 days or more in a tax year, or
- 280 days or more in Ireland over two consecutive tax years, with a minimum of 30 days in each year
Tax residence is taken into account for several taxes including income tax, inheritance tax and capital gains tax (CGT). It is worth noting that you will become ordinarily resident if you have been resident in Ireland for 3 consecutive tax years. An individual who is ordinarily resident in Ireland is liable to Irish taxes regardless of the number of days spent in Ireland, until being non-resident for another 3 consecutive tax years.
The Irish Immigrant Investor Programme (IIP) offers extensive flexibility to its investors as the minimum stay is only one day per year. Investors can decide whether to become a tax resident in Ireland depending on their situation.
The remittance basis of tax is advantageous to people coming into Ireland if non-domiciled. If not an Irish national, then any investment income is only taxable if you bring it into Ireland.
The remittance basis is very attractive in bringing people to Ireland, as for most IIP applicants, their income is in overseas investments. There are very few countries that offer this favourable tax treatment.
It is important to understand what constitutes an Irish source of income and what is not an Irish source of income. For instance, investors might bring their income into Ireland before they arrive, so-called ‘clean capital’ that is income earned while not resident in Ireland. This money has generally already been taxed overseas and is not from an Irish source. “In general, if you would like to dispose of assets before you move, we suggest you do so at least one year before becoming tax residents in Ireland. The gain should not be subject to Ireland tax even if you remit the proceeds to Ireland at a later time,” says Gabriel.
For example, if an individual who will move to and become tax resident in Ireland in 2022 disposes assets on or before 31 December 2021, the gain should not be subject to Ireland tax even if they remit the proceeds to their Ireland bank account in 2021 or later. If you earn overseas investment income while resident in Ireland, as long as you do not bring the funds into Ireland then Irish Revenue will not seek to tax it.
There is also the Special Assignee Relief Programme (SARP), which is a tax incentive used to attract talent from outside Ireland to work in Ireland. If a person meets the conditions of SARP they enjoy a preferential tax rate on employment income where the income tax rate that applies is 28%.
It is crucial to plan early to achieve the best tax benefits. Try to create a clear list of your assets and investment portfolio that you disclose to your ﬁnancial or tax advisor in order to assess whether it will be considered clean capital and if it is possible to remit it to Ireland without incurring any additional Irish taxes.
It is also important to document the income that is brought into Ireland and have any backup information to hand in the event of any enquiries from Irish Revenue. By not planning correctly regarding the source of the income you bring into Ireland or the timing of when you bring in this income you may become liable to additional taxes or scrutiny from Irish Revenue.
Gabriel says individuals may also consider having separate bank accounts in Ireland. “For example, one account for holding funds remitted to Ireland which should not be subject to tax, and another account for holding funds remitted to Ireland which may be subject to tax. This should help ring-fence income and gains which should not be subject to Ireland tax.”
Tax implication varies from family to family, and it is affected by a myriad of factors. However, IIP’s flexibility allows plenty of time for investors to properly plan their finances before relocating to Ireland. We hope that investors can mitigate unwanted tax spending after understanding how the Irish tax regime works.
Bartra Wealth Advisors prides itself on delivering streamlined, end-to-end services. Our unique business model supports clients throughout their investment and immigration journey, from immigration advisory and government-backed IIP projects through to exit executions. Contact us if you have any questions regarding Ireland’s tax regime or the IIP.
Disclaimer: Information correct as of 27 August 2021. Bartra Wealth Advisors and its affiliates provide individualised services to immigration. All information provided to investors and clients is with such purpose in mind. Should investors have any enquiries about any specific legal, tax or financial planning matter relating to their personal circumstances, Bartra Wealth Advisors recommends that investors seek independent professional advice. Although every care has been taken to ensure the accuracy of the information and contents of the materials, which are obtained from sources believed to be reliable, Bartra Wealth Advisors does not represent, warrant or guarantee the accuracy, completeness, timeliness, reliability or suitability of the information or contents for any particular purpose.