Residence for tax purposes
Your liability for tax in Ireland can be affected by whether you are resident in the country and whether Ireland is your permanent home. There is a specific definition of residence for tax purposes depending on how many days you spend in the country. If you are not resident in a particular year, Ireland can still be your ‘ordinary residence’ since this term refers to the country where you are usually resident over a number of years. The country that is your permanent home is known as your domicile.
Residence for tax purposes
Your residence for tax purposes depends on the number of days that you are present in Ireland during a tax year (A tax year means the period from 1 January to 31 December).
Your tax residence status depends on the number of days you are present in Ireland during a tax year.
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 a tax year plus the previous tax year taken together, with a minimum of 30 days in each year.
A ‘day’
Usually a day means any part of a day. In some circumstances, if you spend part of a day in Ireland it will not be included in your total days present in Ireland. These are any time you:
- remain airside. This is when you remain in an airport or port (in transit) while you are in Ireland.
- are prevented from leaving on your planned day of departure. This is known as ‘force majeure’. This could be due to sudden or severe weather conditions or the breakdown of an aircraft. You will not be regarded as being present in Ireland for the day after.
A ‘tax year’
A tax year is January to December.
Can you choose to be tax resident?
You might not have spent the required number of days in Ireland to be resident for tax purposes. If you are going to be tax resident the following year, you can choose to be tax resident the year you arrive in Ireland,
If you choose to be tax resident in Ireland you will be taxed on your worldwide income. However you can also claim full tax credits.
You must tell Revenue in writing if you choose to become a tax resident in Ireland.
Choosing to be resident for tax purposes
If you arrive in Ireland in a particular year but are haven’t got the required number of days for tax purposes, you can still choose to be resident for that year if you are also going to be resident in the following year. Contact your nearest tax office for details.
Ordinary residence
Your pattern of residence over a number of years is taken into account to decide your ‘ordinary residence’.
If you have been tax resident in Ireland for three consecutive tax years, you become ordinarily resident from the beginning of the fourth tax year.
If you leave Ireland after this time, you continue to be ordinarily resident for three consecutive tax years. For these three years you must pay Irish tax on your worldwide income except for:
- income from a trade or profession, no part of which is performed in Ireland
- income from an office or employment, where all the duties are performed outside Ireland
- other foreign income, for example investment income, if it is €3,810 or less. If it is more than €3,810, the full amount is taxable.
Residence and married couples or civil partners
For a married couple or civil partners, the residence status of each spouse is assessed independently of the other, so it is possible for one spouse or civil partner to be resident and the other to be non-resident. If your residence status differs from your spouse or civil partner, you can choose to be treated as single people for tax purposes if it is more beneficial.
If you are resident and employed in Ireland but your spouse or civil partner is not resident in Ireland and has no income – so that your earnings are the only source of income – then it may be possible to claim the Married or Civil Partner’s Tax Credit and the increased tax rate band. You can do this after the end of the tax year when you file a return of income which includes a declaration about your spouse or civil partner’s income.
What is domicile in Ireland?
Domicile is a concept of general law. It broadly means living in a country with the intention of living there permanently. Domicile is a much more permanent concept than residence.
Everyone has a ‘domicile of origin’ at birth (usually the domicile of the father). You keep your domicile of origin unless you choose to gain a new domicile.
To gain a new domicile, you must show clear evidence that you:
- intend to live permanently in the new country
- do not intend to return to live in your domicile of origin.
Your domicile affects how foreign-source income is taxed in Ireland.
When you are born, you have a domicile of origin. This is usually the domicile of your father unless your parents have not married or you live with your mother only. This provision is set down in Irish law in the Domicile and Recognition of Foreign Divorces Act 1986.
This domicile can be changed to a domicile of choice, if you move to a different country with the intention of living there permanently.
Tax implications
If you are resident and domiciled in Ireland for tax purposes, you are chargeable to tax in Ireland on your worldwide income. Worldwide income is the total income that you earn anywhere in the world in a tax year. This is subject to any relief due under the terms of a relevant Double Taxation Agreement.
Non-residents
If you are neither tax resident nor domiciled in Ireland for tax purposes, you are chargeable to tax in Ireland on:
-
- Irish-source income, including income from an Irish public office
- foreign employment income where the duties of the employment are carried out in Ireland.
You might be non-resident in Ireland for tax purposes, but ordinarily resident and domiciled. This will affect what income is chargeable to Irish tax.
Mulroy and Company Solicitors Galway will be happy to advise you in respect of all inheritance tax matters.
We are here to help. Please do not hesitate to telephone us at 091 – 586760 or email us to discuss your claim.
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Source: Revenue Commissioners & Citizens Information