Am I Resident, Ordinary resident or Domiciled in Ireland? And why does it matter?

Being an Expatriate opens up a whole world of opportunities but it also brings complexity, having to deal with the legislative, products and taxes of two or more countries can brings its own headaches and can lead to expensive missteps.

One of the more complex areas even for professionals is gaining an understanding of residency rules and how they are interact with overseas jurisdictions. I thought a good starting point is look at what are the rules in Ireland and some of the significant implications from an Irish perspective.

What categories you sit in at any point in time determines which country has primary taxing rights and what taxes apply to you.

Are you Resident?

To be resident considered resident in Ireland is based solely on physical presence. Residency is acquired in respect of a tax year where an individual spends either of the following:

• 183 days in Ireland during that tax year or

• aggregate 280 days in Ireland over two consecutive tax years with at least a presence of 30 days in the second tax year.

Under the aggregation test, the individual is regarded as resident in the second tax year. An individual is considered present in Ireland if they spent any part of that day in Ireland.

Are you Ordinary residence?

Under section 820 TCA 1997 an individual becomes ordinarily resident in Ireland for a tax year after he has been resident in the state for three consecutive tax years. Similarly, it ceases at the end of the third consecutive year in which an individual is not resident. Ordinary residence, a distinct concept from residence, is defined in Irish tax law.

Ordinary residence is particularly important in determining your income tax and capital gains tax liability after cessation of residence.

Are you Domicile?

There is no statutory definition of domicile. Domicile is a legal concept and can be broadly defined as a person’s natural home. Every individual is born with a domicile of origin. It is possible for a person to lose their domicile of origin and acquire a domicile of choice. Likewise it is possible for an individual to lose their domicile of choice and revive their domicile of origin.

Domicile will only change if there is an intention to live on a permanent basis in another country. Domicile is an important concept under Irish law as it is relevant not only for tax purposes but also for determining the rules of succession.

Why is all this important?

Well mainly as there are significant tax implications for you depending on what country you are resident, originally resident or domiciled.  For example if you are resident or ordinarily resident in Ireland, but not domiciled here, you are subject to income tax and capital gains tax on the remittance basis. This means that liability to income tax on income arising outside Ireland is limited to amounts of foreign income you remit into Ireland either actually or constructively. Gains on disposals of assets situated outside Ireland will be taxed on amounts of disposal proceeds you remit into Ireland, again either actually or constructively. So depending on the tax rules on where you are domiciled you may have no requirement to pay tax on this foreign income.

Summary,

Residency and Domiciliary issues can be complex but they also provide significant planning opportunities for individuals that have lived in more than one country and it advisable to consult a professional to ensure you are making the right choices for you.

At Trinity Financial Management we have many years of experience of working with clients to help them to plan and live a fulfilling retirement. Contact Frank on frank@trinityfinancial.ie to discuss.

This article is provided on the strict understanding that it is for the reader’s general consideration only. Accordingly, no action must be taken or refrained from based on its contests alone.

Join Our Newsletter

Archives

Copyright 2017 © All Rights Reserved - Trinity Financial Manager Ltd trading as Trinity Financial Management. 582957