Expats Returning Home
At Chartered Capital we work with a high number of Irish expats who have either returned home, or plan to return home at some point in the future. Although your personal circumstances will be unique to you, the number one that our clients pose to us is, “Will the money I earned abroad be taxed when I move home?”.
At Chartered Capital we work with a high number of Irish expats who have either returned home, or plan to return home at some point in the future. Although your personal circumstances will be unique to you, the number one that our clients pose to us is, “Will the money I earned abroad be taxed when I move home?”.
To address the question “will the money I earned abroad be taxed when I move home?”, we must first determine your tax status. On the basis that you are an Irish citizen it is likely that you are Irish Domiciled for tax purposes *(see below for more info regarding your domicile). Once you have determined your domicile, the next step is to determine where you are “tax resident”.
An individual is treated as being tax resident in Ireland if, in the tax year from 1 January to 31 December, an individual:
- Is physically present in Ireland for 183 days or more or;
- Spends a combined total of 280 days or more in Ireland in both the current and preceding tax years. Note, you will not be treated as resident under this test for any tax year during which 30 days or less are spent in Ireland.
If you have been tax resident outside of Ireland for each of the three preceding tax years you are no longer considered to be “Ordinarily Resident” in Ireland for tax purposes.
Once you have had a chance to digest the above, and assuming you have determined that you are a non-resident, Irish domiciled individual, you are only taxable on your Irish source of income (for example, if you owned a rental property in Ireland, on the basis that this property is located in Ireland, any income generated from this property would be subject to Irish taxation). For the avoidance of doubt, any funds that you may have built up in your account overseas can be transferred to an Irish account on your return without you having to pay tax on it.
*(Your domicile is the country where you live with the intention of remaining there permanently. It may be different to your residence or nationality. 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. Your domicile can be changed to a “domicile of choice”, if you move to a different country with the intention of living there permanently.)
Once you return home and become tax resident again, you are taxable on your worldwide incomes and gains, regardless of where in the world those gains originate from.
Where an individual leaves Ireland following a period of tax residence they may continue to be ordinarily resident in Ireland for a period of three years following the year of departure. Irish-domiciled individuals will continue to be liable to Irish capital gains tax on their worldwide gains for this period of ordinary residence subject to any Double Taxation Relief being available with the country of destination.
Where an individual is non-resident and non-ordinarily resident, they are only liable to capital gains tax on gains arising on the disposal of specified Irish assets. Specified Irish assets include land and buildings situated in Ireland and assets situated in Ireland, which at the time of disposal or earlier were used for the purposes of a trade to Ireland. Gains on the disposal of such assets are chargeable irrespective of the residence, ordinary residence and domicile for the period the disposal was made in.
The following table provided a summary of the position;
| Scenario | Resident | Ordinarily resident | Domiciled | Liable to Irish income tax on |
|---|---|---|---|---|
| 1 | Yes | Yes | Yes | Worldwide income |
| 2 | Yes | Yes/No | No | • Irish source income • Foreign employment income to the extent duties of the employment are performed in Ireland • Other foreign income (including foreign employment income relating to duties performed outside of Ireland) to the extent that it is remitted into Ireland |
| 3 | No | Yes | Yes | Worldwide income with the exception of: • Income from a trade, profession, office or employment all the duties of which are exercised outside Ireland • Other foreign income provided that it does not exceed €3,810 |
| 4 | No | Yes | No | Same as scenario 2 above except: Income from the following sources is not liable to Irish income tax even if remitted to Ireland: • Income from a trade, profession, office or employment all the duties of which are exercised outside Ireland • Other foreign income provided that it does not exceed €3,810 |
| 5 | No | No | Yes/No | Irish source income |
Before returning to permanently reside in Ireland, consideration should be given to;
- The liquidation of all of your current investments before becoming Irish resident in order to rebase the cost price of your investments for Capital Gains Tax planning purposes. Ensure to consider the local tax implications of any asset liquidation where you currently live.
- If your spouse or partner is non-domiciled, consideration should be given to putting all investment capital into their sole name prior to moving to Ireland
A useful resource for further tax residence and domicile queries is the Irish Government’s Citizen’s Information website. See https://www.citizensinformation.ie/en/money_and_tax/tax/moving_country_and_taxation/tax_residence_and_domicile_in_ireland.html
Side note; Please be aware that when you return to reside in Ireland you will likely be able to claim “split-year relief”, whereby any foreign employment income earned before you return to Ireland will not need to be subject to Irish taxation and although you can split your income between foreign income and Irish income, your Irish tax credits and tax bands are not split, meaning you will benefit from a full year’s worth of the lower tax band and full tax credits.
Irish Rental Income
A further word on Irish rental income. As alluded to above, income arising from property situated in Ireland is chargeable to tax here regardless of your tax residence or domicile status. Taxable rental income is calculated based on gross amounts of rents receivable less allowable expenses. Generally, for expenses to be deductible they must:
- Meet the criteria applied to regular trade expenses;
- Not be of a capital nature and;
- Be incurred by the taxpayer (i.e. you).
Wear-and-tear allowances are available in respect of capital expenditure incurred on fixtures and fittings provided by the landlord for the purposes of furnishing the rental property.
Further considerations apply where a landlord leaves Ireland, becoming non-resident. In order to receive the rents gross, the landlord must nominate an agent who is resident in Ireland and who can take on the responsibility to receive the gross rents and file the annual tax returns on their behalf.
Where an agent is not nominated, the tenant is obliged to deduct income tax at the standard rate (currently 20%) from the gross rents payable. At the end of the tax year, the tenant must provide the landlord with a completed Form R185 to show that the tax has been accounted for by the Revenue. The landlord can then claim this amount as a credit on their annual income tax return.
As mentioned at the outset and to reiterate the point, on the basis that everyone’s circumstances are unique to them, and secondly, given the sometimes volatile nature of international taxation rules and regulations, we do recommended as standard to all our clients that they seek independent tax advice. (Please let us know if you require the contact details of a tax specialist that we confidently recommend.)
