Tax Residence Rules

The rules for tax residency for business in Ireland

The taxation of individuals in Ireland is based on the concepts of residence and domicile. In order to be deemed resident in Ireland for tax purposes, a person would need to be present in Ireland for more than half of the tax year, or for 280 days over two consecutive years.

Tax Residence Rules

Domicile in Ireland, on the other hand, is determined by several factors, including the maintenance of a home in the Republic, having an Irish-domiciled father, or otherwise establishing a life in the jurisdiction.

An individual resident and domiciled in Ireland pays tax on his world-wide income; an individual resident but not domiciled pays tax on his foreign income only if it is remitted to Ireland. A non-resident individual pays income tax only on Irish-sourced income, and is liable to capital gains tax only on gains arising in Ireland or remitted to Ireland, unless he is domiciled in Ireland in which case he is liable on all capital gains. However, in the 2009 budget, the residence rules were tightened so that all visits to Ireland by those non-resident for tax purposes will be counted against their permitted days in the country.

Delivering his Finance Bill 2010  in February, Finance Minister Brian Lenihan announced the creation of a Domicile Levy of EUR200,000 on all Irish domiciled individuals that are also Irish citizens. The levy is designed to apply to wealthy Irish-domiciled individuals with capital in the Republic of greater than EUR5mn, worldwide income of more than EUR1mn, and an Irish tax liability of less than EUR200,000. Lenihan announced that the levy would be payable regardless of where the individual in question is living.

An individual becoming resident in Ireland who can show that they intend to be resident for tax purposes in the following tax year will not need to pay taxes on earnings from outside Ireland, prior to the date of arrival. Similarly, a departing tax resident who intends not to be resident in the following tax year is not taxable in the Republic on income earned outside Ireland following departure. This is known as the ‘split year treatment'.

Non-residents

Non-residents are among the groups (alongside pensioners on lower incomes) which can receive savings interest without the imposition of the 25% Deposit Interest Retention Tax (DIRT), by lodging a written declaration of non-residence with their bank.

With regard to tax residency in relation to corporate entities, Non-resident companies have traditionally been available in Ireland, but under the Finance Act, 1999, all Irish-incorporated companies became resident; however, there are a number of exceptions to the rule, some of them to accommodate the situation of multinational companies (many American) who have established themselves in Ireland. Where a company is deemed to be non-resident, it will be liable to pay income tax on any income arising in Ireland that is not subject to corporation tax.

This article is an extract from Personal Business Tax Guide , dated 4th January 2011, for the latest version please click here .

Domicile in Ireland, on the other hand, is determined by several factors, including the maintenance of a home in the Republic, having an Irish-domiciled father, or otherwise establishing a life in the jurisdiction.

An individual resident and domiciled in Ireland pays tax on his world-wide income; an individual resident but not domiciled pays tax on his foreign income only if it is remitted to Ireland. A non-resident individual pays income tax only on Irish-sourced income, and is liable to capital gains tax only on gains arising in Ireland or remitted to Ireland, unless he is domiciled in Ireland in which case he is liable on all capital gains. However, in the 2009 budget, the residence rules were tightened so that all visits to Ireland by those non-resident for tax purposes will be counted against their permitted days in the country.

Delivering his Finance Bill 2010  in February, Finance Minister Brian Lenihan announced the creation of a Domicile Levy of EUR200,000 on all Irish domiciled individuals that are also Irish citizens. The levy is designed to apply to wealthy Irish-domiciled individuals with capital in the Republic of greater than EUR5mn, worldwide income of more than EUR1mn, and an Irish tax liability of less than EUR200,000. Lenihan announced that the levy would be payable regardless of where the individual in question is living.

An individual becoming resident in Ireland who can show that they intend to be resident for tax purposes in the following tax year will not need to pay taxes on earnings from outside Ireland, prior to the date of arrival. Similarly, a departing tax resident who intends not to be resident in the following tax year is not taxable in the Republic on income earned outside Ireland following departure. This is known as the ‘split year treatment'.

Non-residents

Non-residents are among the groups (alongside pensioners on lower incomes) which can receive savings interest without the imposition of the 25% Deposit Interest Retention Tax (DIRT), by lodging a written declaration of non-residence with their bank.

With regard to tax residency in relation to corporate entities, Non-resident companies have traditionally been available in Ireland, but under the Finance Act, 1999, all Irish-incorporated companies became resident; however, there are a number of exceptions to the rule, some of them to accommodate the situation of multinational companies (many American) who have established themselves in Ireland. Where a company is deemed to be non-resident, it will be liable to pay income tax on any income arising in Ireland that is not subject to corporation tax.

This article is an extract from Personal Business Tax Guide , dated 4th January 2011, for the latest version please click here .

Further reading

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