Global expatriate tax guide

Expatriate tax - Ireland

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Expatriates taking up employment in Ireland will be subject to very specific tax and social security rules.

Tax compliance and reporting obligations for companies and individuals have increased in recent years but significant tax savings can also be generated for expatriates arriving to Ireland when tax planning is undertaken.

Grant Thornton Ireland’s Global Mobility Services team has extensive technical expertise to take on the most complex and specialist work, while remaining flexible and responsive to expatriates’ everyday needs.

In particular Grant Thornton Ireland, a member firm of Grant Thornton International Ltd, can support expatriates and their employers to identify strategic assignment planning structuring opportunities, develop assignment policies; as well as providing social security planning and compliance services regarding Irish tax filing and payroll requirements.

Click on each of the areas below to expand for more information:

Facts and figures
Registration

Non-Irish nationals will need to register for a Personal Public Service (PPS) number. The PPS number is an individual identification number for tax and social security purposes.

Tax returns and compliance

Most Irish national employees working in Ireland pay their tax through payroll withholding and are not required to file a tax return. However, foreign nationals on assignment to Ireland may have a more complicated tax position and may be required to file an Irish tax return even if their taxes are being paid by their employer through withholding.

Personal tax returns should be filed by 31 October following the end of the tax year concerned.

Tax year

The Irish tax year runs from 1 January to 31 December.

Income tax rates

Resident individuals 2019

Marital Status Taxable Income (€) Rate of income tax
Single 0 – 35,300 20%
  35,301+ 40%
Married couple with one 0-44,300 20%
Income source 44,301+ 40%
Married couple with two 0-44,300 with max increase 20%
income sources of 26,300+ balance 40%
The Universal Social Charge (USC)

The USC is a tax payable on gross income, including notional pay. All individuals are liable to pay the USC if their gross income exceeds €13,000 per annum. The USC will be collected through payroll in most cases. The standard rates of USC are:

  • 0.5% on the first €12,012
  • 2% on the next €7,862
  • 4.5% on the next €50,170
  • 8% on the balance.

In addition, there is a USC surcharge of 3% if an individual’s non-employment income is more than €100,000 a year. The 3% is levied on the non-employment income above €100,000.

Where the individual is not tax resident in Ireland, only the single person’s standard rate band is available (aggregation relief may apply).

Married individuals will be treated as a single person for Irish tax purposes where their spouses remain in their home countries and continues to earn their own income.

Personal tax deductions, based on personal tax circumstances, apply to Irish tax residents.

Sample income tax calculation

Sample income tax calculation for year ending 31 December 2019.

Income
Employment income   81,500
Benefits Provided Home 3,750
  Host 23,950
Gross Income   109,200
Less allowances, reliefs and deductions    
Pension contributions   (4,075)
Taxable income   105,125
Tax at 35,300 @ 20% 7,060
  69,825 @ 40% 27,930
    34,990
Less: credits and reliefs    
Personal allowance (1,650)  
PAYE credit (1,650) (3,300)
    31,690
     
Add: Universal Social Charge 12,012 @0.5% 60
  7,862 @2% 157
  50,170 @4.5% 2,258
  39,156 @8% 3,132
    5,607
Add: PRSI    
PRSI 109,200 @4% 4,368
Total income tax USC & PRSI   41,665
Basis of taxation
Charge to tax

A charge to Irish tax is dependent on whether the income arises in Ireland and the extent of the charge will be determined by an individual’s tax residency status.

Residence

Exposure to Irish tax will be determined by the expatriate’s residence, ordinary residence and domicile status.

Tax residence in Ireland is determined by the expatriate’s actual presence within a tax year. The expatriate will be treated as an Irish tax resident where:

  • they spend 183 days or more in Ireland in any tax year, or
  • they spend an aggregate of 280 days or more in Ireland over the course of two tax years where they will establish residence in the latter year (with a minimum of 30 days in each).

The term ordinary residence is distinct from residence and refers to an individual’s pattern of residence over a number of years. Where an individual is Irish tax resident for three consecutive years, he will be considered ordinary resident from the following year.

As mentioned above the concept of tax residence is considered in conjunction with the concept of domicile. The test for domicile is complex and based on substantial case law. Usually, individuals’ domicile will be determined by the country they are born in.

Income from employment

An Irish tax charge arises on employment income derived from duties performed in Ireland. Assessable employment income includes all wages, salaries, overtime pay, bonuses, gratuities, perquisites, and benefits etc. There is also a requirement on the expatriate’s employer to deduct Irish payroll withholding tax from the assessable employment income.

Source of employment

As mentioned above, where duties are performed in Ireland, any remuneration received in respect of these duties is treated as Irish source income and is subject to Irish income tax regardless of the expatriate’s tax residency status (subject to the relevant double taxation agreement).

Benefit in kind

In general, where the benefit is enjoyed in Ireland, an Irish income tax charge will arise. Subject to the expatriate concessions set out below, housing, meal allowances, provision of a car and relocation allowances will come within the charge to Irish income tax in addition to the individual’s salary.

Domicile levy

The domicile levy is an annual tax charge of up to a maximum of €200,000 and applies to individuals who are:

  • Irish domiciled
  • Worldwide income for that year exceeds €1,000,000
  • Liability to Irish income tax is less than €200,000
  • Irish located property is greater than €5,000,000.
Relief for foreign taxes

Where income has been subject to double taxation, in Ireland and a foreign jurisdiction, relief can be claimed where provided for in the relevant double taxation agreement. The USC may also be relieved under the double taxation agreement.

Expatriate concessions

Accommodation and subsistence

An individual who is seconded to Ireland for a period of not greater than 2 years, may be able to receive tax free accommodation and subsistence, subject to certain conditions, for the first 12 months of an assignment.

Special Assignee Relief Programme (SARP)

This relief applies to individuals arriving to work in Ireland between 2012 and 2020, including individuals returning to Ireland who have been outside of Ireland for at least 5 tax years.

Where certain conditions are satisfied, 30% of taxable employment income over €75,000 and up to €1,000,000 will be disregarded for income tax purposes. Income disregarded for income tax purposes is not exempt from the USC or PRSI.

Foreign Earnings Deduction (FED)

This relief applies to individuals working temporarily overseas in certain specified States. The relief is subject to a maximum claim of €35,000 and applies for the tax years 2012 to 2020. Relief is granted against income tax only, not USC or PRSI.

Research and Development (R&D) tax credit

This relief applies to key R&D employees. Where certain conditions are satisfied, the relief allows a company to transfer a portion of its R&D tax credit against key employees’ income tax (subject to the condition that credit is not reducing the employees’ effective tax rate below 23%).

Deductions against income

Certain expenses can be provided by an employer free of income tax if they qualify as wholly, exclusively and necessarily incurred in the performance of the employment duties.

Contributions to an Irish Revenue approved pension scheme (or certain foreign pension schemes) are deductible for income tax purposes– subject to specified limits.

Other taxes
Capital gains tax

This is a tax on gains arising on the disposal of assets. The remittance basis of assessment may apply to the proceeds of foreign gains (ie non Irish gains), depending on an individual’s residency and domicile status.

The current CGT rate is 33%.

Inheritance, estate, and gift taxes

A liability to Irish inheritance and gift tax (capital acquisitions tax, CAT) depends on the individual’s Irish tax residence and domicile position.

There is usually a requirement for a non-Irish domiciled individual to have resided in Ireland for a certain period before a charge to Irish CAT arises.

Where the asset concerned is considered to be an Irish asset, a charge to Irish CAT will arise. The current CAT rate is 33%.

Investment income

The expatriate’s Irish tax residency and domicile status will determine whether investment income such as interest, dividends etc., will become liable to Irish income tax.

Local taxes

There are no local taxes applied to an individual in Ireland.

Property charges

The Local Property Tax (LPT)

Local Property Tax is an annual self-assessed tax charged on the market value of all residential properties in Ireland. The tax will apply at a rate of 0.18% of the market value of the property up to€1,000,000. A rate of 0.25% will apply to the value in excess of €1,000,000.

An individual is considered a liable for LPT in a tax year if he or she owns a residential property on the liability date – 1 November in the preceding year. For 2020, the liability date is 1 November 2019 and the payment due date is 10 January 2020 if paying the full amount due in one instalment.

Real estate tax

Stamp duty is the tax that functions as a real estate tax in Ireland. Stamp duty is applicable to any property that is transferred by written documents. Because the sale of real property must be in writing, stamp duty always applies to transfers of real property.

Stamp duty is levied on the consideration passing for the transfer of the land.

The rate of stamp duty applied depends on the level of consideration passing. For residential property, the first €1,000,000 is taxed at 1% and consideration over €1,000,000 is taxed at 2%.

For non-residential property the rate of Stamp duty is 7.5% (from 9 October 2019).

Social security taxes

Where work is performed in Ireland, generally a charge to Irish social security (PRSI) will arise. The expatiate will be treated as an employee and will be subject to PRSI at 4% on gross employment earnings. The employer will also be required to contribute 11.05% of the relevant income and benefits to Irish PRSI. PRSI must be collected at source along with payroll taxes.

Where the expatriate is transferring from an EU jurisdiction, and holds the relevant documentation, an exemption to Irish PRSI will apply (subject to the relevant time limits).

Where the expatriate is transferring from a jurisdiction outside the EU with which Ireland holds a bi-lateral agreement and the expatriate holds the relevant documentation; an exemption to Irish PRSI will apply (subject to the relevant time limits).

Where the expatriate is transferring from a jurisdiction that does not fall into one of the above categories, the Irish rules will determine the expatriate’s liability.

Stock options

A charge to tax generally arises on the exercise of stock options based on an individual’s Irish workdays over the vesting period. This is on the basis that the gain arising on the exercise of the stock options is also chargeable to tax in a country with which Ireland has a Double Tax Agreement.

The tax liability (including the USC and PRSI) must be paid to the Irish Revenue within 30 days of exercise accompanied with a form RTS01.

In a situation where the gain is chargeable to tax in a country with which Ireland does not have a Double Agreement, then different considerations apply.

Individuals who exercise share options are chargeable persons and therefore must submit a self-assessment tax return to the Revenue by 31 October following the year in which the options are exercised.

All share awards which are subject to income tax, with the exception of share options, are now subject to the PAYE withholding regime.

Wealth tax

There is no wealth tax in Ireland.

Other specific taxes

There are no other specific taxes relating to expatriates in Ireland.

Tax planning opportunities

With the correct planning, non-Irish domiciled individuals who are tax residents in Ireland can minimise their worldwide tax charge.

Individuals who are Irish resident but domiciled outside of Ireland are only taxable in Ireland in respect of foreign income and foreign gains to the extent that they are remitted into Ireland. This can give rise to tax minimisation strategies for non-domiciled individuals who become Irish tax residents.

Grant Thornton Ireland’s expatriate tax team can advise expatriates structure their global tax affairs to minimise their worldwide tax charge.

For further information on global mobility tax services in Ireland, please contact:

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Jane Quirke
E jane.quirke@ie.gt.com