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Ireland - Income Tax

Ireland - Income Tax

Taxation of international executives

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Tax returns and compliance

When are tax returns due? That is, what is the tax return due date?

31 October following the year of assessment. This can be extended to mid-November where the individual is filing and paying their tax liability online.

What is the tax year-end?

31 December.

What are the compliance requirements for tax returns in Ireland?

Residents

Every self-assessed individual is liable to pay Irish income tax or capital gains tax for any tax year-ending 31 December and is required to make a return of income and/or chargeable capital gains to the Irish Revenue no later than the 31 October following the relevant tax year.

Individuals who have no income or gains other than employment income subject to withholding Pay-As-You-Earn (PAYE) are generally not required to submit a tax return.

For the 2020 tax year, a tax return is due to be filed no later than 31 October 2021. Extension to the filing and payment date may be available where the individual uses the Revenue Online Service (ROS) web site of the Irish Revenue to both submit their tax return and make electronic tax payments from a designated bank account. Individuals who do not use the facility are subject to the main filing deadline indicated (31 October). Failure to file a tax return within 2 months of the relevant filing date results in an automatic penalty equal to 5 percent of the income tax and/or capital gains tax liability due before deduction of any preliminary tax paid for the tax year. The late filing penalty increases to 10 percent thereafter.

Individuals subject to tax under the self-assessment system are required to make a balance of income tax payment by 31 October following the end of tax year together with an estimated preliminary (income) tax payment for the current tax year. For 2020, a preliminary income tax payment is due no later than 31 October 2020 and the 2020 balance of tax is payable by 31 October 2021. The required limits for the preliminary income tax payments are as follows:

  • 100 percent of the income tax liability for the previous tax year
  • 90 percent of the income tax liability for the current year, or
  • 105 percent of the income tax liability of the pre-preceding tax year where payment is made via direct debit. (This option may only be chosen where the individual had a tax liability for pre-preceding tax year.)

Capital gains tax for disposals made during the period 1 January to 30 November is due by 15 December of that tax year. Capital gains tax on disposals of assets during the period 1 December to 31 December must be paid by 31 January following the end of the relevant tax year. The relevant transactions are also reportable on the annual tax return relating to the year of disposal.

Failure to make tax payments on time, or within the required limits, results in interest penalties effective from the due date for payment.

Generally, if an individual (other than a director of an Irish company) does not have income that is taxed otherwise than under the PAYE system, there is no requirement to file a tax return unless they have chargeable capital gains during the tax year. Generally, all Irish company directors must make returns even if taxed only under the PAYE system.

Non-residents

Non-residents are liable to Irish tax on Irish-source income only (subject to DTA relief).

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Tax rates

What are the current income tax rates for residents and non-residents in Ireland?

Residents

Income tax table for 2020

Personal income tax rates

 

At 20% first

At 40%

Single person

EUR35,300

Balance

Married couple/ civil partnership (one income)

EUR44,300

Balance

Married couple/ civil partnership (two incomes)*

EUR70,600

Balance

One parent/ widowed parent/ surviving civil partner

EUR39,300

Balance

*EUR44,300 with an increase of EUR26,300 maximum

Personal tax credits

Single person

EUR1,650

Married couple/ civil partnership

EUR3,300

Single person child career credit

EUR1,650

Additional credit for certain widowed persons/ surviving civil partner

EUR1,650

Employee credit

EUR1,650

Earned income credit (increased)*

EUR1,500

Home career credit (increased)

EUR1,500

*Applies to self-employed income and certain PAYE employments not subject to the PAYE credit

PRSI contribution, Universal Social Charge

 

Percentage

Income

Employer

11.05%

No limit

 

8.70%

If income is EUR386 p/w or less

Employee** (class A1)

 

 

PRSI

4%

No limit*

Universal Social Charge

0.5%

EUR0 to EUR12,012**

 

2.0%

EUR12,013 to EUR20,483 ***

 

4.5%

EUR20,483 to

EUR70,044****

 

8%

>EUR70,044

*Employees earning EUR352 or less p/w are exempt from PRSI. In any week in which an employee is subject to full-rate PRSI, all earnings are subject to PRSI. Unearned income for employees in excess of EUR3,174 p.a. is subject to PRSI. Sliding scale PRSI credit of max. EUR12 per week where weekly income between EUR352 and EUR424.

** Individuals with total income up to EUR13,000 are not subject to the Universal Social Charge.

*** Increase in upper limit of the 2.0 percent band from EUR19,874 to EUR20,483.

**** Reduced rate (2.0 percent) applies for persons over 70 and/or with a full medical card, where the individual’s income does not exceed EUR60,000.

Self- employed PRSI contribution, Universal Social Charge

 

Percentage

Income

PRSI

4%

No limit*

Universal Social Charge

0.5%

EUR0 to EUR12,012**

 

2.0%

EUR12,013 to EUR20,483 ***

 

4.5%

EUR20,483 to

EUR70,044****

 

8%

EUR70,045 to EUR100,000

 

11%

>EUR100,000

*Minimum annual PRSI contribution is EUR500

** Individuals with total income up to EUR13,000 are not subject to the Universal Social Charge

*** Increase in the upper limit of the 2.0 percent band from EUR19,874 to EUR20,483.

**** Reduced rate (2.0 percent) applies for persons over 70 and/or with a full medical card, where the individual’s income does not exceed EUR60,000.

Non-residents

Income tax table for 2020

Taxable income bracket (single person)

Total tax on income below bracket

Tax rate on income in bracket

From EUR

To EUR

EUR

Percent

0

35,300

7,060

20

35,301

Over

0

40

Universal Social Charge

The Universal Social Charge (USC), which came into effect on 1 January 2011, is a levy payable on gross income, including notional pay, before any relief for any capital allowances, losses or pension contributions.

All individuals are liable to pay the Universal Social Charge if their gross income exceeds the threshold of EUR13,000. In the case of individuals aged 70 or over, and individuals who hold full medical cards, the 2 percent (2019 and 2020) rate applies to all income over EUR13,000. This reduced rate however is only available for those whose gross income is less than EUR60,000 per annum.

The USC is essentially another form of income tax and is usually regarded as an admissible tax for the purposes of Ireland’s Double Taxation Agreements.

 

2019

 

2020

Per year

Rate of universal social charge

Per Year

Rate of universal social charge

EUR

Percent

 

Percent

Up to EUR12,012

0.5%

Up to EUR12,012

0.5%

Between EUR12,013 and EUR19,874

2.0%

Between EUR12,013 and EUR20,483

2.0%

Between EUR19,874 and EUR70,044

4.5%

Between EUR20,483 and EUR70,044

4.5%

Between EUR70,045 and EUR100,000

8%

Between EUR70,045 and EUR100,000

8%

There is a surcharge of 3 percent on individuals who have non-PAYE income that exceeds EUR100,000 in a year regardless of age.

Residence rules

For the purposes of taxation, how is an individual defined as a resident of Ireland?

Residence is based solely on physical presence in Ireland. 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
  • aggregates 280 days in Ireland over 2 consecutive tax years with at least presence of 30 days in the second tax year.

Under the aggregation test, the individual is regarded as resident for the second tax year. An individual is considered present in Ireland if they spent any part of that day in Ireland.
Ordinary residence begins once an individual has been resident in Ireland for 3 consecutive tax years. Similarly, it ceases at the end of the third consecutive year in which an individual is not resident.

Irish Individuals who are no longer resident but who retain ordinary residence and are Irish domiciled are taxable on worldwide income subject to certain exclusions. Excluded income includes; income from an employment, trade, or profession the duties of which are exercised wholly abroad and foreign investment income not exceeding EUR3,810 during a tax year.

Where annual foreign income exceeds EUR3,810, the total amount of such income remains taxable in Ireland subject to relief under a tax treaty.

Is there, a de minimis number of days rule when it comes to residency start and end date? For example, a taxpayer can’t come back to the host country/jurisdiction for more than 10 days after their assignment is over and they repatriate.

No. There is no de-minimis for residency purposes. However, a 30 day de-minimis is applied where individuals who are employed abroad come to perform duties of their employment in Ireland.

What if the assignee enters the country/jurisdiction before their assignment begins?

Each case should be considered on its own merits.

Termination of residence

Are there any tax compliance requirements when leaving Ireland?

There are no special procedures on the termination of residence.

What if the assignee comes back for a trip after residency has terminated?

Each case should be considered on its own merits.

Communication between immigration and taxation authorities

Do the immigration authorities in Ireland provide information to the local taxation authorities regarding when a person enters or leaves Ireland?

Yes.

Filing requirements

Will an assignee have a filing requirement in the host country/jurisdiction after they leave the country/jurisdiction and repatriate?

Each case should be considered on its own merits. In general, a tax return will be required if the assignee has Irish-source income.

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Economic employer approach

Do the taxation authorities in Ireland adopt the economic employer approach1 to interpreting Article 15 of the Organisation for Economic Co-operation and Development (OECD) treaty? If no, are the taxation authorities in Ireland considering the adoption of this interpretation of economic employer in the future?

Historically no, but Revenue issued guidance at the end of 2016 which sets out their view that the economic employer concept is being followed. The Revenue guidance went further than the OECD interpretation of the economic employer concept. Following a year of lobbying and submissions to Revenue and the legislature, revised guidance was circulated in April 2018. It continues to provide that the economic employer principle is applicable, and it gives useful examples where Irish Revenue will consider an economic employer will apply. Typically, an individual will be regarded as economically employed where they are considered integral to the business of the Irish company. A number of factors are provided in considering whether a foreign employee is integral to the Irish company’s operations, such as:

  • Who bears the risk/responsibility for the results produced by the foreign employer?
  • Who authorizes, instructs or controls when, how and/or where and how the work is performed?
  • Who does the foreign employee report to while working in Ireland?
  • Whether the role or duties performed by the foreign employee are more typical of the function(s) of the foreign employer or the Irish company.

De minimus number of days

Are there a de minimus number of days2 before the local taxation authorities will apply the economic employer approach? If yes, what is the de minimus number of days?

Based on Revenue guidance, 60 workdays, once the 60 workdays do not form part of a more substantial period of working in Ireland (i.e. more than 1 tax year). Effective from 1 January 2020, employers are required to consider the number of workdays spent in the state in a single year of assessment only. The de minimis rules are complex and advice should be sought.

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Types of taxable compensation

What categories are subject to income tax in general situations?

All benefits, whether in-cash or in-kind, arising from an employment form part of taxable income, subject to certain exceptions. The following are examples of remuneration that would be included as income for tax purposes:

  • reimbursement of taxes
  • reimbursement of school fees [although school fees of up to EUR5,000 per child can be reimbursed tax free where an individual qualifies for SARP – see section on ‘Expatriate Concessions’]
  • cost-of-living allowances
  • housing allowances and housing provided by the employer on a non-arm’s length basis
  • moving allowances (but excluding direct reimbursement of expenses incurred in moving to take up a new employment)
  • use of company car (with the exception of an electric car with a market value of less than EUR50,000)
  • the benefit of loans at reduced or zero interest rates provided directly or indirectly by the employer
  • round sum expense allowances
  • medical insurance or other medical benefits provided by the employer
  • any sums paid by the employer to provide pension or other retirement benefits, except where such sums are paid under a pension scheme approved by the revenue commissioners
  • share options (except options granted under a scheme for which revenue approval has been granted).

Intra-group statutory directors

Will a non-resident of Ireland who, as part of their employment within a group company, is also appointed as a statutory director (i.e. member of the Board of Directors in a group company situated in Ireland) trigger a personal tax liability in Ireland, even though no separate director's fee/remuneration is paid for their duties as a board member?

If Directors have not been specifically remunerated for their Director roles, there is a risk that the Irish Revenue could attribute a portion of their total remuneration as Irish Director fees. Since the Directorship of an Irish company is considered an Irish office, the fees (or deemed fees) derived from this position is taxable in Ireland via PAYE. Each case should be reviewed on its own merits and advice should be sought.

a) Will the taxation be triggered irrespective of whether or not the board member is physically present at the board meetings Ireland?

As above

b) Will the answer be different if the cost directly or indirectly is charged to/allocated to the company situated in Ireland (i.e. as a general management fee where the duties rendered as a board member is included)?

No, as the Directorship of an Irish company is considered an Irish office,

c) In the case that a tax liability is triggered, how will the taxable income be determined?

Irish Revenue could attribute a portion of their total remuneration as Irish Director fees.

Tax-exempt income

Are there any areas of income that are exempt from taxation in Ireland? If so, please provide a general definition of these areas.
 

The following items are not subject to tax:

  • contributions by an employer to an Irish revenue approved pension scheme
  • foreign pension contributions in certain circumstances
  • contributions by an employer to an Irish revenue approved profit-sharing scheme
  • certain relief is available in respect to non-contractual payments made in connection with the termination of an employment
  • provision by an employer of a travel (bus or train) pass to employees or directors of the company
  • provision of bicycles for employees and directors aimed at encouraging more employees to cycle to and from work.
  • a voucher or once off tangible benefit up to the value of EUR500 per employee per annum subject to certain conditions

The Revenue commissioners are prepared to accept that tax free subsistence that relates to the provision of accommodation and utility charges may be paid or reimbursed for the first 12 months of a temporary assignment provided that the period of assignment in Ireland does not exceed 24 months.

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Expatriate concessions

Are there any concessions made for expatriates in Ireland?

Special Assignee Relief Programme (SARP)

A Special Assignee Relief Programme (SARP) was introduced in 2012 which applied to individuals arriving in Ireland during 2012, 2013 or 2014. It was announced in Finance Act 2014 that the regime has been extended to 2017, and in Finance Act 2017 it was extended for another 3 years, to end on 31 December 2020. The relief was further extended in Finance Act 2019 for an additional 2 years and is now due to end on 31 December 2022.The relief operates on the basis of providing a tax-free deduction from remuneration based on a formula as follows:

                                        (A-B) X 30%
 

Where A is the total remuneration of the employee (a cap of up to EUR1,000,000 applies in 2019 onwards in the case of an employee who comes to Ireland in the years 2019 onwards. This EUR1,000,000 cap will apply from 2020 onwards for those who arrived in Ireland in Ireland on or before 31 December 2018) and B is EUR75,000.

The following conditions must be met.

  • The employee must have been employed by a non-Irish company for 6 months (12 months in the case of an employee who came to Ireland in the years 2012 to 2014) prior to arriving in Ireland.
  • This employer must be incorporated and tax resident in a country/jurisdiction with which Ireland has a. a Double Taxation Agreement or tax information exchange agreement or b. an associated company of a relevant employer.
  • The employee can be seconded to work in Ireland under their existing employment contract or be employed directly by an Irish Group company.
  • The employee must be Irish resident but may be resident elsewhere. If not Irish resident in the year of arrival, relief may start from the following year. Prior to 2015, an individual could not be regarded as resident in another country/jurisdiction – this condition has not been abolished retrospective to the 2014 tax year.
  • The employee must have a minimum base salary of EUR75,000 per annum. For individuals arriving in Ireland in 2015, commission or similar payments are excluded in determining whether an employee meets the EUR75,000 income threshold.
  • A certification procedure has also been introduced whereby the employer must certify within 90 days of arrival in Ireland that the employee meets the conditions to avail of the relief.
  • The employee must not have been tax resident in Ireland for the 5 years preceding the year of arrival.
  • The employee must arrive in Ireland to work in any of the tax years 2015to 2022 (inclusive).

Relief is also available to these individuals who perform duties outside of Ireland as part of their assignment. In the case of employees who arrived in Ireland in the years 2012 to 2014, substantially all of the employee’s duties must be performed in Ireland for at least 12 consecutive months.

The relief will apply for the first 5 years of the individual’s residency in Ireland.

Foreign Earnings Deduction (FED)

In 2012 a Foreign Earnings Deduction (FED) for employees who travel to develop markets in BRICS countries/jurisdictions namely Brazil, Russia, India, China and South Africa.

It was provided in Finance Act 2014 that the FED tax relief will be extended until 2017, and in Finance Act 2017 it was extended until 31 December 2020. The relief was further extended in Finance Act 2019 for an additional 2 years and is now due to end on 31 December 2022.

With effect from 1 January 2013, the number of countries/jurisdictions was extended to include Algeria, Democratic Republic of Congo, Egypt, Ghana, Kenya, Nigeria, Senegal and Tanzania.

Finance Act 2014 extended the number of qualifying countries/jurisdictions to include Japan, South Korea, Singapore, the United Arab Emirates, Saudi Arabia, Qatar, Bahrain, Indonesia, Vietnam, Thailand, Chile, Oman, Kuwait, Malaysia and Mexico.

Finance Act 2017 extended the qualifying countries/jurisdictions to include Colombia and Pakistan.

The deduction will apply to an Irish resident individual who has 30 qualifying days working outside Ireland in any of the qualifying countries/jurisdictions in a continuous 12-month period. Prior to 1 January 2017, 40 days were required and prior to 1 January 2015, 60 qualifying days were required.

A qualifying day is one of at least 3 consecutive days throughout the whole of which the individual is performing the duties of their employment in any of these countries/jurisdictions. Days of travel, between Ireland and the qualifying country/jurisdiction, can be included as qualifying days. This was a new provision under Finance Act 2014.

The FED is calculated based on the following formula:

  • Number of qualifying days in a year of assessment x Qualifying Income
  • Aggregate number of days in the year of assessment that the individual held a relevant employment.
  • Qualifying income excludes remuneration in the form of benefits in kind. Share remuneration is included. The income qualifying for FED is capped at a maximum of EUR35,000.

Remittance Basis

An expatriate who is resident in Ireland but not domiciled is not liable to Irish tax on income from a foreign employment performed outside of Ireland, unless it is remitted into Ireland.

The remittance basis also extends to foreign investment income/capital gains in the case of non-domiciled individuals.

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Salary earned from working abroad

Is salary earned from working abroad taxed in Ireland? If so, how?
 

Please see previous discussion, as remittance basis may apply, where an individual is resident, non-domiciled and working under a non-Irish employment contract.

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Taxation of investment income and capital gains

Are investment income and capital gains taxed in Ireland? If so, how?
 

Rents derived from an Irish property are liable for Irish taxes regardless of the residency position of the recipient. For resident and domiciled individuals, rents from worldwide properties are subject to Irish taxes (subject to certain exemptions). Individuals’ resident but not domiciled in Ireland will be taxed on Irish rental income in full, and rents derived from other foreign properties if remitted to Ireland.

When calculating assessable rental income, most expenses incurred in renting the property are deductible. Such expenses would include agents’ fees, advertising costs, repairs etc. If the property is furnished, either an annual wear and tear allowance of EUR254 or an allowance equal to 12.5 percent of the total cost of the fixture and fittings, whichever is the higher, is available for 8 years starting from the year in which the cost is incurred. A deduction is available against gross rents for mortgage interest paid on borrowings for the purchase, improvement or repair of a rental property. A claim for mortgage interest has been increased to 100 percent for 2020.

The entitlement to a reduction for mortgage interest paid against rental income is also conditional on compliance with the registration requirements of the Residential Tenancies Act 2004.

The Private Residential Tenancy Board (PRTB) was established to operate a national tenancy registration system, to provide information and policy advice on the private rented sector. Landlords are now required to register details of all of their tenancies within 1 month of the commencement of the tenancy. The tenancy must be registered with the PRTB and the appropriate registration fee paid. A form PRTB1 should be completed and submitted to the PRTB in this regard. In certain instances, Irish residents can claim an exemption of up to EUR14,000 on rental income received from a room, which is made available as rented residential accommodation in a principal private residence. [This income threshold was increased from EUR12,000 in Finance Act 2016]. Where annual rental income exceeds this amount all rental income received during the tax year is taxable subject to the deductions available as outlined. Certain conditions need to be satisfied in order to exclude this type of rental income from Irish tax; namely, the occupation of the property by the taxpayer wholly as their sole residence throughout the tax year. This exemption is therefore not available to individuals on assignment from Ireland during a tax year. The exemption is also not available where the rent is paid to an employee/office holder of the person making the payment.

Dividends and interest income are taxable as part of total income. Individuals’ resident but not domiciled in Ireland and in receipt of investment income from sources outside Ireland will only be taxable to the extent that the income is remitted into Ireland.

Dividends from Irish resident companies carry a tax credit in the form of dividend withholding tax, which is included in total income but is deductible from income tax payable. Double taxation relief is available in respect of foreign withholding tax on foreign (non-U.K.) dividends received under a relevant tax treaty. In the case of a non-domiciled individual, no credit is available for foreign dividend withholding tax unless the dividend is remitted into Ireland.

Interest paid by Irish banks, building societies, and similar financial institutions (including Irish branches of foreign banks) are subject to Deposit Interest Retention Tax (DIRT) (33 percent for 2020). No additional income tax is payable on the interest regardless of the individual’s marginal tax rate, but Universal Social Charges may be payable.

A non-resident person is entitled to exemption from this withholding tax if the appropriate non-resident’s declaration is made to the bank or other financial institution.

Individuals are liable to capital gains tax on chargeable gains, that is, capital gains as computed in accordance with the rules prescribed in the Irish Capital Gains Tax Acts. An individual, resident and domiciled in Ireland, is liable to capital gains tax on worldwide chargeable gains. An individual, who is resident but not domiciled in Ireland, is liable on chargeable gains from Irish situated assets, but not on chargeable gains from other assets if the proceeds of the disposal are not remitted into Ireland.

Non-resident and non-ordinarily resident individuals are liable on chargeable gains from the disposal of certain Irish specified assets, but not on the disposal of any assets situated outside Ireland. The main assets on which a non-resident is liable are Irish land, buildings and interests in such land (such as a leasehold interest or mineral rights).

Certain specified assets are exempted so that capital gains from their disposal are not chargeable gains. Exempted assets include an individual’s principal private residence (but not a second home), Irish government securities, most life assurance policies, tangible movable assets with a predictable life of less than 50 years (such as a racehorse).

In the case of a gain on the disposal of a principal private residence carrying development value (sale value in excess of current use value), the exemption does not apply to the part of the gain attributable to the increase in the development value since the date of acquisition.

Chargeable gains are calculated after making an indexation adjustment to the base cost to allow fully for inflation between the year of acquisition and the year of sale. However, in the case of gain on the disposal of Irish situated land or buildings carrying development value, only the current use value at the date of acquisition is indexed. Indexation (relief for inflation) does not apply after 31 December 2002. Any individual liable to capital gains tax is exempted from the first EUR1,270 of chargeable gains in each tax year. There is no transfer of any unutilized allowance between married couples.

The rate of capital gains tax is 33 percent except for gains arising from the sale of certain foreign life assurance policies and units from offshore funds not based in either the EEA or in an OECD country/jurisdiction with which Ireland has a double tax agreement. A special 10 percent rate can apply where an individual qualifies for Entrepreneur Relief. Additional advice should be sought.

Dividends, interest, and rental income

Interest

In general, deposit interest received from Irish or EU lending institutions is liable to Irish income tax at 33 percent with effect from 1 January 2020.

Dividends

From 1 January 2020 the rate of DWT is set to increase to 25 percent. Withholding tax was previously withheld at the standard rate (i.e. 20 percent). It applies to distributions made by an Irish resident company.

Gains from stock option exercises

Residency status Taxable at:
  Grant Vest Excercise
Resident N N Y
Non-resident N N Y/N
Other (if applicable) N/A N/A N/A

 

Foreign exchange gains and losses

A gain arising on a foreign exchange transaction can be regarded as a chargeable gain for Irish Capital Gains Tax purposes.

Principal residence gains and losses

A gain accruing to an individual on the disposal of their private residence and grounds up to one acre which has been occupied by the individual throughout the period of ownership as their only or main residence is exempt from Irish capital gains tax.

Partial relief is available on gains on the disposal of a property which was an individual’s principle residence for part of the period of ownership only. In addition, certain periods of absence may be regarded as periods of occupation for the purposes of calculating the relief such as, the last 12 months of ownership, periods of foreign employment if the individual occupies the residence both before and after the periods.

Capital losses

Chargeable gains for a year of assessment are aggregated with allowable losses for the year in computing the net amount assessable to capital gains. Losses may also be brought forward from previous years. Allowable losses which remain unrelieved may be carried forward indefinitely.

Personal use items

Depends on the nature of the item.

Gifts

Assets acquired by inheritance or gift are deemed to have been acquired at market value at the date of the death or gift.

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Additional capital gains tax (CGT) issues and exceptions

Are there additional capital gains tax (CGT) issues in Ireland? If so, please discuss?

Capital gains exit tax

Anti-avoidance legislation has been introduced in respect of temporary non-residents who dispose of certain assets during a tax year of non-residence for the purpose of avoiding Irish capital gains tax. It applies with respect to the 2003 tax year onwards.

For the restriction to apply, an individual must beneficially own "relevant assets" on the 31 December of the tax year of departure. These are defined as shares in a company or a right to acquire shares or other rights in a company. The market value of the relevant assets on this date must be equal to or exceed either 5 percent of the value of the issued share capital of the company or EUR500,000 for the restriction to apply.

Where an individual leaves Ireland and during a period of non-residence sells relevant assets but returns to Ireland within 6 tax years of departure, the individual is deemed to have disposed of and immediately reacquired the relevant assets as at the 31 December of the tax year of departure at the market value on that date. Any chargeable gain accruing must be included in the tax return applicable for the year of return.

This legislation will not apply where, as a resident of Ireland, the individual would not have been assessable to Irish capital gains tax in respect of gains on a disposal of relevant assets.

Are there capital gains tax exceptions in Ireland? If so, please discuss?

Pre-CGT assets

Not applicable

Deemed disposal and acquisition

Not applicable.

Local Property Tax

An annual self-assessed Local Property Tax (LPT) charged on the market value of all residential properties in Ireland (whether rented or occupied) is now in force in Ireland. A half year charge applied in 2013 with a full year charge applying in 2014 and thereafter. The LPT charge for a property is based on the market value on the “valuation date”. The charge ranges from EUR90 per annum (for properties valued under EUR100,000 on the valuation date) to EUR3,050 for properties values at EUR1.5m or more on the valuation date.

For 2013, the valuation date was 1 May 2013. For 2014, the “valuation date” was 1

November 2013.

The amount of LPT due for 2020 depends on the value declared for the property on 1 May 2013 and also the LPT rate applying to your property for 2020.

In order to be within the charge to LPT for 2020, an individual must own (co-own or have an interest in) the property on 1 November 2020. Individuals who have sold their residential property after 1 November 2019 will be liable to pay LPT on the property for 2020, even if it was sold before the end of 2020.

Payment of the tax can be made via the payroll system on a monthly basis or via direct debit or once off payments directly to the Irish Revenue.

General deductions from income

What are the general deductions from income allowed in Ireland?
 

The only deductions allowed in computing income from an employment are in respect of expenses incurred by the employee wholly, necessarily and exclusively in the performance of the duties of the employment. In practice it is very difficult to obtain a deduction on this basis. In any case, it is usual for the employer to reimburse such expenses directly to the employee.

Most allowances are now granted by way of a tax credit.

2020 tax credits

EUR

Single/separated

1,650

Married couple

3,300

Widowed (no children)

1,650

Home carer

1,600

Employment (PAYE)

1,650

The home carers’ credits is claimable by married persons who are jointly assessed and where one spouse works at home to care for children, the aged or incapacitated persons. The career spouse’s income is not in excess of EUR7,200. A reduced tax credit applies where the income is between EUR7,200 and EUR10,400.

The credit and the increased standard rate band for certain two earner couples are mutually exclusive, but a person may opt for whichever is the more beneficial.

The employee PAYE credit is only available to Irish employment income or other EU employment income, which is subject to a similar system of wage withholding.

A deduction is available for alimony made pursuant to a court order. Such payments constitute taxable income (from which the payer deducts tax at the standard rate) of the recipient. No deductions are available for maintenance paid in respect of child support. In general, a deduction from total income is given for interest paid on any loan used to purchase, repair, develop, or improve an individual’s principal private residence.

Tax reimbursement methods

What are the tax reimbursement methods generally used by employers in Ireland?

Current year gross-up is the normal method of recognizing tax reimbursements paid by the employer.

Calculation of estimates/prepayments/withholding

How are estimates/prepayments/withholding of tax handled in Ireland? For example, Pay-As-You-Earn (PAYE), Pay-As-You-Go (PAYG), and so on.
 

Each individual, other than one whose income is fully taxed under the Pay-As-You-Earn (PAYE) system, is required to make a prepayment, known as preliminary tax. In order to avoid interest, the amount of preliminary tax paid must be of an amount at least equal to the lesser of the following:

  • 90 percent of the tax due for the year as determined after the tax return has been filed
  • 100 percent of the individual’s tax liability for the immediately preceding tax year, or
  • 105 percent of the income tax liability of the pre-preceding tax year where payment is made via direct debit. (This option may only be chosen where the individual had a tax liability for pre-preceding tax year).

In determining the preliminary tax payment under each of these tests, the relevant percentage is applied to the aggregate of the individual’s liabilities to income tax, PRSI and USC. However, any of these taxes or levies that have been withheld by an employer under the PAYE system is credited before applying the relevant percentage.

In practice, the Irish Inspector of Taxes may issue a notice stating the amount of preliminary tax that the inspector thinks is likely to be due based on the previous year’s tax return. The amount in the Inspector’s notice becomes payable on the preliminary tax due date unless the individual displaces the inspector’s figure by paying their own estimate before that date. The individual is not required to make any preliminary tax payment for a year if their liability to Irish tax (excluding tax under PAYE) for the preceding year was zero. For example, an expatriate starting to work in Ireland has no preliminary tax to pay in the first tax year in which they are a resident. However, such a person has the normal obligation to make a tax return and pay their tax liability after the end of that year.

Pay-as-you-earn (PAYE) withholding

Calculated on monthly cash remuneration and benefits-in-kind.

PAYE instalments

Generally, paid monthly.

When are estimates/prepayments/withholding of tax due in Ireland? For example, monthly, annually, both, and so on.

Monthly.

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Relief for foreign taxes

Is there any Relief for Foreign Taxes in Ireland? For example, a foreign tax credit (FTC) system, double taxation treaties, and so on?
 

Normally, relief for foreign income tax suffered on any income is granted as a credit against the Irish income tax on the same income. A credit is only available under the following circumstances:

  • the recipient of the income is resident in Ireland for the relevant tax year
  • the income is derived from a country/jurisdiction with which Ireland has a tax treaty.

Ireland has currently 74 tax treaties (73 of which are in effect) with most major countries/jurisdictions.

An individual resident but not domiciled in Ireland is not allowed a credit for foreign tax to the extent that it is attributed pro rata to foreign income not remitted into Ireland.

The only form of unilateral relief from double taxation given is by deducting the foreign tax from the relevant foreign income. Unilateral relief is given for foreign tax suffered on income not covered by a tax treaty and may, if the taxpayer elects, be taken instead of a tax credit available under a tax treaty.

Similarly, relief for any foreign tax suffered on any chargeable capital gain is given against Irish capital gains tax on the same chargeable gain, but only where permitted under a tax treaty. If not so permitted, unilateral relief is available in calculating the chargeable gain in the form of a deduction of the foreign tax.

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General tax credits

What are the general tax credits that may be claimed in Ireland? Please see list below.

  • single
  • married
  • home career’s allowance
  • employee tax credit
  • rent relief - this no longer applies in relation to new leases taken out after 7 December 2010
  • widow
  • one parent
  • medical insurance (if paid gross by employer)
  • deposit interest retention tax (DIRT)
  • dividend withholding tax (DWT)
  • college fees.

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Sample tax calculation

This calculation3 assumes a married taxpayer resident in Ireland with two children whose 4-year assignment begins 1 January 2017 and ends 31 December 2020. The taxpayer’s base salary is 100,000 US dollars (USD) and the calculation covers 4 years.

 

2017

USD

2018

USD

2019

USD

2020

USD

Salary

100,000

100,000

100,000

100,000

Bonus

20,000

15,000

10,000

10,000

Cost-of-living allowance

10,000

10,000

10,000

10,000

Housing allowance

12,000

12,000

12,000

12,000

Company car

6,000

6,000

6,000

6,000

Moving expense reimbursement

20,000

0

10,000

0

Home leave

0

5000

0

0

Education allowance

3,000

3,000

3,000

3,000

Interest income from non- local sources

6,000

6,000

6,000

6,000

Exchange rate used for calculation: USD1.00 = EUR0.7350.

Other assumptions

  • All earned income is attributable to local sources.
  • Bonuses are paid at the end of each tax year and accrue evenly throughout the year.
  • Interest income is not remitted to Ireland.
  • The company car is used for business and private purposes and originally cost USD20,000.
  • The employee is deemed resident throughout the assignment.
  • Tax treaties and totalization agreements are ignored for the purpose of this calculation
  • Moving expense reimbursement is not taxable as relocation expenses meeting certain conditions are exempt.
  • The individual’s spouse and children accompany them on assignment and the spouse is not in receipt of any income which is taxable in Ireland.

Calculation of taxable income

 

2017

EUR

2018

EUR

2019

EUR

2020

EUR

Days in Ireland during year

365

365

365

365

Earned income subject to income tax

 

 

 

 

Salary

73,500

73,500

73,500

73,500

Bonus

14,700

11,025

7,530

7,530

Cost-of-living allowance

7,350

7,350

7,350

7,350

Net housing allowance

 8,820.00

 8,820.00

 8,820.00

 8,820.00

Company car

 4,410.00

 4,410.00

 4,410.00

 4,410.00

Moving expense reimbursement

0

0

0

0

Home leave*

0

0

0

0

Education allowance

 2,205.00

 2,205.00

 2,205.00

 2,205.00

Interest income from non- local sources**

0

0

0

0

Total taxable income

 110,985.00

 107,310.00

 103,635.00

 103,635.00

Calculation of tax liability

 

2017

EUR

2018

EUR

2019

EUR

2020

EUR

Taxable income as above

 110,985.00

 107,310.00

 103,635.00

 103,635.00

Irish tax thereon

0

0

0

0

Less:

 

 

 

 

Domestic tax rebates (dependent spouse rebate)

0

0

0

0

Foreign tax credits

0

0

0

0

Total Irish tax

29,784

28,064

26,144

26,044

Total USC

6,068

5,595

5,162

5,147

* It is assumed that the home leave amount is exclusive of one home leave trip per year and therefore not taxable.

** It is assumed that the other income represents non-Irish income which has not been remitted to Ireland and therefore not taxable.

It is assumed that an A1/Certificate of Coverage has been obtained; therefore, Irish social security contribution has not been included in any calculations.

Footnotes

1. Certain tax authorities adopt an "economic employer" approach to interpreting Article 15 of the OECD model treaty which deals with the Dependent Services Article. In summary, this means that if an employee is assigned to work for an entity in the host country/jurisdiction for a period of less than 183 days in the fiscal year (or a calendar year of a 12-month period), the employee remains employed by the home country/jurisdiction employer but the employee’s salary and costs are recharged to the host entity, then the host country/jurisdiction tax authority will treat the host entity as being the "economic employer" and therefore the employer for the purposes of interpreting Article 15. In this case, Article 15 relief would be denied, and the employee would be subject to tax in the host country/jurisdiction.

2. For example, an employee can be physically present in the country/jurisdiction for up to 60 days before the tax authorities will apply the ‘economic employer’ approach.

3. Sample calculation prepared by KPMG, the Irish member firm affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity, based on the revenue commissioners of Ireland.

Disclaimer

All information contained in this publication is summarized by KPMG Ireland, the Irish member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity, based on the Irish tax, social security and immigration legislation in force for the period 1 January 2020 to 31 December 2020.

© 2020 2020 KPMG, an Irish partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

For more detail about the structure of the KPMG global organisation please visit https://home.kpmg/governance.

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