Ireland: Personal Taxation
The standard rate of Irish income tax for individuals in 2013 is 20% on the first EUR32,800 of taxable income, rising to 41% on the balance. For a married couple (one earner), the 20% band is increased to EUR41,800, and if there are two earners, to EUR65,600.
As from 2001 Ireland operated a tax credit system for most personal allowances. There is a personal allowance of EUR1,650 (2012), it is doubled for a married couple. There are some other permitted deductions, including mortgage interest and pension contributions.
Income is comprehensively defined and includes employment income and benefits, income from property, income from a trade or profession, and investment income. An important exemption for one class of individuals applies to the earnings of Irish-resident artists from works of cultural or artistic merit. Overseas workers can deduct a proportion of income relating to the overseas work.
Ireland operates a self-assessment scheme for income tax, except in relation to employees, whose tax is deducted through a 'PAYE'-style scheme by their employers. The fiscal year is the calendar year.
Since new tax rules came into force in 2006, all employees working in the Republic became subject to Irish PAYE, even if they were already paying PAYE in their home country. An announcement in late September 2007 by the Irish Revenue Commissioners has relaxed this; provided some reasonable conditions are met by their employers, workers on assignments of up to six months in the Republic will not be liable for Irish PAYE. Employees normally living and working in Northern Ireland will pay PAYE as usual under the UK tax rules, provided their spell of employment in the Republic does not exceed six months.
In the 2009 budget a 2% levy was introduced for incomes in excess of EUR100,100 (EUR1,925 per week), with a further 1% on incomes in excess of EUR250,120 (EUR4,810 per week). An exemption of EUR18,304 ensured that persons on low income were exempt from the income levy. An exemption of EUR20,000 and EUR40,000 for single and married pensioners respectively, was also to be introduced to ensure that persons aged 65 and over who are exempt from tax under the age exemption limits will be exempt from the levy.
In an interim budget announced by Finance Minister Lenihan in response to the financial and economic crisis, the income levy rates were doubled to 2%, 4% and 6%. The exemption threshold was lowered to EUR15,028. From May 1, 2009, the 4% rate applies to income in excess of EUR75,036 and the 6% rate to income in excess of EUR174,980.
The health levy rates were also doubled to 4% and 5%. The entry point to the higher rate is EUR75,036.
From the tax year 2011 onwards a Universal Social Contribution (USC), replacing the health and income levy, was introduced for all employed and self-employed individuals if their annual income exceeds EUR10,035. The USC rates range from 2% for income up to EUR10,036, 4% from EUR10,037 to EUR16,016 and 7% on income above EUR16,016. The maximum rate for those aged 70 or over and for medical card holders is 4%.
Low income earners, ie those earning below EUR10,036 are no longer subject to the USC from January 2012 onwards. For Individuals with income above EUR10,036 rates are the same as in 2011.
A special 20% rate which applied to the trading profits from dealing in or developing residential development land was abolished by the April 2009 interim budget. The income from trading profits from dealing in or developing residential development land is charged at the person’s relevant marginal rates of income tax or the 25% rate of corporation tax.
Curbs on tax relief introduced in the 2009 budget mean that the tax rate of Ireland’s highest-paid taxpayers cannot fall below 30% (20% previously). The entry point to the restriction will now occur at adjusted income levels of EUR125,000 with the full restriction applying at EUR400,000.