Ireland: Personal Taxation
Residence and Liability for Taxation
In Ireland the taxation of individuals is based on a mixture of the concepts of residence and domicile.
As in many countries, residence is consequent on presence in Ireland for more than half of a tax year, or for 280 days in two consecutive years. An individual's domicile is in the country where he maintains his permanent home, in the country where he regards himself as belonging. Domicile in Ireland is acquired from an Irish-domiciled father, but can be changed to another country by establishing a life there. Resident foreign employees will thus not normally be domiciled in Ireland.
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.
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.
Until December 2000, Irish tax-payers were assessed annually to tax on gains in investment funds, at the rate of 20% for Irish-resident funds and 40% for foreign funds. Now there is instead an 'exit tax' of 26% (increased from 23% in the Finance Act 2009) on encashment or maturity, for domestic and foreign funds alike. For non-residents this tax will apply only to Irish-source income.
In his budget speech in December 2009, Finance Minister Brian Lenihan announced the introduction, effective from the 2010 tax year, of an ‘Irish domicile levy’ of EUR200,000 on Irish nationals and domiciled individuals whose worldwide income exceeds EUR1m and whose Irish-located capital is greater than EUR5m, regardless of where they are tax resident.
To help pay for a new jobs package, the government announced a pension levy in May 2011, which is payable by pension funds and plans approved under Irish legislation, namely occupational pension schemes, Retirement Annuity Contracts, and Personal Retirement Savings Accounts. The 0.6% levy is to take the form of a stamp duty on all capital value assets under management, which is calculated on figures from January 1, 2011, or the last date of the accounting period ending in the 12 months preceding that date, effectively backdating the tax's imposition. The tax does not affect the provision of retirement benefits to non-residents; and does not apply to those funds which had already formally resolved to wind up before May 10, 2011, when the scheme was announced.