Post by Sapphire Capital on Jul 11, 2008 23:23:04 GMT 4
The residence test
The Irish position offers greater certainty than the UK in that there is one statutory test for residence. A person will be regarded as Irish resident if:
* he is present in the state for a period of 183 days or more in the tax year;
* he is present in the state for a period of 280 days or more in the current and previous tax year; but where a person is present here for 30 days or less, he will not be regarded as resident for that tax year.
Presence at the end of a day (that is, at midnight) is required to be regarded as present for that full day. In an ongoing situation, it is possible for an individual to spend up to 139 days in Ireland in a tax year without becoming Irish resident.
Remittance basis for non-domiciliaries in Ireland
Under the current Irish tax regime, it remains sufficient to rely on non-remittance. There is no formal requirement to elect or to pay any additional charge.
Previously, income tax was applied on an arising basis for UK source income, but that is changing under the Irish Finance Bill 2008. The arising basis will continue to apply for UK source gains and employment income (from employment exercised in Ireland), which will be taxable whether remitted or not. All other foreign income and gains can be subject to the remittance basis.
Income tax anti-avoidance
The Irish Taxes Consolidation Act (TCA) contains anti-avoidance legislation in relation to the transfer of assets abroad and specifically imposes a tax charge on Irish resident or ordinarily resident and domiciled persons who have power to enjoy income arising to persons resident or domiciled out of the state, or receives a benefit ultimately provided out of assets which were transferred abroad or associated operation.
CGT anti-avoidance
As the UK capital gains anti-avoidance provisions have been extended to non-domiciled resident individuals, the Irish anti-avoidance position, at this point in time looks favourable in comparison:
Section 590 TCA operates to apportion gains in a non-resident close company to Irish resident or ordinarily resident and domiciled individuals.
Section 579 TCA applies to attribute gains in an offshore trust to an Irish resident or ordinarily resident and domiciled settlor who is deemed to have an interest in the settlement.
Section 579A TCA attributes gains arising to offshore trustees to capital distributions made to Irish resident/ ordinarily resident and domiciled beneficiaries.
Gifts/inheritances
It is important for any non-domiciled person considering Ireland to note the potential exposure to Irish gifts and inheritance tax (CAT). CAT is a beneficiary based tax, charged at 20%, and is imposed on any Irish situate assets comprised in a gift or inheritance and where, at the time of the gift or inheritance, either the donor or beneficiary is resident in Ireland.
Non-domiciled individuals however will not be deemed to be resident for CAT purposes unless they have been resident for five consecutive tax years at the relevant time. In such a case, they will be within the Irish CAT charge on their worldwide estates, and any trusts of which they are the settlor.
Subject to managing this CAT issue, be it by breaking residence every five years or structuring the timing of distributions, Ireland should be a very attractive destination for UK resident non-domiciled individuals.
source: Matheson Ormsby Prentice Paraic Madigan (paraic.madigan@mop.ie) & John Gill (john.gill@mop.ie)
+353 1 232 2000
The Irish position offers greater certainty than the UK in that there is one statutory test for residence. A person will be regarded as Irish resident if:
* he is present in the state for a period of 183 days or more in the tax year;
* he is present in the state for a period of 280 days or more in the current and previous tax year; but where a person is present here for 30 days or less, he will not be regarded as resident for that tax year.
Presence at the end of a day (that is, at midnight) is required to be regarded as present for that full day. In an ongoing situation, it is possible for an individual to spend up to 139 days in Ireland in a tax year without becoming Irish resident.
Remittance basis for non-domiciliaries in Ireland
Under the current Irish tax regime, it remains sufficient to rely on non-remittance. There is no formal requirement to elect or to pay any additional charge.
Previously, income tax was applied on an arising basis for UK source income, but that is changing under the Irish Finance Bill 2008. The arising basis will continue to apply for UK source gains and employment income (from employment exercised in Ireland), which will be taxable whether remitted or not. All other foreign income and gains can be subject to the remittance basis.
Income tax anti-avoidance
The Irish Taxes Consolidation Act (TCA) contains anti-avoidance legislation in relation to the transfer of assets abroad and specifically imposes a tax charge on Irish resident or ordinarily resident and domiciled persons who have power to enjoy income arising to persons resident or domiciled out of the state, or receives a benefit ultimately provided out of assets which were transferred abroad or associated operation.
CGT anti-avoidance
As the UK capital gains anti-avoidance provisions have been extended to non-domiciled resident individuals, the Irish anti-avoidance position, at this point in time looks favourable in comparison:
Section 590 TCA operates to apportion gains in a non-resident close company to Irish resident or ordinarily resident and domiciled individuals.
Section 579 TCA applies to attribute gains in an offshore trust to an Irish resident or ordinarily resident and domiciled settlor who is deemed to have an interest in the settlement.
Section 579A TCA attributes gains arising to offshore trustees to capital distributions made to Irish resident/ ordinarily resident and domiciled beneficiaries.
Gifts/inheritances
It is important for any non-domiciled person considering Ireland to note the potential exposure to Irish gifts and inheritance tax (CAT). CAT is a beneficiary based tax, charged at 20%, and is imposed on any Irish situate assets comprised in a gift or inheritance and where, at the time of the gift or inheritance, either the donor or beneficiary is resident in Ireland.
Non-domiciled individuals however will not be deemed to be resident for CAT purposes unless they have been resident for five consecutive tax years at the relevant time. In such a case, they will be within the Irish CAT charge on their worldwide estates, and any trusts of which they are the settlor.
Subject to managing this CAT issue, be it by breaking residence every five years or structuring the timing of distributions, Ireland should be a very attractive destination for UK resident non-domiciled individuals.
source: Matheson Ormsby Prentice Paraic Madigan (paraic.madigan@mop.ie) & John Gill (john.gill@mop.ie)
+353 1 232 2000