A person who is Irish resident and domiciled is liable to income tax on all of his income worldwide. Therefore, he must include all foreign income in his Irish tax return, even if the income has no connection with Ireland and it is never transmitted to Ireland.
Generally they will either be a Double Tax Agreement with the country in which the income foreign income arises, or Ireland will get a unilateral credit for tax paid in the other country.
Domicile is a less precise concept than residence. Generally, a person is domiciled where he or she intends to make his permanent home. A person can only have one domicile at a time.
A person will usually acquire the domicile of his father on birth. Where his parents are not married, the persons normally assumed the domicile of his mother. Generally, the domicile of a person under 18 years old, will change with that of his or her parents. This is referred to as the person’s domicile of origin,
Once a person reaches the age of 18 years, he or she can acquire a new domicile. A new domicile may be acquired, if the person can be shown to have broken his link with his or her existing domicile or his origin of domicile. The existing domicile is presumed to continue until a new one has been acquired.
It must be shown that the pre-existing domicile has been abandoned in order to obtain a new domicile. A new domicile can be acquired by residing in a new state with the intention to residing there indefinitely, as his permanent home. A person will retain domicile if leaves a state but retains an intention to return. Domicile may be retained, even where the person resides for substantial periods elsewhere.
The domicile levy applies to all relevant individuals. These are individuals who are domiciled in the state, whose worldwide income exceeds €1 million for the year and his Irish tax liability is less than €200,000 and who own Irish property with a market value of at least €5 million on 31 December in that year.
Although the focus of the levy is on non-residents, it is applicable to the residents
The domicile levy came into effect in 2010. It applies to
- persons who are domiciled in and citizens of, Ireland,
- who have worldwide income of more than €1,000,000 for the tax,
- whose Irish tax Irish tax liability is less than €200,000, and
- who have Irish situated property worth more than €5,000,000 at the end of the tax year.
The levy does not depend on residence but on the above factors only.
The effect of levy is to ensure the persons in the above category at least €200,000. The levy is available as a credit against Irish income tax liability.
The domicile levy provisions exempt persons whose only source of employment is employment income to which PAYE applies. This exception extends to other sources of income that are collected through PAYE. The 2014 Act provides for the income subject to deposit interest retention tax.
The other interest exceptions only applies where the amount of the non-employment, deposit and other income does not exceed €3174. This does not apply to foreign deposit income.
Computation & Collection
Persons in the above category must file a return by 31st October in the year following the relevant year of assessment. The valuation date is the year end.
The Revenue may make an assessment. The domicile levy is subject to penalty provisions.
Revenue may send a notice to any person it believes to be a relevant individual, requesting within 30 days that they deliver full and true return of all particulars in relation to the determination of the domicile levy to gather with the payment of the levy. This supplements the existing requirement which requires the levy to be paid by 31 October in the next year.
Scope of Levy
Finance Act 2017 amends the domicile levy. This applies to Irish domiciled individuals who own assets in excess of €5 million euro and have worldwide income exceeding €1 million Euro who have paid less €200,000 Irish income tax in the year. Certain technical amendments are made. The amendment clarifies that capital allowances and losses are not taken into account in determining worldwide income for the purpose of the levy for the year 2018 and later years.
An individual who is resident but not Irish domicilednor ordinarily resident is liable to income tax on income arising in Ireland and foreign income remitted to Ireland. A remittance is income or gains from a foreign source which has been sent into Ireland.
Prior to 2008 reforms, UK source income was taxed in full even though, it was not remitted into Ireland . Each of the UK and Ireland has now changed this rule. After 2010, the remittance basis is available only, to persons who are not domiciled in Ireland.Therefore where a person acquires Irish domicile, the remittance basis no longer applies.
An Irish citizen who is not ordinarily resident but is resident (e.g. returning from a period abroad) is similarly taxed on foreign income, only to the extent remitted into Ireland. Remission into Ireland means that the income is transferred into Ireland.
Under the remittance basis of tax, remittances from income into Ireland are taxable. Where, however a person can show that what is remitted into Ireland is not income, but a capital gain or income earned prior to becoming resident, this will not be taxable. Remitted income may qualify for a tax credit under a double taxation agreement.
Where money is remitted from a mixed fund of capital and income acquired before and after becoming resident, Income is presumed to be remitted first. When income is exhausted, then the balance may be considered capital and not subject to the remittance of income rules.
The income must arise years after the person becomes resident in Ireland. It does not apply to the proceeds of a capital gains. It does not apply to income on investments accumulated for example from a rental property or securities acquired, prior to the person becoming resident.
Employment income, where the duties are performed in the state, is not subject to the remittance basis.
Income from offshore funds is subject to the remittance basis. Gains from regulated funds in an EU/EEA/DTA(OECD only) country do not enjoy the remittance basis.
There is extensive anti-avoidance legislation which may deem arrangements which have the effect of indirectly making the foreign income available to be a remittance and thereby taxable .Income is traced into capital assets and accounts, where the proceeds of sales represent income. To that extent, it may be regarded as income remitted.
Where a non-domiciled individual transfers his or her foreign source income, or property bought using that income, to his or her spouse or civil partner, and after 13 February 2013, that income or property is remitted to the State, that remittance will be deemed to have been made by the non-domiciled individual. A similar amendment is made to the remittance basis of assessment for Capital Gains Tax.
There is deemed an application of income from a foreign source by the non-domiciled individual, in the making of a loan or transfer of assets / money to a spouse / civil partner, or in the acquisition of property which is subsequently transferred to the persons’ spouse or civil partner. There is deemed to be a remittance into the State by the individual who has made the application of income where;
- there is remittance payable in the State,
- property imported,
- money arising from property not imported,
- money so received on account of such remittances
which is derived from a loan, transfer of money or property.
If there is an application of income after a remittance by a spouse or civil partner, it is deemed to be made by the person applying the income.
Anti-avoidance rules apply where the individual applies the income from a foreign security or possession in making a loan or transfer of money to a spouse or civil partner and the acquisition of property which is subsequently transferred to that person’s spouse or civil partner.