Shownotes
Ordinary residency in Ireland can have important tax consequences, particularly for people planning to leave the country after several years of Irish tax residence. In this episode, Stephanie Wickham explains how ordinary residency differs from tax residency, when it begins and ends, and why it can keep certain income and gains within the Irish tax net after departure. She also looks at Double Taxation Agreements, treaty residence, temporary non-residency rules and why advance tax planning matters before selling an asset or business.
Why This Topic Matters
Ordinary residency is one of those Irish tax concepts that sounds simple until you try to work out what it means in practice. It is separate from tax residency, takes time to acquire and, importantly, takes time to lose. That can matter for people who have left Ireland and assume their Irish tax exposure ended when they stopped being tax resident.
Stephanie explains why ordinary residency in Ireland tends to be less significant when someone first moves here, but can become much more important when they leave. A person who is Irish tax resident is already generally within the Irish tax net on worldwide income and worldwide gains, subject to the relevant rules and exceptions. Ordinary residency therefore often becomes a bigger planning issue after departure.
What Stephanie Covers
Stephanie starts with the basic Irish tax residency rules. Broadly, an individual may be Irish tax resident if they spend 183 days or more in Ireland in a calendar year, or meet the two-year 280-day test, subject to the minimum 30-day presence rule she discusses in the episode.
She then explains **ordinary residency**, which generally arises after three consecutive years of Irish tax residence. It also takes three years to lose. This delayed exit is the part that can catch people by surprise.
For someone who has left Ireland but remains ordinarily resident, Irish domestic law can continue to tax certain worldwide income and gains. Stephanie discusses the exclusions she commonly considers, including income from a trade or employment carried on wholly outside Ireland and a limited de minimis amount of passive income. She also explains why **Capital Gains Tax** can be particularly relevant where someone leaves Ireland with a valuable asset or business that may be sold later.
That leads into the role of a **Double Taxation Agreement**. Ireland has an extensive treaty network, and in some cases a person who has left Ireland may become treaty resident in another country. Depending on the wording of the particular treaty and the person’s circumstances, that treaty analysis may help limit the effect of Irish ordinary residency.
The detail matters. Stephanie points out that Ireland’s treaties are not identical. The Irish agreements with Australia, the UK and the US, for example, can produce different outcomes because the wording and history of each treaty differ. This is why simply reading one treaty provision online is rarely enough to settle a cross-border tax position.
The episode also touches on Ireland’s **temporary non-residency rule in section 29A**, which can potentially keep certain gains within the Irish tax net where someone leaves Ireland and later returns within the relevant period. For people moving to jurisdictions such as the UAE, Stephanie also flags that treaty outcomes can require particular care where the destination country does not impose a comprehensive personal income tax and capital gains tax regime.
Finally, she explains the practical importance of Ireland’s self-assessment system. Taxpayers are responsible for assessing their liability, paying the tax due and filing the appropriate return. If a departure, business sale or asset disposal is being planned, getting advice before the transaction takes place can make a real difference. Once a gain has crystallised, the scope for restructuring the position is much narrower.
What Listeners Will Learn
Listeners will come away with a clearer distinction between Irish tax residency and ordinary residency, including when ordinary residency begins and when it ends. They will also understand why leaving Ireland does not always mean leaving the Irish tax net immediately.
The episode highlights the questions worth asking before a move: Are you ordinarily resident? When will that status cease? Do you expect to realise gains after leaving Ireland? Is there a relevant Double Taxation Agreement, and could you become treaty resident elsewhere? Could the temporary non-residency rules apply?
For expats, returning Irish residents, founders and investors with cross-border assets, the practical message is straightforward. Timing can make a real difference. If you are planning to leave Ireland and expect a significant transaction after departure, it is worth reviewing your tax residency, ordinary residency, domicile and treaty position before the move or disposal takes place.
About the Host
Stephanie Wickham is a Chartered Tax Adviser and Chartered Accountant and the founder of Expat Taxes. She specialises in Irish and international tax matters affecting expats, returning Irish emigrants and people with ongoing cross-border tax obligations.
Her own experience of living in Australia for eight years before returning to Ireland also gives her a very practical understanding of what an international move involves beyond the tax return.
LinkedIn: https://www.linkedin.com/in/stephanie-wickham-b4aba13b/
Website: https://expattaxes.ie/
Quotes from the Episode
“Ordinary residency is one of those tax concepts that’s quite specific to Ireland. It’s quite difficult to understand.” — Stephanie Wickham
“It takes three years to acquire ordinary residency and it takes three years to lose it.” — Stephanie Wickham
“Once you leave Ireland and you are an ordinary resident, Ireland, under domestic legislation, will keep you in the Irish tax net on some income and all gains.” — Stephanie Wickham
“If you are planning to depart Ireland in future, you would do well to take advice in advance of your departure to determine what your tax liabilities might be.” — Stephanie Wickham
Frequently Asked Questions
What does ordinary residency in Ireland mean for tax purposes?
Ordinary residency is a separate Irish tax concept from tax residency. An ordinarily resident person can be liable to Irish tax on worldwide income and gains, subject to certain exceptions. It can become particularly important after someone leaves Ireland because ordinary residency may continue even when Irish tax residency has ended.
When do I become ordinarily resident in Ireland?
You become ordinarily resident in Ireland after being Irish tax resident for three consecutive tax years. As Stephanie explains in the episode, ordinary residency generally does not affect someone during their first three years in Ireland because it has not yet been acquired.
How long does ordinary residency last after I leave Ireland?
It takes three years to lose ordinary residency. This means that someone who leaves Ireland after becoming ordinarily resident can remain within the scope of certain Irish tax rules for a period after departure.
Can Ireland tax my foreign income or capital gains after I move abroad?
Potentially, yes. If you remain ordinarily resident after leaving Ireland, Irish domestic law can continue to tax some income and all gains. There are exceptions, including certain income from a trade or employment carried on completely outside Ireland and a limited amount of passive income. The precise treatment will depend on your circumstances.
Can a Double Taxation Agreement override Irish ordinary residency rules?
In some circumstances, a Double Taxation Agreement may help where someone who has left Ireland becomes treaty resident in another country. Stephanie explains that this can potentially set aside the effect of ordinary residency, but the outcome depends on the wording of the particular treaty and requires a detailed technical analysis.
What should I check before leaving Ireland if I plan to sell a business or other valuable asset?
Before leaving, it is important to establish whether you are ordinarily resident, when that status will end, and whether a future gain could remain taxable in Ireland. You should also consider the relevant Double Taxation Agreement and Ireland’s temporary non-residency rule, which can potentially keep certain gains within the Irish tax net for five years. Taking advice before the move or sale matters because once the transaction occurs, the tax liability may already have crystallised.
Related Episodes
Irish tax residency (know before you go!)
Tracking your Tax Residency across the World with Tim Heulin
Tax Domicile: What it means and why it matters (SUMMER REPLAY)
Residency, Relationships & the Realities of Expat Tax with Peter Ferrigno (Part 2)
Voiceover
Welcome to Taxbytes for Expats, the top tax tips you want to know as an expat. The podcast is here to help answer the common queries and concerns expats have when moving to or from Ireland.
Complex taxes explained simply. We’ll focus on the Irish and international tax issues to be aware of to ensure you save time, money, and stress.
Stephanie Wickham
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Hi, everyone.
Welcome back to this episode of Taxbytes for Expats. Today, it is just me. I don’t have a guest. I want to talk about an Irish tax topic because I think sometimes in this podcast, we have brilliant people on to talk about very relevant topics, but sometimes we lack the time and space just to get into the nitty gritty of Irish tax and some of the veryVery topical questions that clients bring to us in consultations.
Because obviously, in consultations, you know, people get to have a detailed one on one. They ask their questions, their concerns, and what kind of rises up through that is some themes.
So I’d like to kind of unpick those in a few episodes and try to create an episode that might resonate with people who very kindly tune in to listen to us.
So what I’m going to talk about here is a tax concept.called ordinary residency. And if I had a euro for every time a client says to me, oh, I’m going to be ordinary resident, what does that mean?
I’d be in a good space because ordinary residency is one of those tax concepts that’s quite specific to Ireland. It’s quite difficult to understand.
The technical analysis that can sometimes help it not to be too impactful can be complicated. There’s a lot flying in the face of just a simple understanding of it,Application.
And what that means is that it can cause concern for people. So let’s see if we can just boil it down to some easy takeaway points, make it easy to understand, and hopefully put some fears to bed for people who are maybe planning to move, planning to leave, and worried about what this topic means.
So it’s probably quite important at this juncture to say that a podcast episode should never be confused with or replaced a replacement for detailed tax advice. And I’llI’ll just preface what I’m going to say with that because obviously everyone’s situation is different and you’ll benefit from detailed tax advice.
If ordinary residency is going to bite, you need a good advisor to help you navigate it. But what is it and when could it bite to use that phrase? In Ireland, we have two concepts of residency.
The first, most people know it, you are a tax resident of Ireland if you spend more than 183 days in Ireland in a calendar year.Any part of a day counts, or if over the course of two years you spend more than 280 days, but at least 30 in any year, you can’t be a resident of Ireland in a year you haven’t had 30 days’ presence.
That’s the ordinary concept or the general concept, let me say, of tax residency. And then there’s the secondary residency concept called ordinary residence.
And it is defined in legislation and it essentially occurs when an individual has three consecutiveYears of tax residence. So if you are planning to move to Ireland, you are going to have three years residency.
You are going to become an ordinary resident of Ireland. It takes three years to acquire ordinary residency and it takes three years to lose it. So I generally say to clients, look, you know, when you’re moving to Ireland, people can tend to become a little bit concerned about ordinary residency.
It essentially is not going to impact you for the first three years. And in any event, itdoesn’t do anything that residency doesn’t of itself do.
So what do I mean by that? A tax resident of Ireland is taxed on worldwide income and worldwide gains. With some limited exceptions, an ordinary resident is too. So what that means is they both have the same impact from a cash perspective.
So you’re going to be paying tax in Ireland before you become an ordinary resident. So to some extent, we focus on the tax residency. In my personal view, ordinary residency tends to matter more when somebodyIs leaving Ireland.
So I think that’s probably the first takeaway I’d like you to have if I’m departing Ireland and I am an ordinary resident, what does that mean? So, first, let’s go back to kind of the basics.
An ordinary resident is liable to Irish tax on worldwide income and gains, except for income arising from a trade or employment that is exercised completely outside of Ireland.
And there’s a de minimis passive income of just under €4,000, which is excluded.Save for that, ordinary residency taxes worldwide income and gains.
So it matters. Once you leave Ireland and you are an ordinary resident, Ireland, under domestic legislation, will keep you in the Irish tax net on some income and all gains.
So if somebody is leaving Ireland to go and live in a jurisdiction that we don’t have a double tax agreement with, it is really important that they understand what ordinary residency means.
At that junction, we also will determine a client.Tax domicile because it can be helpful to understand that. But I think what somebody needs to be aware of is if I’m departing Ireland permanently and I’m going to a jurisdiction that has not concluded a double tax agreement with Ireland, then I need to get some advice about what my ordinary residency means.
But in the majority of cases, when we speak to clients, they’re not going to a jurisdiction that doesn’t have a treaty with Ireland. Like Ireland has a very broad treaty network. I believe we have upwards of70 countries that have concluded double tax agreements with Ireland.
So, therefore, we need to look at the relevant double tax agreement. And this is probably where it gets interesting because the Irish treaty network is quite big and the majority of the treaties, if not all, are similar to the OECD model convention.
However, they don’t all read the same. They weren’t all concluded in the same time period.Therefore, if I was to look at, for example, the Australian Irish double tax agreement versus the Irish UK one versus the Irish US one, we will get different outcomes for similar situations with reference to the treaty because of how it’s written.
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Now, where we can sometimes get some positive outcomes in limited circumstances is if somebody has left Ireland, they have remained an ordinary resident, and they become what is called a treaty resident of another jurisdiction.
That is quite a technical analysis. So we generally need a foreign advisor to help us there.If that’s possible, what it means is that the ordinary residency can be cut through and set aside.
A couple of points of caution here. We generally will work with clients who maybe are leaving Ireland and perhaps they have a successful business they’re going to sell or they have a successful asset that has a large unrealized gain.
And they are, because life has taken them elsewhere, they’re moving abroad and they know that they’re going to liquidate and have a gain after they left Ireland.Residencies is going to catch them.
And we also have a temporary non residency rule in section 29A of the Tax Act, which will actually keep certain gains in the Irish tax net for five years potentially.
And that’s designed to capture people who are leaving Ireland with the intention to return within a certain timeframe. So all of this is to say that while ordinary residency can cause concern for people who are planning to move in Ireland,You need not be concerned in the majority of cases because your tax liability is going to arise primarily because of your residency in Ireland rather than your ordinary residency, which won’t be triggered until you’ve been in Ireland for three consecutive tax years.
And rather, what becomes more relevant from an analysis and a technical perspective is when you’re leaving Ireland. It’s asking questions around, Am I ordinary resident?
When will I no longer be ordinary resident?Incoming gains for the period after I’ve left Ireland. And what’s interesting as well here is, I’ve mentioned it in previous episodes, but the Irish tax system is a self-assessed tax system, which means you, as a taxpayer, are required to self-assess your liability, declare your tax bill, and file a return to support that payment.
So it can be quite important that you understand what obligations you have. And equally, when we know an obligation,Is going to arise, we can be most impactful in terms of the resulting liability when we consider it in advance.
So, what I mean there is if you are planning to depart Ireland in future, you would do well to take advice in advance of your departure to determine what your tax liabilities might be.
Because obviously, once the transaction has occurred, we can’t undo it. The tax liability has crystallised and needs then to be.
In terms of other contentious points, we do see as well clients sometimes looking to depart to go to some of the Middle Eastern countries, such as the UAE.
I’ve referenced in this episode how treaties can help us. Sometimes tax jurisdictions, such as the UAE, that don’t have a comprehensive tax system, and by that I mean that they don’t tax individuals currently for income tax and gains.
There could be problems leaning heavily on those treaties or tax appeal cases that would suggest that revenue are not favourable to allowing a treaty to override domestic provisions in that situation or that the treaty isn’t always effective.
So, again, what am I saying? It’s worth taking advice. If you are planning to go overseas and you have perhaps read the treaty, it’s always good to speak with an advisor to understand what revenue practice, tax appeal,Decisions, commentary, and non Irish case law, such as UK law, has said because it can be nuanced.
So, hopefully, that’s helpful. And if you do have questions about your ordinary residency position or anything else that we’ve discussed in today’s episode, you can always reach out to us info at expattaxes.ie.
We’ll do our very best to help with your query. For the majority of people who send us queries, the natural step is first to suggest that you have a one on one tax consult with one of our team.
In that forum,We will review your query and determine what support you need. Because, like everything, tax is specific to your circumstance and you need advice that’s tailored to your specific situation.
Thanks very much for listening to this. And I will catch you on the next episode.
Voiceover
Thanks for listening to Taxbytes for Expats. Please do leave a rating or review wherever you listen to your podcast. And as always, remember to take professional tax advice specific to your personal circumstances.
Before acting or refraining from action in connection with the matters dealt with in this series, the material in this podcast is intended to give general guidance only.
