The remittance basis of taxation for foreigners moving to Ireland

Consulting Expat Foreign domicile
May 28th, 2021
Written by: admin_et

The remittance basis of taxation for foreigners moving to Ireland

Your worldwide income is taxable in Ireland in a year you trigger Irish tax residency. Of note to a foreign domiciled individual is the remittance basis of taxation. This article provides information for foreign domiciled individuals. If you need advice on your domicile position we can assist.

Individuals who qualify for the remittance basis of taxation should seek tax advice in advance of their move to Ireland to ensure they have arranged their affairs efficiently.

Why? 

The remittance basis of taxation is provided for by section 71(3) of the Taxes Consolidation Act 1997.  This legislation means that a foreign domiciled individual is not taxable on foreign sources of income or gains unless these amounts are remitted to Ireland. For example, if a US domiciled individual relocates to Ireland and maintains US investments while triggering tax residency in Ireland they will not be subject to Irish tax on the income from these investments unless the income is remitted.

It is important to understand what qualifies as a remittance. For example, if an asset is purchased overseas and subsequently brought to Ireland and sold here the proceeds of the sale is considered a taxable remittance. Tax advice should be obtained to ensure foreign domiciled individuals are clear on what constitutes a taxable remittance.

In advance of a relocation a tax adviser can review your investments/assets and confirm how your affairs can be arranged to ensure you maximise the benefits of this basis of taxation. For example, accounts which generate income can be separated from  pre-residency capital (i.e. savings) accounts before tax residency are triggered. Capital can then be remitted to Ireland for the foreign domiciled individual without a tax charge arising. Foreign income which would otherwise trigger a tax charge if remitted can be left in the overseas account. The Irish Revenue Commissioners deem remittances from 'mixed fund' accounts (i.e. accounts which include both taxable income and pre-residency capital) to come first from income, therefore deeming them taxable.

We appreciate this is a complex area. We explain tax legislation in a simple way so that you can be clear about your obligations. Get in touch with us today to arrange a consultation or to learn more about our services.

Stephanie Wickham

Stephanie is an award-winning international and expatriate tax specialist with over a decade’s experience. She is a KPMG trained Chartered Tax Adviser and Chartered Accountant.

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