Split-Year Treatment in Ireland | Irish Tax Relief | Expat Taxes

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November 25th, 2022
Written by: admin_et

Split-Year Treatment in Ireland | Irish Tax Relief | Expat Taxes

Moving to or from Ireland? This is what you need to know about split-year treatment 

If you’re moving to or from Ireland, it’s always a good idea to consider your tax situation ahead of time. Especially as an expat, having your affairs in order can save a lot of headaches later. Moving abroad is already stressful — the less energy you need to spend on figuring out your taxes, the better. 

But what exactly is your tax liability if you move to or from Ireland in the middle of the tax year, and more importantly, what is split-year relief? This exact question causes a lot of confusion for many people, but luckily, we’re here to help clear it up for you!

Firstly, when is the tax year in Ireland? 

In Ireland, the tax year runs from 1 January to 31 December. Irish tax residents are entitled to full standard rate tax bands and tax credits.

If you are required to lodge an Irish income tax return you have until 31 October of the following year to do so.  However it’s important to be aware that at that point you settle:

  • Your tax liability for the preceding year; and
  • You are required to make a preliminary tax payment for the next tax year

For example: Under self-assessment (for those who are self-employed), you will need to pay 2023 Preliminary Tax by 31 October of 2023. You can base this payment on:

  • 90% of your expected 2023 tax liability; or
  • 100% of your 2022 liability

Interest charges can arise where preliminary tax is underpaid so it is important to ensure a sufficient payment is made to meet either of the above criteria. 

As an expat, when am I considered to be tax resident in Ireland?

Even though some exceptions will apply, you are generally resident in Ireland for tax purposes if you are present in Ireland for:

  • 183 days or more (during a single tax year)

or

  • 280 days or more in total (taking both the current tax year plus the preceding tax year into account)

As an expat, it’s always worth speaking to a tax expert about your tax liability before making assumptions based on Revenue’s guidelines. 

What is split-year treatment?

Split year treatment protects an employee who is tax resident in two countries in the same tax year when moving to Ireland to work OR moving from Ireland to work overseas. 

For example, if you are employed and move to Ireland from abroad, you’ll likely be receiving employment income from a foreign source until the date of your move (or until the termination of an existing work contract). Likewise, if you move away from Ireland, you’ll be receiving foreign employment income in a year where you remain Irish tax resident. 

N.B. Irish tax residents are taxable on worldwide income - i.e. income from a foreign employment contract remains taxable in Ireland unless a relief applies such as split year treatment.

Split-year treatment is a tax relief designed to ensure you don’t end up paying tax to two separate countries on the same income. Split-year treatment only applies to income generated from your employment, it does not apply to any non-employment income.

If eligible for split-year treatment, you can avail of tax credits on a cumulative basis

As an expat, how can I qualify for split-year treatment?

In general, your eligibility for split-year treatment will depend on whether you are an Irish tax resident when you arrive in or leave Ireland and your intention at the time of your move. 

Some general guidelines are as follows:

If you’re leaving Ireland to become an expat overseas:

To be considered eligible for split-year treatment, you must be resident in Ireland during the year of your departure and intend on not being resident again in the year following your departure. You must be leaving Ireland for more than a temporary purpose.

To prove that you are leaving Ireland permanently , a letter from your employer or a copy of your work contract may be required. If split year relief is granted, your post-departure foreign employment income is not taxable in Ireland.

If you’re moving to Ireland as an expat:

If you are moving to (or back to) Ireland from abroad, you can claim split-year treatment in the year you arrive. This means that you will only be treated as a resident from your date of arrival i.e. your employment income is only taxable from this date, pre-arrival employment income is not.

To qualify for split year treatment, you will need to be resident in Ireland for the following year. To prove your intention to remain in Ireland following the year of your arrival, again, a copy of your employment contract or letter from your employer may be required. 

As we’ve already mentioned, you can also avail of full tax credits on a cumulative basis under split-year treatment. 

Note: If you are moving to Ireland for the first time, it’s important to note that you will require a PPSN number to get set up with the Irish tax system. You must be living in Ireland before you can apply for a PPSN number and will require formal ID and proof of address.

How Expat Taxes can help:

The Irish system has so many different rules, guidelines, and exemptions so it can be easy to get overwhelmed before a move abroad. This is why we help people moving to and from Ireland get their tax affairs in order and make their move as stress-free as possible.

Whether you’re hoping to get some clarity on your tax liability ahead of time, or you’ve already moved abroad and are looking for expert tax advice in a hurry — we’re here to help. Our one-on-one virtual consultations cover everything from specific tax rules to remote working and other unique personal circumstances. 

All you have to do is book in at a time that suits you and we’ll help you regain control of your taxes, the easy way!

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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