1 Pre-entry Tax Planning
1.1 In Ireland, what pre-entry estate and gift tax planning can be undertaken?
Irish Capital Acquisitions Tax ("CAT") is the name for the tax that applies to gifts and inheritances. It applies if either the disponer or the beneficiary is resident or ordinarily resident in Ireland (the "State") or where the subject matter of the gift or inheritance comprises of Irish situate property. A concession applies for nondomiciled individuals so as to treat them as not being tax resident in Ireland until they have been tax resident for five consecutive tax years prior to the year of assessment. (See question 3.1 below.)
Therefore, a gift or inheritance should be made before a disponer becomes resident in the State where the beneficiary is not an Irish resident or ordinarily resident and the gift/inheritance does not comprise of Irish situate assets.
1.2 In Ireland, what pre-entry income tax planning can be undertaken?
Where an individual is resident and domiciled in Ireland they will be liable to Irish Income Tax and Capital Gains Tax ("CGT") on their worldwide income and gains. Therefore, where assets comprise of gains, those assets should be realised before the individual becomes tax resident in Ireland. Separately, where an individual is non-domiciled and becomes resident in Ireland, liability to Income Tax and CGT is limited to Irish source income and Irish gains and other worldwide income and gains to the extent remitted to Ireland (the remittance basis of taxation). Accordingly, an individual, prior to taking up residence in Ireland, could establish separate bank accounts to which accumulated income and gains arising prior to taking up residence would be lodged separately to any future income and gains arising after taking up residence.
1.3 In Ireland, can pre-entry planning be undertaken for any other taxes?
Please see the answer to question 1.2 above.
2 Connection Factors
2.1 To what extent is domicile relevant in determining liability to taxation in Ireland?
Domicile is a very significant connection factor. Where an individual is tax resident in the State, the addition of domicile as a connecting factor will mean that all of the individual's worldwide income and gains are subject to Irish tax, subject to any reliefs under existing double tax treaties.
2.2 If domicile is relevant, how is it defined for taxation purposes?
There is no statutory definition of domicile under Irish Law, it is a legal concept. Every individual is born with a domicile of origin. It is possible for a person either to lose their domicile of origin and acquire a domicile of choice or to lose their domicile of choice and revive their domicile of origin. Ireland is a common law system, whereby in addition to statute, legal principles are derived from case law.
2.3 To what extent is residence relevant in determining liability to taxation in Ireland?
In Ireland, a person's tax liability is determined by the concept of residence. A resident individual's worldwide income and gains are subject to Income Tax and CGT (save if they are not domiciled in Ireland and being charged on the remittance basis of taxation as outlined in question 1.2 above). Since 1 December 1999, CAT is charged if either the beneficiary or the disponer is a resident of Ireland or ordinarily resident in Ireland on the date of the gift or inheritance.
2.4 If residence is relevant, how is it defined for taxation purposes?
Under Irish legislation, a person will be regarded as tax resident in Ireland if they are:
present in the State for a period of 183 days or more in the tax year (which is a calendar year); present in the State for a period of 280 days or more in the current and previous tax year, subject to the provision that where a person is present here for 30 days or less they will not be regarded as resident in that tax year. The other important issue is that of ordinary residence. Under Irish legislation an individual becomes ordinarily resident in Ireland for a tax year after he has been resident in the State for three consecutive tax years. An individual who has become so ordinarily resident in Ireland for a tax year shall not cease to be ordinarily resident until a year in which he has not been resident in the State for the previous three consecutive years.
A person who is ordinarily resident and domiciled but not resident is liable to Irish Income Tax on foreign income (other than foreign earnings) in excess of €3,810 and capital gains.
2.5 To what extent is nationality relevant in determining liability to taxation in Ireland?
Irish nationality does not trigger any tax liability in Ireland. As noted above, the attribution of ordinary residence to an individual may extend liability to Irish tax after emigration.
2.6 If nationality is relevant, how is it defined for taxation purposes?
See the answer to question 2.5.
3 General Taxation Regime
3.1 What gift or estate taxes apply that are relevant to persons becoming established in Ireland?
CAT is a tax imposed on gifts and inheritances ("Benefits") payable by the beneficiary. The current rate of CAT is 30%, subject to taxfree thresholds.
CAT is charged on Benefits if:
(i) either the donor or the recipient is tax resident or ordinarily resident in Ireland; or
(ii) the subject of the gift or inheritance is an Irish situate asset.
A foreign domiciled person is not considered resident or ordinarily resident in Ireland for CAT purposes unless the person was both:
resident for the five consecutive years of assessment preceding the date of the Benefit; and
on that date is either resident or ordinarily resident in Ireland.
3.2 How and to what extent are persons who become established in Ireland liable to income tax?
The income of an individual, in an income tax year, is subject to the charge of Income Tax in Ireland. An individual's tax residence...