The International Comparative Legal Guide To Private Client 2017

Author:Mr John Gill and Allison Dey
Profession:Matheson
 
FREE EXCERPT

1 PRE-ENTRY TAX PLANNING

1.1 In your jurisdiction, what pre-entry estate and gift tax planning can be undertaken?

Irish Capital Acquisitions Tax ("CAT") applies to gifts and inheritances 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 Irish situate property. Non-domiciled individuals are not treated as Irish tax resident 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 (or a beneficiary) becomes resident in the State where the beneficiary (or the disponer) is not Irish resident or ordinarily resident and the gift/inheritance does not comprise Irish situate assets.

1.2 In your jurisdiction, what pre-entry income and capital gains tax planning can be undertaken?

Where an individual is Irish resident and domiciled 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 your jurisdiction, can pre-entry planning be undertaken for any other taxes?

Where an individual is Irish resident and domiciled they will be liable to Irish income tax and capital gains tax ("CGT") on their worldwide income and gains. Therefore, where assets comprise 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.

2 CONNECTION FACTORS

2.1 To what extent is domicile or habitual residence relevant in determining liability to taxation in your jurisdiction?

Domicile is a very significant connecting 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.

The concept of habitual residence does not exist in Ireland and is not defined under Irish law.

2.2 If domicile or habitual residence 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 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.

2.3 To what extent is residence relevant in determining liability to taxation in your jurisdiction?

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 non-Irish-domiciled and being taxed on the remittance basis of taxation as outlined at question 1.2 above). Since 1 December 1999, CAT is charged if either the beneficiary or the disponer is Irish resident or ordinarily resident 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 Irish tax resident if they are:

present in the State for a period of 183 days or more in the tax year (which is a calendar year); or 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.

2.5 To what extent is nationality relevant in determining liability to taxation in your jurisdiction?

Irish nationality does not trigger any tax liability in Ireland.

2.6 If nationality is relevant, how is it defined for taxation purposes?

See question 2.5.

2.7 What other connecting factors (if any) are relevant in determining a person's liability to tax in your jurisdiction?

If assets are regarded as Irish situate under Irish tax legislation (for example, Irish real property), the relevant Irish tax liability will apply.

3 GENERAL TAXATION REGIME

3.1 What gift or estate taxes apply that are relevant to persons becoming established in your jurisdiction?

CAT is a tax imposed on gifts and inheritances ("Benefits") payable by the beneficiary. The current rate of CAT is 33%, subject to tax free thresholds.

CAT is charged on Benefits if:

either the donor or the beneficiary is Irish tax resident or ordinarily resident; or 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 your jurisdiction liable to income and capital gains tax?

An individual's tax residence, ordinary residence and domicile status (as referred to in section 2 above) need to be considered when determining the extent of the individual's exposure to Irish income tax.

Income tax

Individual is resident and domiciled The individual is subject to Irish income tax on his/her worldwide income as it arises. Individual is resident and non-domiciled The individual is subject to Irish tax on foreign income under the remittance basis of taxation. The...

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