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Expat Briefing Editorial Team, 29 November, 2013
Once upon a time, Ireland was a country that people tended to move from rather than to. That all changed with the emergence of the Celtic Tiger economy and, while Ireland has endured some tough times recently, strong foreign investment from the United States in particular means that demand for skilled labour remains strong. In this briefing we give the essential facts about Ireland and run the rule over its work permit rules, which were recently tweaked.
Geography and Climate
The island of Ireland lies to the west of England and Wales. The Irish Republic (Eire) occupies 83 percent of the land area of the island, which is just over 70,000 sq km.
In terms of weather conditions, one certainly doesn’t move to Ireland to top up one’s sun tan! Often the first landfall of Atlantic low pressure systems, Ireland experiences more than its fair share of wind and rain, and rainfall can be as much as 2,000mm annually. On the other hand, snow and frosts are rare when compared with mainland Europe, or even the British Isles, and the mild, temperate climate has produced a land of verdant hills and pastures – they don’t call it the Emerald Isle for nothing!
Population, Language and Culture
Eire has a population of over 4.7 million (July 2013 est.); the capital, Dublin, has a population of more than a million. Irish is the official language, but in practice English is the everyday language. The history and culture of the Irish are too well-known to need description, but it is worth remarking that Dublin has evolved over recent years into a lively and cosmopolitan city with a thriving cultural life.
Apart from Dublin, the main cities are Cork, Galway and Limerick. There are international airports at Dublin, Shannon and Cork. Dublin serves more than sixty foreign destinations, the vast majority of which are in the EU.
The Irish economy has been prosperous, due at least in part to the energetic pro-business stance of successive governments, but did not escape the global downturn in 2008 and was one of the EU countries worst hit by the economic recession in 2009. After enjoying GDP growth rates of 4.5-6 percent between 2003 and 2008, the economy shrank by 7 percent in 2009. In late 2010, with banking system close to collapse and the budget deficit in double figures, the Government had little choice but to seek financial assistance from the EU and the IMF, resulting in an EUR85bn bail-out. Nevertheless, Ireland fought hard in the face of EU pressure to retain its favourable corporate tax rules, and with one of the lowest business tax rates in the EU (12.5 percent), growth returned much quicker than expected – the economy grew by 1.3 percent in 2011 – and the country is set to exit its bail-out programme in December 2013 having achieved the targets set by the “troika” of lenders.
Ireland remains a magnet for investors seeking a base in the EU, and remained so even in the depth of the debt crisis. The country is especially favoured by US companies, as some rather surprising statistics attest. According to the American Chamber of Commerce in Ireland, collectively US companies have USD204bn (GBP125bn) in foreign direct investment (FDI) in Ireland. This equates to more than the total invested in the much hyped BRIC economies (Brazil, Russia, India, China) or all of South America. During the decade to 2010, US investment in Ireland was three times that invested in China, and the US accounted for 74 percent of Ireland's inward investment in 2012. Ireland is the top location worldwide for US FDI in the chemicals sector, which includes pharmaceuticals and second worldwide in the information sector. Today, over 115,000 people are directly employed in over 700 US firms in Ireland, and US firms contribute EUR3bn (GBP2.5bn) to the Irish Exchequer in taxes and an additional EUR13bn in expenditure to the Irish economy in terms of payrolls, goods and services employed in their operations.
As mentioned, pharmaceutical research and information technology are two of Ireland’s most important industries, providing as they do highly-skilled and well-paid jobs. Other important sectors are finance and ancillary services, high-tech and light manufacturing and food processing.
Ireland’s currency is the euro, which became legal tender in January 2002 after a three-year transitional period.
In Ireland the taxation of individuals is based on a mixture of the concepts of residence and domicile.
As in many countries, residence is consequent on presence in Ireland for more than half of a tax year, or for 280 days in two consecutive years. An individual's domicile is in the country where he maintains his permanent home, in the country where he regards himself as belonging. Domicile in Ireland is acquired from an Irish-domiciled father, but can be changed to another country by establishing a life there. Resident foreign employees will thus not normally be domiciled in Ireland.
An individual resident and domiciled in Ireland pays tax on his world-wide income; an individual resident but not domiciled pays tax on his foreign income only if it is remitted to Ireland. A non-resident individual pays income tax only on Irish-sourced income, and is liable to capital gains tax only on gains arising in Ireland or remitted to Ireland, unless he is domiciled in Ireland in which case he is liable on all capital gains.
In the 2009 budget, the residence rules were tightened so that all visits to Ireland by those non-resident for tax purposes will be counted against their permitted days in the country.
The standard rate of Irish income tax for individuals in 2013 is 20 percent on the first EUR32,800 of taxable income, rising to 41 percent on the balance. For a married couple (one earner), the 20 percent band is increased to EUR41,800, and if there are two earners, to EUR65,600.
Income is comprehensively defined and includes employment income and benefits, income from property, income from a trade or profession, and investment income.
Curbs on tax relief introduced in the 2009 budget mean that the tax rate of Ireland’s highest-paid taxpayers cannot fall below 30 percent (20 percent previously). The entry point to the restriction occurs at adjusted income levels of EUR125,000 with the full restriction applying at EUR400,000.
A Universal Social Contribution (USC), applies to all employed and self-employed individuals if their annual income exceeds EUR10,035. The USC rates range from 2 percent for income up to EUR10,036, 4 percent from EUR10,037 to EUR16,016 and 7 percent on income above EUR16,016. The maximum rate for those aged 70 or over and for medical card holders is 4 percent.
Capital gains tax of 30 percent is charged on gains derived from the disposal of assets.
On July 1, 2013, a new property tax, known as the Local Property Tax, or LPT, was introduced. The LPT is self-assessed and charged at 0.18 percent of the market value of residential properties worth up to EUR1m, and at 0.25 percent on any excess value over EUR1m.
Other taxes include value-added tax, which has a standard rate of 23 percent, and stamp duties on residential and commercial property purchases.
As the old adage goes, what goes up, must come down. And never a truer word was spoken in relation to the property market in Ireland. The scale of the property boom in the years prior to 2008 was unprecedented. From 1996 to 2006, the price of second-hand houses in Ireland rose by 334 percent on average. In Dublin, the boom was even more amplified, with average prices rising by 391 percent over the same period. But the bust, when it came, was also spectacular. By the fourth quarter of 2012, the national average asking price was just under 55 percent below its 2008 peak, according to Irish property website daft.ie.
As we draw towards the end of 2013, there are more signs that the Irish property market has finally bottomed out. For instance, in a November 2013 report, Moody’s, the influential ratings agency, declared that the Irish property crash was “over,” and that prices were beginning to stabilize. However, it predicted that it would take many more years before the market was back to full health, given high levels of household debt.
However, in recent months, prices for houses and apartments in Dublin have begun to rise strongly, largely due to supply constraints. The Residential Property Price Index showed prices in the city rose by 2.3 percent between September and October 2013, and by November 2013 house prices in Dublin were 15 percent higher than they were a year earlier.
Prices for a one-bedroom apartment in Dublin start at about EUR120,000, and you can expect to pay at least EUR150,000 for a two-bedroom flat in the capital. Two-bedroom houses in Dublin are EUR160,000 upwards, while three-bedroom properties currently sell for EUR190,000 to EUR300,000, depending on location.
House prices in other regions are somewhat lower.
Nationwide, the average home price stood at EUR171,500 in the second quarter, 4 percent down from a year earlier.
In general, non-EEA nationals must have a permit to work in Ireland. EEA and Swiss nationals do not need an employment permit.
The EEA consists of the 28 European Union member states together with Norway, Iceland and Liechtenstein.
Under the Employment Permits Act 2003 and the Employment Permits Act 2006 there are four types of employment permits: work permits, Green card permits, spousal/dependant work permits and intra-company transfer permits. The rules for each type of permit are outlined below.
Work permits are available for occupations with an annual remuneration of EUR30,000 or more. They are normally granted for two years initially, and then for a further 3 years, after which a work permit may no longer be needed.
Work permits for jobs with an annual remuneration below EUR30,000 will only be considered in exceptional cases. These exceptions include:
Either the employer or employee can apply for a work permit, based on an offer of employment. However, a “labour market needs test” is required with all work permit applications made by the employer. This test requires that the vacancy must have been advertised with the Department of Social Protection employment services/EURES employment network for two weeks and in either a local newspaper or jobs website for three days. This is to ensure that, in the first instance an EEA or Swiss national cannot be found to fill the vacancy. If the employer has been unable to find an EEA or Swiss national, they must contact their local employment services office within four weeks to ask for a decision to be made on the vacancy. In response to the employer’s request, the employment services office will decide whether a work permit is justified to fill the vacancy.
The employer is prohibited from deducting recruitment expenses from the employee's pay or retaining the employee's personal documents.
All work permit holders enjoy the same employment rights as Irish or EEA citizens for the duration of the employment permit.
The green card permit is an employment permit for most occupations with annual remuneration of over EUR60,000 or certain occupations where there are skill shortages. It is also available for a restricted list of occupations with annual remuneration of EUR30,000 to EUR59,999. The eligible occupations list was revised in April 2013, and now includes the following posts:
The green card permit is issued for two years and a renewal permit is not required. However, Green card holders must remain with their first employer for at least 12 months before changing jobs.
Holders of a Green card permit can have their spouses, civil partners and families join them immediately.
Employers or employees can apply for a green card permit, and there is no need for an employer to complete the labour market needs test. However, an employment permit will not be granted to companies if the granting of the permit would mean that more than 50 percent of the employees would be non-EEA nationals.
Spousal/Dependant Work Permit
Prior to June 1, 2009, there was a separate work permit application process for spouses, civil partners and dependants with more relaxed eligibility criteria. For example, applicants could apply for any vacancy and employers did not have to advertise the job with the DSP and EURES beforehand. Also, fees for first application and renewals were waived.
Applications made since June 1, 2009 however, are subject to rules similar to those for ordinary work permits in that they are subject to the labour market needs test and are subject to fees. Furthermore, they will not be considered for occupations listed as ineligible for work permits, which includes the following jobs:
A work permit or green card applicant must have the qualifications, skills and experience required for the job and must be directly employed and paid by an employer. Green card applicants must also have a job offer for at least two years. Work permit and Green card applications from recruitment agencies and other intermediaries are not acceptable under the scheme. The employer also must be trading in Ireland, registered with the Revenue Commissioners and with the Companies Registration Office.
Intra-Company Transfer Permits
The Intra-Company Transfer Employment Permit is designed to facilitate the transfer of senior management, key personnel or trainees who are foreign nationals from an overseas branch of a multinational corporation to its Irish branch. These permits are considered invaluable in the initial establishment of a foreign direct investment company.
The main attraction of this permit is that it facilitates the temporary injection of corporate or HQ personnel and also provides for such employees to stay on the foreign payroll. This can be desirable for the employee as it can ensure they retain certain benefits (e.g. foreign pension contributions).
An intra-company permit cannot, however, be used to permanently substitute the filling of a vacancy which otherwise would have resulted in a job opportunity in the domestic labour market.
Furthermore, in relation to employees remaining on a foreign payroll, the Government’s preference is for all permit holders to be salaried employees and paid under an Irish Employment contract. It therefore applies strict criteria in situations where employees remain employed by a foreign-based employer.
Intra Company Transfer Employment Permits are strictly limited to the following eligible positions:
Senior Management refers to an employee primarily having one of the following functions:
Key personnel refers to persons working within an organisation who possess specialist knowledge essential to the establishment’s service, research equipment, techniques or management.
At the cessation of the employment or when the permit expires the employee/transferee in question must return to their country of origin. However, after holding an Intra-Company Transfer Employment Permit for one year an employee may apply for an alternative employment permit e.g. a Green card or a work permit.
In terms of the criteria relating to the employer i.e. the ‘hosting’ Irish branch: