Ireland To Tighten Tax Residence Rules

By Editorial 03 May, 2012

Ireland's Minister for Finance Michael Noonan has launched a consultation on possible revisions to the current residence rules for the taxation of individuals.

Announcing the consultation, Noonan said the changes would build upon government efforts to ensure affluent individuals that have strong economic ties to Ireland but are not tax resident, pay a "fair contribution" to Irish coffers.

In Budget 2012, Ireland abolished the 'citizenship condition' for payment of the Domicile Levy, to ensure that individuals could not avoid the levy by renouncing their citizenship. At the time, Noonan announced the tax treatment of so called 'tax exiles' would be placed under constant review.

In line with the position prevailing in many other countries, under Irish tax law, individuals who are tax resident in the nation are taxable on their worldwide income, gains, gifts and inheritances, whilst individuals who are not resident in the country for tax purposes are taxable on Irish source income and gains, on income from employments where the duties are carried out in the nation, and on gifts and inheritances of Irish situated property.

In Ireland, an individual’s residence status for tax purposes for a tax year is determined by reference only to a “day counting” test of the number of days that an individual is present in the State for that tax year (183 days in a tax year or 280 days between the year in question and the preceding year).

In addition to the residence rules, to capture revenues from high net worth individuals who have significant interests in Ireland, the Domicile Levy was introduced to ensure these individuals made a minimum tax contribution to the Exchequer. The levy, as introduced, applied to Irish citizens who were Irish domiciled, with Irish located assets worth in excess of EUR5m (USD6.6m), Irish income in excess of EUR1m in a tax year, and an Irish income tax liability below EUR200,000. The levy is EUR200,000, but any Irish income tax paid in respect of the tax year can be credited against the levy liability. From January 1, 2012, the levy no longer applies solely to Irish citizens.

In line with the recommendations of a 2009 report from the Commission on Taxation, Noonan has launched a consultation to seek input from stakeholders on further revisions. The report recommended that the 183/280 days test for determining the tax residence of an individual should be supplemented by additional criteria, which it said should include a permanent home test and a test based on an individual’s centre of vital interests. These additional criteria are used in a range of other jurisdictions.

The consultation in particular seeks input on:

In seeking views, the government underscored that the proposals, which are being considered for implementation from 2013, should at least maintain receipts, retain Ireland's appeal for inward investment, and be simple to administer.

A comprehensive report in our Intelligence Report series giving detailed information on offshore jurisdictions in tabular form, titled "The Lowtax Offshore Charts: Country Characteristics and Taxation; Residence Guide", is available in the Lowtax Library at and a description of the report can be seen at

Tags: Individuals | Expatriates | Tax | Investment | Ireland | Tax Avoidance | Fiscal Policy | Law | Offshore | Individual Income Tax |


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