General

All forms of direct taxation in Ireland operate on a self assessment basis. Self assessment was introduced during the 1988/ 1990 period and has been a tremendous success.

Direct Taxation

Income Tax

Income tax is charged on the taxable income of individuals, partnerships, and on Republic of Ireland property income of non-resident individuals and companies. The government fixes the tax rates in its annual budget.

This standard rate of tax is also the rate of withholding tax deductible from certain types of income paid to foreign investors, for example, rents and interest. The overall income tax liability of an individual is calculated at the end of each income tax year by reference to his total income less deductions.

The Republic of Ireland tax year ends on April 5th and an individual's liability to income tax is assessed by reference to this date.

The income tax position of non-residents or foreign domiciliaries is ruled by the concepts of domicile and residence.

Domicile, Residence and Ordinary Residence
Domicile is a concept of common law and is not defined in statute. Under Irish law, an individual can only have one domicile at any one time. An individual acquires a domicile of origin at birth based on the domicile of his parents. An individual may renounce his domicile of origin and acquire a domicile of choice. This will involve making permanent ties with the country where the domicile of choice is being established.

An individual is Resident in Ireland for a particular tax year if:

*he is present in the State for 183 days or more in that tax year, or

*he is present in the State for 280 days or more in that tax year and the preceding tax year together

Irish tax law also entitles an individual, who is not resident for a tax year under either of the above criteria, to elect to be treated as a resident for that tax year if he can satisfy the Irish authorities that he will be resident for the next tax year.

An individual is Ordinarily Resident in the State for a tax year if he has been regarded as resident in the country for each of the preceding three tax years.

An individual who is resident, ordinarily resident and domiciled within the state for a particular tax year is liable to all forms of Irish taxation on world-wide income.

Non-residents and foreign domiciliaries may, however, be exempt from some Irish taxation on the grounds of foreign domicile, residence or ordinary residence.

The retention of foreign assets, family ties, and foreign citizenship, coupled with return visits to a homeland and the execution of an overseas will, assists in the retention of a foreign domicile.

There are eight possible permutations of domicile, residence and ordinary residence in the Republic of Ireland and great care must be taken to obtain professional advice as to the Republic of Ireland taxation consequences of an individual investing in, moving to, or acquiring a residence in the Republic of Ireland.