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Income Tax

By Noone Casey

Income Tax Rates

Bands of taxable income

 

2023

2022

Single/Widowed(Without dependent Children)
  • €40,000 @ 20%
  • €36,800 @ 20%
 
  • Balance @ 40%
  • Balance @ 40%
     
Single Parent / Widowed Parent (With dependent children)
  • €44,000 @ 20%
  • €40,800@ 20%
 
  • Balance @ 40%
  • Balance @ 40%
     
Married couple/civil partners (one income)
  • €49,000 @20%
  • €45,800 @20%
 
  • Balance @ 40%
  • Balance @ 40%
     
Married couple (two incomes)
  • *€80,000 @ 20%
  • *€73,600 @ 20%
 
  • Balance @ 40%
  • Balance @ 40%

*In the case of a married couple with two incomes the standard rate band is €80,000 (made up of €49,000 plus an amount of €31,000 which may be transferred between spouses, if one spouse earns less than €31,000 there is a loss of some of the benefit of the higher band).

Income Exemption Limits

    2023
     
65 years and over

 


   
     
Single/Widowed   18,000
Married Couples   36,000
     
               
Tax Credits @ 20%   2023 2022
Single  

1,775

1,700

Married/Civil Partners(Jointly assessed)  

3,550

3,400

Widowed Person in year of bereavement/surviving civil partner  

3,550

3,400

Widowed person no children (additional credit but not in the year of bereavement)  

540

540

Widowed person/single person with dependent child (additional)  

1,650

1,650

Additional tax Credits in years following bereavement      
Year 1  

3,600

3,600

Year 2  

3,150

3,150

Year 3  

2,700

2,700

Year 4  

2,250

2,250

Year 5  

1,800

1,800

Home carer’s credit* max

1,700

1,600

Incapacitated child max

3,300

3,300

Dependent relative

 

 

(where income of dependent relative is less than €14,060 for 2016)

 

245

245

Age credit single

245

245

  married

490

490

Blind person Single

1,650

1,650

  Married one spouse blind

1,650

1,650

  Married both spouses blind

3,300

3,300

Additional Credit Guide Dog  

165

165

PAYE    1,775  1,700
Earned Income Credit (other than income qualifying for a PAYE credit)   1,775  1,700
Deduction from Total Income;

 

 

Allowances @ 40%

     
Allowance to employ a carer for an incapacitated person max

75,000

75,000

*Relief in respect of the cost of maintaining a guide dog (max €825 @ 20% = €165) may be claimed under the heading of Health Expenses.

Earned Income Credit
The Earned Income Credit of €1,775 is available to individuals
earning self-employed, trading or professional income. For company directors, the credit will apply to proprietary directors as their earnings are not taken into account for the purposes of the Employee (PAYE) Tax credit. Where an individual has earned income which qualifies for Employee (PAYE) Tax Credit and Earned Income Tax Credit, the combined value of both tax credits cannot exceed €1,775.

 

Residence, Ordinary Residence and Domicile

An individual is liable to Irish Income Tax(“IT”) on his/her worldwide income provided he/she is resident and domiciled for the tax year, subject to any specific relief under the relevant Double Taxation Agreement.  To be resident an individual must be present in the state for:

  • 183 days or more in that tax year, or
  • 280 days in that tax year and the preceding tax year, subject to a minimum of 30 days in each year.

Presence in the State at any time during the day will count towards determining residence for tax purposes.

An individual is “ordinarily tax resident” if he/she  is tax resident for three consecutive tax years, where they cease to be resident they remain ordinarily resident for three years after the tax year of departure and can therefore remain taxable in Ireland.  An ordinarily tax resident individual is chargeable to Irish income tax on worldwide income with the exception of profits of a trade or profession carried on abroad.  Foreign investment income exceeding €3,810 in the tax year will be subject to Irish tax.

Domicile can be a difficult concept but broadly means the country that an individual considers as his/her natural home.

An Irish resident or ordinarily resident and domiciled individual will also be liable to Irish Capital Gains Tax on their worldwide gains. This leaves individuals ceasing to be Irish resident exposed to Irish tax on investment income and Capital Gains Tax for three years after the tax year of departure.

Despite the reference to three years in the paragraph above, an anti avoidance provision imposes Capital Gains Tax on individuals who dispose of shareholdings during a period of temporary non-residence, described as absences of less than 5 years.

Split Year Treatment

An individual who arrives in Ireland with the intention of becoming resident in the following tax year is liable to income tax on employment income only from the date of arrival to the following 31 December. Similarly, a resident individual who leaves Ireland other than for a temporary purpose is liable to income tax on employment income up to the date of departure only. This “split year treatment” applies to employment income only.

Relief from a liability to Irish Income Tax may also arise under provisions of Double Taxation Agreements between Ireland and other states.

Trans Border Workers

Irish resident individuals employed abroad in a jurisdiction with which Ireland has a double taxation agreement can exclude income on employment earned abroad from Irish tax and the Universal Social charge (USC). The employment abroad must be for a minimum period of 13 weeks and foreign tax must e paid on that income, and the duties must be performed wholly abroad. The individual must be present in Ireland for a minimum of one day a week during the period of qualifying employment. The relief does not apply to State or Semi State employments.

An individual will be deemed to be present in the State if he/she is present at any time during the day.

Remittance Basis for Non-Domiciled Individuals

Individuals domiciled outside Ireland are entitled to a “remittance basis” of assessment in Ireland on investment income and income from employment duties exercised outside Ireland under a foreign contract – i.e. they are only subject to Irish IT on income brought into the country.
Where an individual who is entitled to the remittance basis has transferred money to his/her spouse that individual will be taxed on the transfer.


Income:

Fully Taxable:

All Irish source income, including the Irish workdays of a foreign employment and capital gains, are taxable in Ireland regardless of whether they are remitted or not.


Not Taxable:

Foreign employment income (non-Irish workdays) and investment income are taxed only where remitted.

Capital:

Irish citizens who are not ordinarily resident but who are resident are taxed on foreign capital gains.
Non-Irish domiciled individuals are taxable on foreign capital gains only to the extent that they are remitted to Ireland. CGT applies to all Irish specified assets regardless of residence, which includes all Irish land and buildings as well as certain other assets such as mineral rights.

Special Assignment Relief Program SARP

The main conditions to qualify for the new relief are that:
• The individual must have been a full-time employee of a company incorporated and resident in a DTA State for six months (2015-2025).
• For 2015-2025 the requirement is to perform duties for 12 months from the date of arrival.
The relief is of value to new workers who come to or return to Ireland or returning workers who have been outside Ireland for at least five tax years. While a number of conditions apply in order to
obtain the relief, it is not limited to either foreign employments or non-Irish domiciles.
Subject to conditions, the relief is available for employees arriving in Ireland and is available for five consecutive tax years.
The relief allows a basic salary and certain cash allowances to be excluded from tax. The relevant amount is valued at 30% of basic salary and allowances between upper €1,000,000 and lower (€100,000) thresholds.
Note the lower threshold increased from €75,000 to €100,000 since 1 January 2023.
Certain key items of compensation are excluded:
• Benefits in kind including company cars and preferential loans
• Termination/ex-gratia payments
• Bonus payments whether contractual or otherwise
• Stock/equity options and
• Other share based remuneration
However, the above emoluments may be included in assessing the relief once the minimum threshold has been established.
The relief is only for IT and does not apply for USC or PRSI.
It is possible for employees and employers to obtain relief through the PAYE system so that the relief can have an immediate impact rather than waiting until the tax year has ended to make a claim.
Employees making a claim automatically become chargeable persons for the year of claim which means a tax filing requirement. Employers will also have a reporting requirement to Revenue for various details about such employee claims, and for 2015- 2025 claims the employer is required to report within 90
days of the individual arriving, in addition to the annual reporting.
Making a claim under the new SARP provisions means that a deduction is not claimable where another relief is claimed by the employee – e.g., Split Year Relief, Trans-border Relief, Foreign Earnings Deduction Relief, R&D Incentive and the limited remittance basis that still exists.

Foreign Earnings Deduction(“FED”)

A deduction is available for employees working temporarily overseas in the following countries (known as “relevant states”):
Brazil, Russia, India, China,South Africa. Algeria, Democratic Republic of Congo, Egypt, Ghana, Kenya, Nigeria, Senegal, Tanzania. Japan, Singapore, South Korea, Saudi Arabia, UAE, Qatar, Bahrain, Indonesia, Vietnam, Thailand, Chile, Oman, Kuwait, Mexico, Malaysia Colombia.
The deduction is subject to a maximum claim of €35,000 (i.e., a tax refund of up to €14,000).
In order to receive this relief, the employee must spend at least 30 days working in a relevant state in a tax year or in a continuous 12-month period. These “qualifying days” must form part of a period
of at least three consecutive days including travelling time spent working in the relevant state (previously four consecutive days excluding travelling time).
The deduction does not apply to employees paid out of the public revenue of the State e.g., civil servants, Gardaí and members of the Defence Forces or individuals employed by any board,authority or similar body established by or under statute.
The deduction is calculated based on the amount of time spent working in the relevant state and is calculated according to the following formula:

D*E/F

  • D is the number of qualifying days in the tax year
  • E is the net employment income in the tax year (including share awards and share option income but excluding benefits in kind, termination payments and restrictive covenants)
  • F is the number of days in the tax year that the individual held the office or employment

An example of how this deduction works is as follows. An individual who is tax resident in Ireland spends 120 qualifying days working in Brazil. The employment income for the year amounts to €100,000. The Foreign Earnings Deduction is calculated as follows.


(120*X €100,000) / 365

Specified amount = €32,877

Total employment earnings            €100,000
Less deduction                                              €32,877
Taxable Income                                            €67,123

The deduction is claimed at the end of the tax year when making an annual return of income for that year. A deduction will not however be claimable where another relief is claimed by the employee e.g. split year relief, Trans-border Relief, Special Assignment Relief Programme, R&D Incentive and the limited remittance basis that still exits.

Seafarer Allowance

An allowance of €6,350 from employment income is available to seafarers provided they are on an international voyage(s) i.e. a voyage beginning or ending in a port outside the State for at least 161 days in a tax year. This allowance cannot be claimed in conjunction with the split year treatment. The allowance is also available to crews of vessels servicing drilling rigs in Irish waters.

Fisher tax credit

A tax credit of €1,270 is available each year from 2017  to any person engaged in fishing on board a fishing vessel as long as they are Irish tax resident and spend at least 80 days at sea actively engaged in sea-fishing. It is not possible to claim this credit and the seafarer allowance to shelter the same income.