Income Tax

• Income Tax Rates
• Bands of taxable income
• Income Exemption Limits
• Income Levy
• Tax Residence
• Split Year Treatment
• Cross Border Workers
• Remittance Basis of Assessment
• Special Assignment Relief Program
• Seafarer Allowance

Income Tax Rates

Bands of taxable income

*In the case of a married couple with two incomes the standard rate band is €70,600 (made up of €44,300 plus an amount of €26,300 which may be transferred between spouses, if one spouse earns less than €26,300 there is a loss of some of the benefit of the higher band).

top

Income Exemption Limits

The relevant exemption limits are increased by €575 for each of the first two dependent children and by €830 for the third and any subsequent dependent children.

top

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

Job Plus Scheme

Cash payments made to qualifying employers to offset the cost
of employing individuals who have been long term unemployed
are exempt from income tax or corporation tax. The
Department of Social Protection will pay the incentive to the
employer monthly in arrears over a two-year period as follows:
€7,500 for each person over 25 years old recruited who
has been unemployed for more than 312 days in the last
18 months.
€10,000 for each person under 50 years old recruited who
has been unemployed for more than 936 days in the
previous 40 months.
Sepatate rules apply for those under 25 or over 50 years old.

Earned Income Credit
The Earned Income Credit of €1,350 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 €1,650.

Relief for Long Term Unemployed Starting a Business

Where an individual who has been unemployed for 15 months and has been in receipt of jobseekers benefit, jobseekers allowance or a one parent family credit, and where that individual starts a new business, the individual is entitled to claim relief from income tax on the first two years of trading capped at a value of €40,000 per annum. USC and PRSI will continue to be payable.

The new business must commence during the period 25 October 2013 to 31 December 2018, but will exclude trades previously carried on by other people to which the qualifying person has succeeded, or activities which were previously carried on by other people.

The qualifying period is a period of 24 months from the commencement of business, it applies for the period of assessment falling wholly or partly in the qualifying periods and not therefore in the first 2 years of assessment.

The relief will be determined by a formula equal to the assessable profits or €40,000 if less, this is multiplied by the number of months or % of months within a year of assessment falling within the qualifying period as a numerator, and the number of months in the year of assessment as a denominator.

The relief applies in priority to losses forward or capital
allowances. Pay and file obligations will apply to the individual
applying for the relief.

top

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.

top

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.

top

Cross 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 be 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.

top

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 tax 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 post 1 January 2013.

For Non-domiciled individuals

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 are taxable on foreign capital gains only to the extent that they are remitted to the country.
• Capital gains tax applies to all Irish specified assets regardless of residence, these include all land and buildings in the state as well as certain other assets for example mineral rights.

Special Assignment Relief Program SARP
On 1 January 2012, a previous form of SARP was updated and a
new form introduced, initially for 2012 to 2014, which has since
been extended to 2020. The main conditions to qualify for the
new relief are that:
• The employee must be resident in the State (and not
resident elsewhere) for 2012-2014 relief claims,
• the individual must have been a full time employee of a
company incorporated and resident in a DTA State for six
months (2015-2020) versus twelve months (2012-2014) prior
to arriving in the State.
• For 2012-2014 duties must be performed in the State for 12
months from date of becoming resident, for 2015-2020 the
requirement is to perform duties for twelve 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,
previously €500,000) and lower (€75,000) thresholds.

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 to the tax year end to make a claim. Employees
making a claim however 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 surrounding such employee claims, and for 2015-
2020 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.

Tax Tip

• In addition to the exclusion of a relevant amount from tax
  an employer will also be able to bear the cost of certain
  items for a relevant employee on a tax free basis, such as:
• One return trip for the employee and family to the
  overseas country they are connected with; plus
• Primary and/or post-primary school fees of up to €5,000
  per annum per child where the school has been approved
  by the Minister of Education.

Foreign Earnings Deduction(“FED”)

A deduction is available for employees working temporarily
overseas in the following countries (known as “relevant states”).
From 2012, this means Brazil, Russia, India, China and South
Africa. From 2013, included are Algeria, Democratic Republic of
Congo, Egypt, Ghana, Kenya, Nigeria, Senegal and Tanzania.
From 2015, additions are Japan, Singapore, South Korea, Saudi
Arabia, UAE, Qatar, Bahrain, Indonesia, Vietnam,
Thailand,Chile, Oman, Kuwait, Mexico and Malaysia. From 2017,
Colombia and Pakistan have been added.

The deduction is subject to a maximum claim of €35,000 (i.e. a
tax refund of up to €14,000) and applies until 2020.

In order to receive this relief, the employee must spend at least
30 (60 in 2014, 40 in 2015 and 2016) 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.

top

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.

top

Fisher tax credit

A tax credit of €1,270 is available each year from 2017 to 2021 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.