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Finance

How to Pay Low Taxes in Ireland as a Non-dom

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There are plenty of good reasons to move to Ireland. It’s a vibrant and friendly country and, in recent times, one of the most economically successful in the world. 

If you’re a high-net-worth individual, Ireland’s Non-dom scheme is a legal method to live there and structure your affairs to pay low taxes. 

In this article, we unpack Ireland’s Non-dom program by examining how it works and its lifestyle and taxation benefits. 

Nomad Capitalist is a turnkey solution for offshore tax planning, dual citizenship, asset protection, and global diversification. 

Bear in mind that this article is not professional tax advice. It will help you decide if Ireland and its Non-dom program are broadly of interest. If you need a detailed tax planning strategy based on your individual needs, you can find out more here

Why move to Ireland?

Ireland has a rich, diverse culture, including music, sport, Celtic myth, literature, excellent cuisine, music and dance, and language. It is a forward-looking country influenced by history, religion, and tradition.

The island of Ireland comprises the Republic of Ireland, a sovereign country and full EU member, and Northern Ireland, which is part of the United Kingdom. The modern Irish state was founded in 1922 after a period of colonial rule by Britain dating back to the 12th century. 

With a rural population reported at 36% in 2022, the urban population is divided between cities Dublin, Cork, Limerick, Galway, and Waterford. The capital Dublin’s metropolitan area, accounts for most of this, with a population of around 1,270,000.  

Those who love nature will not be disappointed. The county has numerous beauty spots that famously include the Cliffs of Moher, Giant’s Causeway, The Burren, and Killarney National Park, to name but a few.  

Ireland has long been a significant livestock and crop producer and has evolved into a highly developed knowledge economy, with software, technology, pharmaceuticals, financial services, and agribusiness the key drivers. 

At 12.5%, Ireland has one of the lowest corporate tax rates in Europe, and this, allied to its skilled, tech-savvy workforce, has attracted large amounts of Foreign Direct Investment – US$1.49 billion in 2022. 

Ireland’s tech sector employs close to 165,000 people and comprises ‘big tech’ players like Microsoft, Apple, Google, Facebook, and LinkedIn. Its low unemployment rate of 4.2%, representing virtually full employment, indicates its economic progress.

Ireland ranked 2nd in the 2023 IMD World Competitiveness Rankings. The ranking reflects Ireland’s strengths in terms of its skilled labor market, its ability to attract inward investment, and the institutions that make it a good place to do business.

Ireland in numbers: 

  • Current population – 5,056,935.
  • Population that identifies as Catholic – 69% (3.5 million).
  • GDP US$ 556.23 billion by the end of 2023 (5.5% growth).  
  • People immigrating – 141,600 (to April 2023). 
  • Non-Irish citizens – 12% of the population. 
  • Most prominent non-Irish groups – Polish, UK, Indian, Romanian, and Lithuanian citizens.,

Is Ireland a tax haven?

It depends on who you ask. The Irish Government completely rejects the tax haven label. Still, its tax environment favours certain corporations and allows them to reroute global profits to Ireland via its tax treaty network. 

In simple terms, foreign corporations can avoid Irish taxes on Irish assets and intellectual property held there through transfer pricing, base erosion, and profit-shifting tools. This means that the effective rate can be in the low single digits. 

This policy famously resulted in Apple receiving US$74 billion in global receipts from 2009 to 2012 and paying less than 2% tax to Ireland.

However, the label tax haven brings to mind zero-tax places like Monaco, Bermuda, the Bahamas, and the UAE, which some argue is an unfavourable comparison. Ireland has somewhat unwillingly bowed to international pressure, especially from the OECD, to endorse a global minimum rate of 15% for multinationals, which comes into force in 2024. 

The good news is that it will only apply to certain companies, and some will still get the 12.5% rate. The country remains hospitable to those who want to establish corporations, mainly research and development start-ups, who can avail of a tax credit worth 25% of qualifying expenditure and the corporation tax trading deduction available for related spending. 

Ireland also allows special-purpose vehicles (SPV) – a subsidiary created by a parent company to isolate financial risk – to be established there to reduce taxes. At the end of Q2 in 2023, there were 3,364 SPVs, with combined assets of €1,087.6 billion. 

With no official requirement for multinationals to provide records of turnover, the subsidies they receive, profit made, or taxes paid, Ireland’s requirement for little or no financial transparency, for some corporations, is an attractive one.  

At 52%, Ireland’s marginal personal tax rate for the highest earners is relatively high by international standards. At standard rates, income up to a specific limit (€36,800 in 2022) is taxed at 20% and above that at the higher rate of 40%.

Ireland’s Non-dom Program 

To be classified as a Non-domiciled individual, or be Non-dom, as it’s referred to, you need to be a tax resident of Ireland. This requires 183 days or more of physical presence in Ireland in a single tax year or 280 days over two consecutive tax years.

The concept of domicile, defined in common law, means that when a person is born, they assume the domicile of the country of their father’s birth. This is your domicile of origin and, in most cases, will be lifelong. 

To obtain a new domicile, known as domicile of choice, an individual must show they have a substantial presence in another country and intend to live there permanently or for an unlimited period. In effect, there must not be an intention to return to the original country. 

To become Irish-domiciled, you must prove to the authorities that you have no intention of ceasing permanent residence in Ireland or leaving the country for the foreseeable future.

Pay Low Taxes in Ireland as a Non-dom

So, assuming you are considered Non-domiciled in Ireland, what are the tax implications? They fall into three categories: Irish source income and gains, foreign employment income, and foreign income and gains. 

Irish source income includes income from Irish employment, Irish stocks, government bonds, and rental income from Irish property, for example. As it was sourced in Ireland, it is liable to income tax, social insurance, health and income levies, and capital gains tax.

The second category, foreign employment income, is also liable to income tax only to the extent it was performed in Ireland. This is a government duty on the proportion of your income earned by directly working in Ireland. 

The last category is foreign income and gains that are remitted to Ireland. Non-doms are subject to income tax and gains earned outside of Ireland only when those funds are sent or brought into the country. 

This is known as the remittance basis of taxation – provided foreign income and gains are kept outside of Ireland, no Irish tax should arise. Even when Irish tax is applied to foreign assets already taxed, double taxation relief is available.

Foreign earned income that is remitted to Ireland will be liable to tax. Foreign capital gains remitted to Ireland will be liable to tax in the year remitted. 

Non-Irish capital losses can’t be used to reduce an Irish capital gains tax liability that arises to a Non-dom individual. Interestingly, suppose someone Non-dom in Ireland has fallen outside the scope of their home country’s capital gains tax legislation. In that case, technically, they can have zero capital gains liability anywhere.

What Constitutes a Remittance for Non-dom? 

Any method involving a Non-dom person getting foreign income or gains constitutes a remittance. Revenue enforces anti-avoidance measures to counteract the sometimes creative ways Non-doms can try to get money in without paying tax. 

For example, borrowing money abroad and bringing the loan proceeds into Ireland, then using unremitted income to repay the loan. So, in this case, the payment of loan capital but not loan interest is treated as a taxable remittance. Similar measures prevent a Non-dom person from transferring foreign gains to a spouse offshore, with the spouse then bringing them back to Ireland. 

Tax planning opportunities are associated with Non-dom status and moving to Ireland to ensure you’re legally paying the least tax possible. 

First, you can apply for split-year residence relief, so you’ll only be liable for Irish employment taxes on income earned after you arrive. In other words, employment income earned before you came to Ireland, but within the same tax year, you become a tax-resident, is not liable to Irish tax. 

Structuring Your Finances to Legally Pay Less Tax

Ideally, to help lower your taxes, you can consider having at least three bank accounts. It’s advisable to have a foreign bank account to hold all the money you earned before moving there. 

The remittance of foreign income earned before the 1st of January in the year you become a tax resident is viewed as non-taxable capital. So, it isn’t liable to the remittance basis of taxation. 

Another foreign bank account could hold all the foreign source income and gains you make while living in Ireland. These funds are only taxed if remitted to Ireland. By being linked to a brokerage account, this can be your account to buy foreign shares and make investments. 

Doing this will keep your non-Irish source investment income separate from your Irish account or be regarded as a remittance and taxed. So, linking your foreign investments to a foreign account will not bring them into the Irish tax system. 

Two foreign bank accounts separate your pre-Ireland cash from foreign income or gains, which are taxable under the remittance basis. If a Non-dom remits money to Ireland from a foreign account that includes taxable capital and non-taxable income, all of it will be taxed. 

If you pay a salary into a foreign bank account, and it is subject to Irish tax, in part or full, remittances into Ireland are deemed to come from the already taxed portion.

While living there, your Irish bank account can hold all your Irish source income and gains. Spending this cash has no further tax implications beyond those which have already happened. 

There are other rules to be aware of around exchange-traded funds (ETF), which, in principle, are not liable to the remittance basis of taxation. Still, these are complicated and have changed recently, so it’s prudent to get professional tax advice. 

For gifts or inheritance, an Irish capital acquisitions tax of 33% will be charged if the asset is situated in Ireland or the Non-dom is the beneficiary and has been resident in Ireland for five years before the gift or inheritance date. It can only arise if the asset is situated in Ireland or if the Non-dom has been a tax resident for at least five years, irrespective of where the asset is located.

Conclusion

Non-dom programs are ideally suited to people who have substantial worldwide income. In our experience, those tend to be seven- and eight-figure investors and entrepreneurs who have worked hard and want to grow their wealth and protect it for future generations. They also want to benefit from their wealth in the here and now by living a beneficial lifestyle. 

That is our Nomad Capitalist philosophy: going where you are treated best by exploring the best combination of tax planning, dual citizenship, and asset protection strategies. Ireland, through its high quality of living, low tax benefits, and the availability of citizenship for almost anyone with ancestral ties, or its investment immigration program, is a perfect option. 

Nomad Capitalist has helped 1,500+ high-net-worth clients from around the world. You can find out how here.

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