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Taxation in Ireland: An Expat Guide

It’s often said that nothing is certain in this world except for two things: death and taxes. In Ireland, there’s a popular saying that you can be certain of three things: death, taxes and rain! Whether you’re new to Ireland, or considering a move, it pays to understand the ins and outs of the tax system. Here’s what you need to know.

The Practicalities

The first thing you will need to do if you are moving to Ireland is apply for a personal public service number. This is required for all dealings with public service agencies, including the Revenue Office.If you are working in Ireland as an employee, you will pay tax through the PAYE system. This stands for Pay As You Earn, and is automatically deducted to the revenue every time your salary is paid. This payment includes income tax, pay-related social insurance and the universal social charge (USC). If you leave your job, your employer will give you a P45. This is a statement of the salary you earned and your tax deductions. At the start of each financial year, you will also receive a P60 from your employer, summing up the previous year’s tax details.

When starting a job, you will need to provide your new employer with the P45 from your previous job to avoid being liable for emergency tax. Emergency tax occurs during a temporary period in which all your earnings are taxed at a higher rate. This happens in situations where your employer does not have a revenue payroll notification (RPN) for you from the Revenue Office; essentially, this means that information regarding your previous tax situation is missing. When starting work for the first time in Ireland, you will need to apply for a certificate of tax credits and standard rate cut-off point. You can do this online on the Revenue Commissioner’s website by filling out the form 12A. It’s best to do this as soon as you accept a job offer to allow time for your details to be processed before your first payday.

If your payslip is lower than you’d expected, and you see ’emergency basis’ or ‘tax code E’ on it, you’ll know you’ve been emergency taxed. This isn’t a cause for concern, but you will need to contact Revenue. Once the Revenue Office process the RPN and send it to your employer, they will take you off emergency tax. Your employer will then refund you the overpaid tax and USC on your next payday. Alternatively, you can apply for a tax refund directly from the Revenue Office.

There are several tax credits and reliefs available. Some of these are automatic, and some you need to apply for. You’ll find a comprehensive list here. If you’re self-employed, or earning non-PAYE income, you will need to file yearly tax returns using Form 11 or Form 12 by October 31st each year. You’ll also need to file returns for any capital gains, gifts or inheritance gained during the year. There is plenty of information about how to do this on the Revenue Commissioner's website. Typically, tax administration in Ireland is recognised as being very efficient.

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Tax Rates In Ireland

Income Tax

Ireland is generally considered a low-tax country. Ireland’s tax burden as a percentage of its GDP is one of the lowest rates of taxation in the OECD. However, taxes are distributed in a way which may be unfamiliar to someone moving here for the first time. Ireland has a heavily progressive tax rate, in the sense that the lowest-income earners shoulder a relatively light proportion of the tax burden. A single person earning less than €18,000 a year is exempt from income tax and will pay between 0.5 percent and 2 percent in social insurance.

There are two tax brackets in Ireland: the standard rate at 20 percent and the higher at 40 percent. However, the standard rate cut-off point is considerably lower than in other countries, and all earnings above €35,000 a year are taxed at the higher rate of 40 percent. This makes Ireland unusual among other OECD countries and means that much of the squeeze is felt by middle-income earners.

However, Ireland also has low social insurance contributions, so the overall tax burden is relatively low. This means that social services are less well-developed than in many other European countries.

Corporate Tax

One notable aspect of Ireland’s tax system is its low corporate tax rates. The tax on trading income for limited and unlimited companies is 12.5 percent – around half that of other small European countries. This policy was adopted by the Irish government to encourage economic growth and attract multinational businesses, many of which have their European headquarters in Dublin. Big businesses also qualify for many tax credits and reliefs that have led to the largest companies paying an effective rate of less than one percent in recent years – this has led to widespread criticism and claims that Ireland is effectively a tax haven.

Property Tax, Service Charges, VAT And Excise Duties

Local property tax (LPT) is annually levied on any residential properties suitable for use as a dwelling. This is a self-assessed tax return, and it is the owner’s responsibility to get a credible market valuation on the property and declare it to the Revenue Office. For properties valued at up to €1M, the LPT rate is 0.18 percent. Any portion of valuation above €1M is taxed at 0.25 percent. There are some service charges, such as a tax on rubbish collection. However, unlike other EU countries, there are no water charges, despite an attempt to introduce tax in recent years. Ireland also has no wealth tax.

The VAT rate of 23 percent is one of the highest in Europe. This is one of the factors that contribute to a higher cost of living in Ireland. Another is the high excise duties on products such as alcohol and cigarettes, although there are also many goods that are tax-exempt. Anyone moving to Ireland from the US should note that, as elsewhere in the EU, VAT is included in the marked prices of goods.

What This Means For Somebody Moving To Ireland

Any person who spends 183 days or more in Ireland in a tax year (1st January to 31st December) is considered resident in the country for tax purposes, and will be liable for Irish tax on their worldwide income and any gains they make in that year. Individuals not ‘domiciled’ (permanently resident) in Ireland qualify for the remittance basis of Irish tax – this means that gains and income from outside Ireland are not liable for taxation in Ireland.

It’s always tricky to get used to a new system of taxation, but there are many resources in place to help, from the Revenue Commissioners, who accept queries, to certified tax advisors, (from the list of Certified Public Accountants) who can offer personalised, specialised advice.

Have you lived in Ireland? Share your experiences in the comments below, or answer the questions here to be featured in an interview!

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