Ireland has a relatively simple tax system compared to other countries, with a low corporate tax rate of 12.5% and a personal income tax rate that ranges from 20% to 40%. The Irish taxation system is administered by the Revenue Commissioners, which is the Irish tax authority.
Double Taxation Agreements
Ireland has a double taxation agreement with over 70 countries, including the United States, Canada, Australia, and most of the EU member states. These agreements aim to avoid double taxation on income earned in both Ireland and the other country. They also provide relief from withholding taxes on dividends, interest, and royalties.
Main Taxes for Expats
Income Tax
Expats in Ireland are subject to the same income tax rules as Irish residents. Income tax is calculated based on the amount of taxable income earned during the tax year, which runs from January 1st to December 31st. The income tax rates for 2023 are as follows:
- The first €35,300 is taxed at 20%.
- The amount above €35,300 is taxed at 40%.
Expats may also be entitled to claim certain tax credits and reliefs, such as the Earned Income Tax Credit and the Home Carer Tax Credit. These credits reduce the amount of income tax payable.
Universal Social Charge
The Universal Social Charge (USC) is a tax on income that was introduced in 2011. It is a flat tax that applies to all income, including employment income, self-employment income, rental income, and investment income. The USC rates for 2023 are as follows:
- The first €13,000 is taxed at 0.5%.
- The amount between €13,000 and €20,000 is taxed at 2%.
- The amount between €20,000 and €70,044 is taxed at 4.5%.
- The amount above €70,044 is taxed at 8%.
Expats who are considered non-resident for tax purposes are not liable for USC.
Capital Gains Tax
Capital Gains Tax (CGT) is a tax on the profits made from the sale of certain assets, such as property, shares, and investments. The CGT rate for 2023 is 33%. However, there are certain exemptions and reliefs available, such as the exemption for the sale of a principal private residence.
Value Added Tax
Value Added Tax (VAT) is a tax on the sale of goods and services in Ireland. The standard rate of VAT is 23%. However, there are reduced rates of VAT for certain goods and services, such as food, medicines, and children’s clothing.
Special Tax Breaks for Expats
Foreign Earnings Deduction
The Foreign Earnings Deduction (FED) is a tax relief for Irish residents who work abroad for a certain period. The deduction allows individuals to claim a tax deduction on income earned while working abroad, provided they spend at least 60 days outside of Ireland in a tax year.
Special Assignee Relief Programme
The Special Assignee Relief Programme (SARP) is a tax relief for highly skilled employees who are assigned to work in Ireland for a qualifying employer. The relief allows employees to claim a tax deduction on a portion of their income, including relocation expenses, for up to five years.
Filing a Tax Return in Ireland
Expats who are considered resident in Ireland for tax purposes are required to file a tax return each year. The tax return must be filed by October 31st of the following year if filing online or by September 30th if filing a paper return.
Expats can file their tax returns online using Revenue’s Online Service. To do so, they need to register for the service and obtain a Personal Public Service (PPS) number, which is a unique identifier used for tax and social welfare purposes in Ireland.
When filing a tax return, expats need to provide details of their income, deductions, and tax credits for the relevant tax year. If they have any foreign income or assets, they may also need to declare them on their tax return.
Tax Exit Procedures
Expats who are leaving Ireland to move abroad need to follow certain tax exit procedures. Firstly, they need to notify the Revenue Commissioners of their departure and provide details of their new address abroad. They should also settle any outstanding tax liabilities before leaving Ireland.
If an expat is considered non-resident for tax purposes, they are not liable for Irish income tax, USC, or CGT on any future income or gains that arise outside of Ireland. However, they may still be liable for Irish tax on any income or gains that arise from Irish sources, such as rental income or capital gains from the sale of an Irish property.
Expats who have paid tax in Ireland may be entitled to claim a refund of some of the tax they have paid. To do so, they need to file a tax return for the relevant tax year and claim the refund through the normal tax refund process.
Overall, the taxation system in Ireland is relatively straightforward, with a low corporate tax rate and a progressive income tax system. Expats in Ireland need to be aware of the main taxes that apply to them, such as income tax, USC, and CGT, as well as any special tax breaks that may be available. They also need to ensure they file their tax returns on time and follow the tax exit procedures if they are leaving Ireland to move abroad. By understanding the Irish tax system, expats can ensure they are complying with their tax obligations and maximizing any tax benefits available to them.