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Ireland’s Non-dom Program: How to Pay Low Taxes in Ireland?

An individual must demonstrate that they have a significant presence in another nation and that they plan to remain there permanently.

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Ireland’s Non-dom Program: Ireland boasts a rich and varied culture that encompasses music, sports, Celtic mythology, literature, fine dining, dancing, music, and language. It is a nation that is forward-looking and influenced by tradition, religion, and history.

Northern Ireland, which is a part of the United Kingdom, and the Republic of Ireland, a sovereign nation and complete member of the EU, make up the island of Ireland. Following 12 centuries of British colonial control, the modern Irish state was established in 1922.

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Ireland’s urban population is split between Dublin, Cork, Limerick, Galway, and Waterford, with a reported 36% rural population in 2022. With a population of about 1,275,000, the metropolitan region of Dublin, the capital, accounts for the majority of this.

Those who enjoy the outdoors won’t be let down. The Cliffs of Moher, Giant’s Causeway, The Burren, and Killarney National Park are just a handful of the county’s many breathtaking locations.

Ireland has been a major producer of crops and livestock for a long time. It has developed into a highly developed knowledge economy, with the main drivers being agribusiness, software, technology, pharmaceuticals, and financial services.

Ireland boasts one of the lowest corporation tax rates in Europe, at 12.5%. This, along with its tech-savvy and trained population, has drawn significant foreign direct investment, expected to reach US$1.49 billion in 2022.

Nearly 165,000 people work in Ireland’s tech industry, which includes “big tech” companies like Facebook, LinkedIn, Apple, Google, Microsoft, and Apple. Its nearly full employment rate of 4.2%, which is low for the country, is a sign of economic growth.

According to the 2023 IMD World Competitiveness Rankings, Ireland came in second. Ireland’s strengths in attracting foreign investment, having a skilled labour force, and having business-friendly institutions are reflected in the ranking.

Ireland’s numerical representation:

Population as of right now: 5,056,935.

69% of the population (3.5 million) self-identifies as Catholic.

GDP will expand by 5.5% to reach US$ 556.23 billion by the end of 2023.

141,600 persons will be arriving by April 2023.

Eleven percent of the population are non-Irish.

The most well-known non-Irish populations are those who are Polish, British, Indian, Romanian, and Lithuanian.

Bank of Ireland Announces Increase in Standard Variable Mortgage Rates

Is Ireland a tax haven?

It varies according to who you ask. The Irish government denies the tax haven classification outright. However, some firms benefit from its tax climate, which allows them to transfer worldwide profits to Ireland through its network of tax treaties.

To put it simply, transfer pricing, base erosion, and profit-shifting techniques allow foreign firms to avoid paying Irish taxes on Irish assets and intellectual property retained there. This implies that a low single digit effective rate is possible.

Due to this approach, Apple is well-known for earning US$74 billion in global revenue between 2009 and 2012 while only paying less than 2% in taxes to Ireland.

But some contend that this is an unfair comparison because the term “tax haven” conjures up images of zero-tax jurisdictions like Monaco, Bermuda, the Bahamas, and the United Arab Emirates. Ireland has reluctantly given in to international pressure, particularly from the OECD, to support a worldwide minimum tax of 15% for multinational corporations that will go into effect in 2024.

The good news is that certain businesses will still receive the 12.5% rate because it will only apply to specific businesses. The nation is still welcoming to individuals wishing to form businesses, primarily start-ups engaged in research and development, since they can benefit from a tax credit equal to 25% of eligible expenses as well as a corporation tax trade deduction for associated costs.

In order to lower taxes, Ireland also permits the establishment of special-purpose vehicles (SPVs), which are subsidiaries formed by a parent business to isolate financial risk. There were 3,364 SPVs at the end of the second quarter of 2023, with a total of €1,087.6 billion in assets.

Ireland’s demand for little to no financial transparency is appealing to some firms because it does not formally compel multinationals to submit records of turnover, subsidies received, profit made, or taxes paid.

Ireland’s top incomes pay a marginal personal tax rate of 52%, which is comparatively high compared to other countries. Income is taxed at ordinary rates at a rate of 20% up to a cap (€36,800 in 2022) and at a higher rate of 40% above that limit.

Ireland’s Non-dom Program

To qualify as a Non-domiciled individual, or simply “Non-dom,” one must be an Irish tax resident. This necessitates being physically present in Ireland for at least 183 days in a single tax year or 280 days over two tax years.

According to common law definitions, a person takes on the domicile of the nation where their father was born at the time of their birth. This is where you were born and raised and will be for most of your life.

An individual must demonstrate that they have a significant presence in another nation and that they plan to remain there permanently or indefinitely to be granted a new domicile, often known as a domicile of choice. Essentially, there must be no desire to go back to the home nation.

You must demonstrate to the authorities that you have no plans to leave Ireland shortly or to cease your permanent presence there to obtain Irish citizenship.

Reduced Taxes under Ireland’s Non-dom Program

If you are deemed non-domiciled in Ireland, what are the corresponding tax ramifications? They are divided into three groups: gains and income from Irish sources, gains and income from international work, and foreign income and gains.

Irish source income comprises, among other things, earnings from jobs in Ireland, Irish equities, Irish government bonds, and rental income from Irish real estate. It is subject to income tax, social insurance, health and income levies, and capital gains tax because it was sourced in Ireland.

Only the portion of the second type, foreign employment income, that was generated in Ireland is subject to income tax. This is a governmental obligation based on the percentage of your earnings from on-the-job employment in Ireland.

Remitted overseas income and gains to Ireland make up the final group. Gains made outside of Ireland are only liable to income tax for non-doms when they are transferred or brought into the nation.

This is referred to as the remittance foundation of taxation; as long as gains and income from abroad are retained outside of Ireland, there should be no Irish tax. There is protection against double taxation even when Irish tax is imposed to already-taxed overseas assets.

Remitted foreign earned income to Ireland will be subject to taxation. Remitted foreign capital gains to Ireland are subject to taxation in the year of remittance.

Non-Irish capital losses cannot offset an Irish capital gains tax obligation that arises for a non-dom individual. It’s interesting to consider that a non-dom in Ireland may not be subject to the capital gains tax laws of their home country. Then, theoretically, they may be completely exempt from capital gains liability everywhere.

What Makes a Non-Dom Remittance?

Remittances are made through any mechanism that involves a non-domestic person receiving overseas gains or income. Revenue enforces anti-avoidance procedures to stop the occasionally cunning ways that non-doms attempt to avoid paying taxes.

For instance, taking out a loan from overseas, bringing the money back to Ireland, then repaying the loan with income that isn’t sent home. Thus, in this instance, the loan capital payment is considered a taxable remittance, even though the loan interest is not. Similar regulations prohibit a non-domestic individual from sending overseas gains to their spouse, who would subsequently return them to Ireland.

Moving to Ireland and obtaining non-dom status are linked to tax planning alternatives, so you may make sure you’re lawfully paying the lowest amount of tax feasible.

First, you can ask for respite from paying Irish employment taxes on income received after you arrive, known as split-year residence relief. Stated differently, employment income received before moving to Ireland but received within the same tax year that you become a resident is exempt from Irish tax.

Organizing Your Funds to Comply with Law and Pay Less Tax

Ideally, you should think about establishing at least three bank accounts to help reduce your taxes. It’s a good idea to save all of your pre-move earnings in a foreign bank account.

Remittances of overseas income obtained before January 1st of the year you become a resident of the country are considered non-taxable capital. It is therefore exempt from the remittance basis of taxation.

All of your earnings and income from overseas sources while residing in Ireland could be deposited into a different international bank account. Only remittances to Ireland will result in the taxation of these funds. This can be your account for making investments and purchasing overseas shares because it’s connected to a brokerage account.

By doing this, your investment income from non-Irish sources will remain unconnected to your Irish account or will be treated as a remittance and subject to taxation. Therefore, your overseas investments will remain outside of the Irish tax system if you link them to a foreign account.

Your pre-Ireland cash is kept apart from overseas profits or income via two foreign bank accounts. The latter are subject to remittance basis taxation. All money that a non-dom sends to Ireland from a foreign account, including both taxable and non-taxable income, will be subject to taxes.

Remittances into Ireland are considered to originate from the percentage that has already been taxed if your salary is paid into a foreign bank account and is subject to Irish tax, either fully or partially.

You can keep all of your gains and income from Irish sources in your Irish bank account while you’re residing there. There are no additional tax consequences associated with using this money beyond what has already occurred.

Exchange-traded funds (ETFs) are subject to additional regulations even if they are not subject to the remittance basis of taxation. Nevertheless, since these are intricate and have recently altered, it is wise to seek professional tax guidance.

Ireland’s Non-dom Program Benefits

If the beneficiary is a non-dom who has lived in Ireland for five years prior to the gift or inheritance date, or if the asset is located in Ireland, an Irish capital acquisitions tax of 33% will be imposed. It can only occur if the asset is located in Ireland or, in the event that the Non-dom has been a tax resident for a minimum of five years, regardless of the location of the asset.

Non-dom programmes are best suited for those with significant international income. These are typically seven- and eight-figure investors and business owners who have put in a lot of work and want to preserve and increase their wealth for future generations. They also desire to live a good lifestyle and reap the immediate benefits of their wealth.

Tarique Anwer
Tarique Anwer
Tarique Anwer obtained his undergraduate degree from Aligarh Muslim University and his Master of Business Administration (MBA) from Annamalai University. He commenced his professional journey at Bank of America. He is an experienced Media professional with demonstrated expertise in news writing, content creation, and people management.

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