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TAXES

The most important message in this section is that if income taxes are a part of your reason for moving to Ireland or if wealth of consequence is involved, professional tax advice should be obtained on both sides of the Atlantic.

It is also important to emphasize that even where income tax considerations are significant, serious consideration must also be given to many other factors, including leaving an established situation, having to develop new relationships, adjust to new living conditions, and make new health care arrangements. Other financial matters, including taxes other than income tax have to be considered, too.

This section focuses mainly on the income tax considerations applicable to Canadians thinking of moving to Ireland. Also raised briefly are some other types of taxes, including gift and estate taxes. The considerations noted will apply (or not) in varying degrees to moves to other countries. This information is presented solely as an assist in preparing to obtain professional advice and is NOT a basis of making tax-related decisions.

Income Taxes: Any income tax discussion must begin by determining whether there is a tax treaty between Canada and the country of destination and, if so, its provisions. It is also necessary to understand the terms 'domicile' and 'residence'.

Ireland and Canada have had a tax treaty for many years. Very significant changes to that treaty come into effect on January 1, 2006.

Domicile is a concept of general law and denotes the place where a person has his or her permanent home. It is distinct from legal nationality and from tax residence. Individuals coming to Ireland from abroad for a temporary purpose, and without any fixed intention of remaining permanently, will continue to be regarded as domiciled abroad.

Individuals who are not domiciled in Ireland qualify for the favourable basis of taxation known as the remittance basis, even if they are regarded as resident in Ireland. For those qualifying for the remittance basis, income (excluding UK-sourced income) is taxable only to the extent that it is brought into (remitted to) Ireland.

For income tax purposes 'residence' is defined by legislation. An individual will be regarded as resident in Ireland for a particular year if he or she spends 183 days or more in Ireland for any purpose in that year or if he or she spends 280 days or more in Ireland for any purpose over a period of two consecutive tax years. In the latter case the individual is considered resident from the beginning of the second tax year.

An individual who is resident in Ireland for three consecutive tax years will be regarded as 'ordinarily resident' for Irish tax purposes from year four onwards and will not cease to be so regarded until being a non-resident for three consecutive tax years.

A major purpose of the Ireland Canada tax treaty is to avoid double taxation. Thus, if a Canadian who is 'resident' in Ireland earns income in Canada, the Canadian government levies a withholding tax against it. That withholding tax provides a tax credit when the income is remitted to and taxed in Ireland.

Ireland taxes income in two bands. The lower band carries a 20% rate and the upper band is taxed at 42%. Personal allowances, available according to a taxpayer's personal circumstances, are given by way of tax credits. Husband and wife are assessed jointly, but may opt for assessment as single persons where this is advantageous.

Capital Gains Tax: Ireland charges capital gains tax, currently at 20 per cent. In measuring such gains, relief is given for inflation through indexation of acquisition cost. Persons who are resident but not domiciled are fully liable in respect of gains from Irish and UK assets, and on foreign gains to the extent that they are remitted to Ireland.

Social Security Taxes: individuals are liable for Pay-Related Social Insurance (PRSI) contributions, including a health levy. The calculation of these contributions includes determining the income subject to such levy, the bands to which the rates involved apply, and the exemptions that might be applicable. Ireland has concluded a social security agreement with Canada. In certain circumstances, social insurance contributions paid in Canada may be taken into account in determining eligibility for Irish State benefits, such as the Old Age and Retirement pensions. Equally, contributions paid in Ireland may count towards Canadian benefits, including the Canada Pension Plan.

Estate and Inheritance Taxes: Ireland applies Capital Acquisitions Tax on gifts and inheritances. The tax is payable by the beneficiary at a rate of 20%. Regardless of one's income tax 'domicile', being an Irish resident for 5 consecutive years subjects one's worldwide wealth to Irish gift and estate taxes. The advice of an Irish tax professional should be sought for tax planning in this regard.

VAT: The COST OF LIVING and the DRIVING IN IRELAND sections of this site discuss VAT, the Irish value added tax equivalent of Canadian federal and provincial sales taxes. Irish VAT varies by the commodity or service involved but is usually 21%.

Other Taxes: The ACCOMMODATION section noted that neither water rates nor property taxes apply to households in Ireland. Also mentioned in other sections are the free prescription items for designated long-term illnesses and the free public transport for seniors.

On the other hand, there are various other taxes, licences and charges, ranging from the VRT (vehicle registration tax) applicable to automobile purchases, outlined in the COST OF LIVING section to, from a Canadian perspective, a mildly annoying TV licence fee (per household rather than per set) and a very annoying government levy for each credit card you have.

PROFESSIONAL TAX ADVICE: this section concludes by reiterating the importance of obtaining professional tax advice, on both sides of the Atlantic, where tax planning is a significant part of the decision to move to Ireland and/or where financial assets of consequence are involved.

 

 
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