Moving to Ireland and the Irish tax system
There are many reasons to move to Ireland, but if you are planning to live in the Emerald Isle then it is important to know the rules when it comes to paying taxes to avoid any unnecessary penalties.
Ireland is a wonderful place to live. A country full of stunning scenery, a mix of historic and ultra-modern cities, with a vibrant cultural and music scene.
The economy is also strong and stable and is recovering well after the pandemic. There are plenty of employment opportunities in a wide range of sectors, from cutting-edge technologies to agriculture.
Ireland is also part of the EU and has unrestricted trade with the 26 other countries that form the bloc. At the same time it is renowned for being a low-tax jurisdiction, especially compared to many other nations in Europe.
The cost of living is also reasonable, even in the capital, Dublin. Moreover, the standard of living is high, with advanced infrastructure – physical and technological – and education system.
So it is little surprise that many people want to live in Ireland. It is relatively easy to become resident – especially if you are coming from elsewhere in the EU. But if you do and are looking to work, then you need to be aware of the tax regime in the country.
Whether you pay tax in Ireland depends on if you live in the country or if it is your permanent home. You are deemed to be a resident in Ireland for tax purposes if you have spent at least 183 days during the tax year – the financial year runs January 1 to December 31 – or 280 in the past two years in Ireland. If this is the case, you will be liable to pay tax on any income you make in Ireland and in other countries. If you are deemed a non-resident, you will only pay taxes on income made in Ireland.
As mentioned, Irish residents must pay tax on their income made in Ireland and in foreign countries – including pensions. Irish residents are also liable to pay tax in the foreign country in which they earned money, but Ireland has double taxation treaties with 76 countries and as a result you do not pay tax in both countries on the same income. Here, the tax is exempted in one country, or a credit is given by one country for tax paid on the income in the other.
PAYING TAX IF YOU ARE AN EMPLOYEE
Ireland operates a Pay as You Earn (PAYE) system for employed people to pay their tax. PAYE sees your taxes deducted from your wages at source and before they hit your bank account. Your employer deducts the correct amount of tax and sends it to the Revenue.
How much tax you depends on how much you earn. The standard rate is 20%, which is paid up to a certain amount, and anything over that is taxed at 40%. In 2022, for a single person, the cut-off for paying standard rate is €36,800. This rises to €45,800 for married couples/civil partnerships with one income, and to €73,600 for married couples/civil partnerships with two incomes. One parent families pay standard rate tax up to €40,800.
When you move to Ireland and look to start work, you must apply for a Personal Public Service Number (PPSN) from the Department of Social Protection (DSP). This is a reference number that is unique to you that is required when you deal with all public service agencies – not just the Revenue. If you are not living in Ireland, you can request the necessary forms from the DSP to apply for a PPSN.
Following this, you must make an application for a certificate of tax credits. This is done by filling in Form 12A, which can be got from the Revenue or your employer. This form should be filled in accurately – and updated if there are any changes – because if it is found to be inaccurate and you are claiming tax credits falsely, the Revenue will take action against you.
Completed 12A forms must be handed into your local tax office. In return, a certificate of tax credits will be sent to you and your employer, which means they can deduct the correct amount of tax from your gross pay. If this form isn’t completed, in time your employer must use the higher emergency tax rate until it has been.
WHAT ARE IRISH TAX CREDITS?
There are a variety of tax credits available that can reduce your tax burden. The tax credits you can be eligible for depend on your circumstances. They are:
Single person: those eligible are single, or divorced or separated People who are married/in a civil partnership: this is due to people who are married/in a civil partnership and are jointly assessed, or if the couple have divorced/separated and one pays enough voluntary maintenance to maintain the other former partner Widowed or surviving civil partner: how much is paid depends on when the spouse/partner passed away and if there are any dependent children. This credit can be claimed for five years after a spouse/partner died if there are dependent children.
For 2022, the credits range in value from €1,700 for a single person or widowed person to €3,600 for a widowed parent in the first year after a partner has died.
TAX RETURNS FOR EMPLOYEES IN IRELAND
If you are an employee, you will receive a P60 document from your employer at the end of the year, which details how much you have earned and the amount of tax you have paid in those 12 months. If that is your only income, you shouldn’t have to file a tax return. But you can fill in a Form 12 to claim relief on tax credits and certain other allowances.
But you have to file a self-assessment tax return if you have other income, such as if you work as a contractor or subcontractor, are self-employed, a landlord or a company director. You also have to file a return if you have income from any investments you have or if you are part of an employee share scheme.
Tax returns can be made online using the Revenues Online Service. To use this, a registration process must be completed, after which you will be sent your own ROS access number by post, which enables you to complete the return online. Following this, the Revenue will issue a P21, which contains how much tax you must pay.
Note, tax returns must be filed by August 31 and any outstanding taxes for the previous year need to be paid by October 31. If you file your return late, then there are penalties.
Malone & Co Accountants https://www.maloneaccountants.ie/ can assist on all the relevant aspects of taxation, as well as providing a wealth of accounting and advisory services as part of an M&A deal or funding round in the sector. We can also provide in-depth information to ensure any deal achieves the value hoped for at the outset. Remember, while Ireland may share a land border with the UK, the regulatory regimes can be quite different, which can trip up unwary investors.