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
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
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
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