Welcome to tax bytes for expats. The top tax tips you

want to know as an expat, the podcast is here to help answer

the common queries and concerns expats have when moving to

or from Ireland. Complex taxes explained

simply, we'll focus on the irish and international

tax issues to be aware of to ensure you save time,

money and stress. Hi

everyone, hope you're well. Welcome to this episode of Tax bytes for

expats. What are we going to talk about today? Well, I suppose it's just me

today. Apologies in advance, but I wanted to talk specifically

to a group of people that we speak to frequently in the

work that we do at expat taxes, and that's people who are

retiring to Ireland, planning to spend their retirement years

here. Two categories, mainly people who maybe

have not lived in Ireland previously, but have decided that it's a

location they'd like to move to. And then the second category, which would be

irish people who have gone overseas and then returned to

Ireland in their retirement years with a view to spending them

here. So when we speak to these people, lots of questions

come, and I'd like to kind of dedicate this episode to trying to

answer some of the ones, specifically the tax ones that come up. And then we'll

try and throw in a few little nuggets of information that relate to maybe

non tax issues. Life admin, let's call it that. That might

be helpful for people who are planning their move. So maybe just to

start, let's just talk generally about, you know, the tax

system in Ireland and what people might expect or should

expect when they move to Ireland from overseas.

So let's use an example, somebody who decides to

move maybe in August of a given calendar year.

The irish tax year is calendar based, so it runs January to

December. And when we're trying to determine if an individual is a tax resident

in that tax year, the first thing we do is we count the number of

days that they have in Ireland in that year. A few points

there. Any part of a day counts. Days before you

actually move here count. So in other words, if you have

had three week holiday in advance of your actual move date, we

count those days. And what we're looking for is to see if you've gone

over the threshold. So the threshold, mainly that most

people think about is 182 days. If you have 183

days in Ireland in a calendar year, you are a tax resident in that

year. The second test, which is not as commonly

applicable, but it can be, is when you aggregate

time over two calendar years, such that you've spent

280 days over two years and you're therefore

a tax resident in the second year. So, first step, apply

those tests. If the answer is you are a tax resident,

then we want to look at how Ireland's going to tax you.

Why? Well, an individual who's tax resident in Ireland is taxed

on their worldwide income and worldwide gains. So going back

to our hypothetical retiree, let's say her name

is Niamh Nev has a us Social

Security pension. So once we've worked out that she's a tax resident in

the year that she moves, now we need to determine whether or not Ireland is

going to actually tax her us Social Security pension.

The answer to the question as to whether it will is to some extent related

to our domicile, which I don't propose to go into in any detail

here. For the sake of this episode, let's assume Nev, with a name like

Nevda, is irish domiciled. In other words, her parents

were irish and she was born and raised in Ireland and she went maybe to

New York in her late twenties and has planned to return in her

retirement years to Niamh is irish domiciled. She has a us Social

Security pension. She relocates to Ireland and spends 183

days in Ireland in the calendar year she moves. Ireland has

taxing rights under our domestic law on her Social Security

pension. And most people will grasp that it's

relatively straightforward. And I think where it gets a bit more complicated, or when

the questions come, is when we start to look at what's happened in the foreign

jurisdiction. So in this case, the US, what we

routinely see is that the Social Security pension in the US

is already being taxed there. So now we have to look at the double tax

agreement, and broadly, the agreement between Ireland and the US

gives sole taxing rights on that pension to

Ireland. So Niamh now has, I suppose, a few questions.

Firstly, she's had to determine if she's an irish tax resident in the year that

she arrives. Secondly, she probably needs to have reviewed

what income she has in her year of arrival. And she

also probably needs to have a chat with her us accountant, mainly

because she needs to let them know. Look, I've moved to a

country where this income that's been taxed here to date is now

going to be taxed in another jurisdiction. So, as you can

see, it's a bit of a paper trail, conversations with the

right people. But ultimately, I would generally say to clients,

it's mainly the first year of the move that presents these issues, that's when

the questions come. That's when both advisors, the irish advisor

and the us advisor, are having to kind of work out what's happening and when.

And usually moving on from that, it's relatively straightforward.

Niamh is probably going to ask the question, okay, so what tax am I going

to have to pay in Ireland? And that's a really good question. Going to come

down, ultimately to the amount of income that she has. We've talked here as if

she only has a Social Security pension. Most of our us clients

tend to have other income types. Let's say, for example, she has

a rental property too. She's decided to rent out her old home

in New York. And that rental income is now

also going to be taxed in Ireland in the year of arrival, if she's a

tax resident in that year, meaning that on her irish tax

return, we will report her Social Security, pension

and the rental income from the us property. So again, we're going to end

up in a situation where Niamh or her us accountant are going to say, so

what about the us tax? And that's a really good question. Generally, when we

speak to clients, there's a common misconception that

tax treaties could be potentially summarized in

maybe one or two lines, such as, you can only pay tax in one

country, or if you've already been taxed on that,

Ireland can't tax you again, or you'll get credit,

and then no further description as to where the credit's given. So I

suppose where we come in is helping clients understand how the double tax

agreement works. And simply put, there isn't really a

line you can deliver to clients to explain it without actually

understanding the type of income that the client is talking about. Take, for example, the

rental income that Nev has in New York, she will likely

continue paying tax to the federal government on that rental

income. She may also have to continue paying estate tax to

New York state. But because she's triggered irish residency,

she now has her worldwide income in the irish tax net. So now Ireland wants

a slice of the pie too. What that's going to mean is on the first

tax return that we do for neave, we'll pick up the us rental income. We'll

take a certain number of deductions which may not be the same as what she's

used to getting in the US, report the income on an irish return, and

then claim credit for the us taxes that have been paid on the income. And

that's basically what the treaty says. It says if you have rental income and the

property is located in one jurisdiction, the individual is a resident in

another. Well, the second country, the place where the individual is

resident, gets to tax the income too, but has to give credit for the tax

in the location where the property is. So what does this

mean for people who are planning a move? Well, I suppose maybe just to

summarize, firstly, be clear as to when you become a tax resident in

Ireland. Count your days, have an idea as to whether or not you're going to

trigger residency, and be aware that you can be physically

living in Ireland but not yet be a tax resident if you haven't

otherwise met the residency rules, which are only days

based. Secondly, once you trigger residency, expect

that Ireland wants in the first instance, particularly if you're irish born and

raised, to tax your worldwide income and gains. And then

thirdly, be aware that that's going to mean that your foreign tax

advisor is probably going to need to have a conversation with an irish advisor at

some point to make sure that the first return, second and third,

subsequent returns you do and deliver to the Revenue commissioners are

done correctly. So maybe just a little bit now about the tax

compliance process in Ireland. So it's a self assessment

system that we have in Ireland, which means an individual self assesses their liability

to tax. I often describe it as being like an honesty system.

In other words, the revenue expects you to report and you actually make

a declaration to that effect on your tax return, which is a legal

declaration that you've disclosed everything correctly. So

it's important to get it right. The tax year, as I mentioned at the start,

is January to December, and if an individual has to file an irish tax

return, they must do so by the 31 October in the year

following. So, for example, working with many clients right now

in May of 2024 on their 2023 tax

returns. So, top tip, please don't leave us till October

to consider tax issues because that's not helpful for you, your foreign

advisor or your newly appointed irish advisor in terms

of registering with revenue. Well, usually your accountant or tax advisor

will do that for you. You can do it yourself. Please bear in mind

we often routinely get queries from clients who tell us that they've

contacted revenue. My personal opinion is that

revenues function. It's not to serve as a help desk for

taxpayers who have complicated international tax questions. So maybe

just if you're finding it difficult to get answers to

complicated cross border tax questions, just be aware that

it's not necessarily revenues remit to provide you

with advice, and you will likely find that if you ask them a question

and you ask them to confirm that what they've given you constitutes advice,

they're quite likely to tell you that it doesn't bear that in mind

in terms of revenue generally. So to register, you'll need a

PPS number and you would register to use an online system.

Coming back to Neve, for example, Neve would need to use ROS

revenues online service. So r o s referred to as

Ros. Neave needs to use this because she is what we

call a chargeable person, which very simply means she has to pay tax

in Ireland, and the tax that she's due to pay, pay has not been withheld

at source. Take Niamh's niece, call her

Mary. Mary's working in Ireland, she has a job, she gets a pay

slip, she pays taxes at source. Mary doesn't have to do a tax return if

she doesn't want to, because she's been taxed at source. She's not a chargeable

person. So there's a slight disconnect, I suppose, between maybe the

irish system and some foreign systems where, you know, maybe Australia or

the US, you must do a tax return annually. That's not the case in Ireland.

You essentially need to make a determination as to whether you have an obligation to

file a return, not a requirement for everybody. In terms

of other non tax issues, a few other things that Niamh might be interested

to know. Firstly, when she reaches the age of 70, she'll find her tax

rate will fall. Her tax rate generally is a function of how

much income that she has. But once she reaches the age of 70, her

income level, within certain ranges, will drop. Her

universal social charge, which is the acronym, is USC,

falls to 2% at certain levels. In addition to that,

a recent change, as I understand it, means that she will continue paying

PRSI if she turned 66 this year,

until the age of 70. Previously, if

an individual was 66 or over, there was no PRSI, and

PRSI is our social insurance charge. It's a flat

4% rate. All of these different acronyms and rates

essentially are determining what tax

Niamh has to pay. So for her to actually tell

her categorically what she needs to pay at the end of the year, we need

to understand what income she has, where it's coming from, what

tax credit she has. But broadly, if an individual

who is at retirement age has income of less than

18,000 euro a year, there's no tax payable. And this is

for an individual who's not married, it's double that for a married couple

of. So there are a few small takeaways about things

Niamh might be interested in. Another thing Niamh might not be aware of, given she's

been out of Ireland for a while, is that, like with many other countries

both within the EU and out, Ireland has a reciprocal agreement

with the US, which essentially will allow a form of

aggregation of the social insurance that Niamh might have

paid when she was living and working in the US with her irish social

insurance record, which probably doesn't look fantastic, because,

know, she went when she was relatively young and only worked in Ireland for a

few years. So I generally say to clients, don't assume you're not

entitled to any kind of an irish pension simply because you're claiming one

overseas. It's always worth contacting the department of social

protection, writing to them, telling them that you've worked in the foreign.

In the foreign jurisdiction you worked in, asking them to review your irish

record. And my understanding is they then reach out to the foreign

jurisdiction to confirm the number of contributions or years you've paid

into the social insurance system there. And they make a determination using a

calculation to work out what you're entitled to from the Irish Department of

Social Protection. So it might not be worth a lot, but it's

worth more than doing nothing, even if it's just to get confirmation that

you're not entitled to something. The other thing that often gets

routinely missed is, and perhaps not as relevant for somebody who's

eligible for a medical card. But we have a drug payment scheme in Ireland, so

if ne, for some reason, is spending quite a lot of money every month on

medicines from her local pharmacy, it's worth having a chat with them

about registering for the drug payment scheme over a certain threshold

every month. She doesn't have to pay for prescribed medicine, so that

could be a useful little thing to know. Other than that,

I think, you know, in terms of helping Nev with her tax

return, helping her understand what she needs to do to

comply, and getting the process up and running

generally, then the conversation turns to have we

thought perhaps, about an irish whale? Is one needed? Have

you written a will under us law? What will that mean from

a tax perspective, in terms of any assets that you hold on your

passing? And I suppose when we're talking to Nev, that's an

important conversation. She's irish domiciled, and what she's going

to find is if, for example, she leaves

assets under her will while irish resident, to

her son, for example, who lives in France,

Ireland will seek to tax the

inheritance that she leaves to her son if it's over a certain level. That level

currently, because of the relationship between Eve and her son, is

335,000 euro in terms of lifetime and

bequests that she makes, including gifts and inheritances to her

son. So assuming as well he hasn't taken anything previously

from his father. So the point I'm making is, when you're up and running in

the irish system, when you've got to grips with what your annual tax

bill is, when you've lodged that return and you've given revenue whatever

they're entitled to, after you've taken credit for what's been paid in the US or

other jurisdiction, it is always worth sitting down and

thinking about planning for the next

generation, because I suppose there are complexities to take into

account when somebody comes to Ireland with foreign assets. In

Ireland, we only have two estate tax treaties, one with the UK and one

with the US. There's quite a bit to that, really, and I suppose what I

really wanted to do in this episode was simplify

it, because it is overwhelming when somebody is making a move later in

life. And I suppose these admin issues, they're life

admin, they can seem very stressful, particularly at the start. So please reach out to

us if you have questions. We offer tax return services to

many retirees in Ireland who have moved here or returned

here from overseas, and we work with foreign advisors in the

foreign jurisdiction. We can recommend one if you don't have one, and we're very happy

to work with your existing advisor. And in addition to that, if you want to

organise a consultation just to step through how some of what we've

spoken about might apply to you, please feel free to reach out

and organise that. We're always happy to help and

delighted to see when our clients plan their move well, execute

it, comply with their tax obligations and at the end of

it, we so regularly hear from clients who are in the

planning phase of their move that they're so happy they made the move and

it's been really successful.

Thanks for listening to tax bytes for expats. Please do leave a

rating or review wherever you listen to your podcast. And as always,

remember to take professional tax advice specific to your

personal circumstances before acting or refraining from action

in connection with the matters dealt with in this series. The material

in this podcast is intended to give general guidance only.