The Gazette 1994

GAZETTE

APRIL 1994

The current Revenue practice can be summarised as follows:- I (a) A remittance basis exemption will apply where an individual goes abroad for part of a tax year and will be taxed only on sums remitted to Ireland. This relief is not available to employments in the UK. 18 (b) Where an individual goes abroad to work in one tax year and returns in a subsequent tax year, tax will be levied on the remittance basis. This equally does not apply to UK employments. (c) Where an Irish resident takes up full time foreign employment abroad, exercised wholly outside the State for a period including a full tax year, the employment income is not subject to tax even when remitted provided the individual will not be regarded as resident in Ireland pursuant to the General Residence Rules. This relief does apply to UK employments. (d) Where an individual comes to this country to exercise an employment and remains here for a period which includes a full tax year, that individual is regarded as an Irish resident for that year, and the years of arrival and departure.

(b) Neither Resident Nor Domiciled Only assets situated in Ireland are liable to the tax.

their future plans must be clearly identified. For example, by taking action to avoid income tax the principal private residence relief for CGT may be lost. When advising individuals on tax minimisation whileworking abroad their future plans must be clearly identified. As this article has shown there is often a divergence between a strict interpretation of the law and Revenue practice. It must be borne in mind by any individual going abroad to work and intending to return that these concessions will be withdrawn if the Revenue interpret the individual's j principal reason for going abroad as a tax avoidance exercise, as opposed to legitimate employment or health reasons where the tax avoidance was a secondary consequence of such actions. Finally, the writer would caution any practitioner when giving advice to carefully consider individual tax treaties with other countries. While most are drawn up on the OECD Model Treaty, there can be subtle differences. References 1. Ireland has a number of Double Taxation Treaties with foreign governments. While most are based on the 1963 OECD Model Tax Treaty, there can be anomalies between different countries and care must be taken in this regard. 2. The domicile is that of a person's father. If a child is born after the father's death, or is illegitimate, the domicile is that of its mother. 3. Prior to October 2, 1986, a married woman's domicile was that of her husband. This was amended by the

Residential Property Tax (a) Domiciled or Resident or Ordinarily Resident

The operative date for liability is April 5 each year. If an individual is any of the above, they are liable on worldwide relevant residential property subject to the income tax exemptions. Not Ordinarily Resident Only liable on property situated in the State. Commentary If an Irish domiciled and resident individual goes abroad to work, the exemption for such person will not apply if his salary is paid to an Irish Bank account. An individual who goes to work in the UK for more than three months, even if paid in Ireland and PAYE is deducted here, will also be required to pay UK tax similar to PAYE. The PAYE paid in the UK is refunded if the individual works in the UK for less than six months 17 . One cannot get an Irish Revenue PAYE Nil Rating unless an individual works abroad for more than six months. The Irish Revenue will, however, accept that a UK citizen working in Ireland for less than six months for a foreign company will not be liable for PAYE in Ireland. For the reliefs from Irish Tax to apply to an Irish citizen domiciled and resident in Ireland who goes abroad on a foreign assign- ment, the Revenue will consider the law of contract, where made and accepted, and where the pay point is. To avoid any difficulties the contract should be made and accepted abroad, not subject to Irish law and payment should be to and from a bank account situated outside Ireland of a non-Irish bank. For the reliefs from Irish Tax to apply to an Irish citizen domiciled and resident in Ireland who goes abroad on a foreign assignment, the Revenue will consider the law (b) Non-Resident, Non-Domiciled

and

However, by concession any foreign income arising before arrival or after the date of departure will not be included in the assessment for those years. It

may be possible fqr some individuals to avail of the Diplomatic Relations and

Immunities Act, 1967. This not only includes diplomats but also individuals working for specialised agencies of the UN 19 . Such an individual may be exempt from Irish tax regardless of the Residence Rules. In addition, the exempt income is not included in his total income in relation to taxation of Irish source income 20 . Conclusion When advising individuals on tax minimisation while working abroad

Domicile and Recognition of Foreign Divorces Act, 1986. 4. Article 4( 1) Double Taxation

Treaty. This replaces the provisions j originally introduced by the Income j Tax Act, 1967 which confirmed j legislation going back to 1926. 5. Article 4(2) Double Taxation Treaty (UK).

of contract, where made and accepted, and where the pay point is.

Ill