7 Things to Know About Tax if You're Moving to Ireland
If you’re considering moving to Ireland, maith thú (well done)!
From the Cliffs of Moher in the west to the Book of Kells at Trinity College Dublin, this fascinating country is packed with a plethora of natural and cultural attractions, and has an exciting economic future.
But before you move, you’ll want to know what your tax future will look like. We’ve got you covered, with everything you need to know before you start your new life in this gorgeous nation.
Ireland is charming – and it also has economic strength beyond its size
1. Taxes are simple if you’re an employee
As an employee in Ireland, you’ll pay tax through the Pay As You Earn (PAYE) system.
That means your employer will automatically take income tax, Pay Related Social Insurance, and Universal Social Charge payments from your salary throughout the tax year – which is the same as the calendar year in Ireland.
If your employer isn’t in Ireland, they must register in Ireland and deduct these taxes from your salary.
If you’re self-employed, you’ll be taxed under the pay and file system.
This requires you to both pay your outstanding tax for the previous year and file your tax returns by 31 October each year (apart from 2021, when the date is 17 November).
2. Income tax is progressive, but easy to understand
In Ireland, you’ll pay a higher tax rate on higher earnings – but unlike in the UK, there’s no tax-free personal allowance. If you earn income, you’ll pay tax on it.
There are two income tax bands: the standard rate, and the higher rate.
Everything you earn up to a certain annual amount is taxed at 20%, which is the standard rate. If you’re single, that amount is €35,300 (£24,940), as of 2021.
If you’re fortunate enough to earn more than that, everything above that level will be taxed at 40%.
You may be exempted from income tax payments if you or your spouse is over 65, or if you’re a composer, sculptor, visual artist, or writer who’s produced an original, creative piece of work that has either cultural or artistic merit.
|Personal situation||20% tax payable on||40% tax payable on|
|Single person||€35,300 (£24,940)||All earnings above the 20% level|
|One parent family||€39,300 (£27,770)||All earnings above the 20% level|
|Married couple/civil partners with one income||€44,300 (£31,300)||All earnings above the 20% level|
|Married couple/civil partners with two incomes||€44,300 (£31,300) + the lower of the following: |
The salary of the partner with the smaller income
|All earnings above the 20% level|
3. Your resident status changes your tax obligations
The amount of tax you’ll pay in Ireland depends on whether or not you’re tax resident in the country, the sources of your income, and where you work.
If you’re in Ireland for at least 183 days of a tax year (which again, is the same as the calendar year in Ireland), you are Irish tax resident.
You’re also resident in Ireland for tax purposes if you spend at least 280 days in this and the previous tax year taken together, with a minimum of 30 days in each year.
Any part of a day counts as a day for these purposes, unless you were in an airport or port for the entire time, or if you were unable to leave the country due to unforeseen occurrences (such as a natural disaster).
It’s not compulsory, but you can register as tax resident when you arrive in Ireland, if you’re planning to live in the country for at least 183 days of the next year. This will allow you to claim tax credits.
If you decide to register, you must inform the Revenue (the Irish government’s tax agency) in writing.
You can ask for split-year treatment in the year you arrive, to ensure you’re not taxed twice on any money you earned for work done outside of Ireland.
If you’re married, but your spouse isn’t resident in Ireland, you’ll be treated as a single person when it comes to paying tax – unless your partner lives abroad and doesn’t earn an income in that country, in which case you can be taxed in Ireland as a married couple.
Once you’ve been tax resident in Ireland for three consecutive tax years, you become ordinarily resident, meaning that if you move away, you may continue paying some tax for three years.
You should also look into whether it benefits you financially to become domiciled.
If you want Ireland to be your new domicile – your permanent home, in effect – you must have strong evidence that you intend to live permanently in Ireland, and do not intend to return to live in your original domicile.
4. The capital gains tax rate is high
When you sell something for a profit, a government will usually tax you on that profit. That tax is known as a capital gains tax.
In Ireland, the capital gains tax rate is 33% across the board, except gains that come from foreign life policies, foreign investment products, and venture capital funds.
So if you sell a house for a €330,000 (£284,000) profit, you’ll pay €110,000 (£95,000) in capital gains tax.
Ireland has the fourth-highest capital gains tax rates for individuals in Europe – well above the UK or the US, which both have a 20% rate.
If you take care of your taxes, you can visit Malahide Castle with peace of mind
5. VAT is also high – but there are many exemptions
The Value-Added Tax (VAT) rate in Ireland currently stands at 23% , after it was temporarily cut to 21% during the COVID-19 pandemic.
This is one of the highest rates in the world – but there are reduced VAT rates for many services.
You'll only pay a 13.5% rate for items like fuel, electricity, vet's fees, building services, short-term car hire, and cleaning services.
There's a 9% rate on sporting facilities and newspapers – which, strangely enough, includes e-books – and a 4.8% rate for agriculture that applies to greyhounds, horse hire, and livestock, though not chickens.
The Irish government has also placed zero VAT on bread, milk, coffee, tea, and books, as well as children's clothes and shoes.
Healthcare products like wheelchairs, crutches, hearing aids, and oral medicine for humans and animals are exempt from VAT too, as are agricultural items including vegetable seeds, fruit trees, fertilizers, and large animal feed.
And you won't pay any VAT to access financial, medical , or educational services, or live theatrical and musical performances – as long as they don't serve food and drink during the show.
As well as not needing to pay VAT for an education, you can also gain tax relief on certain higher education colleges and courses which have been approved by the government.
The most you can claim is € 7,000 (£ 6,000) per course, per person, per academic year.
You have to pay the first € 3,000 (£ 2,600) of costs, and then you'll be able to get relief for the rest of what you owe, up to that € 7,000 (£ 6,000) limit.
6. Corporation taxes are controversially low
Ireland's headline corporate tax rate is 12.5% , which is significantly lower than the UK's 19% rate, the US's 21% rate, and Australia's rate, which is either 25% or 30% depending on how much a business makes.
However, many companies in Ireland have ended up paying much less than this, particularly multinational corporations which originated in the US, such as Apple, Google, and Microsoft.
As a result, Ireland has been dubbed a tax haven and conduit offshore financial center , with one academic study finding that the country's effective corporate tax rate was just 4% .
But with foreign firms employing around a fifth of workers and paying around half of Irish salary tax, the government has resisted American proposals for a global corporate tax rate
7. Government resources make it easier to pay your taxes
If you're moving to Ireland, apply for a Personal Public Service Number as soon as possible.
This unique reference number will allow you to access public services, social welfare benefits, and government information.
You can use the Irish government's myAccount feature to claim tax credits and refunds, declare your income, submit a tax return, and inform the authorities about your new job or private pension.
And if you're an employer or self-employed, you can use the Revenue Online Service to file your tax returns, make payments, and claim repayments, among other functions.
Use these services, as they’ll help you avoid ever being accused of tax evasion, which can saddle you with a potential fine of €126,970 (£89,720) – and up to 5 years in prison.