Where is my Tax Domicile?

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Stephanie  – Chartered Tax Advisor

Often when clients of ours are moving from abroad to Ireland they are keen to understand their tax domicile and how this impacts their Irish tax liability. We outline below a high level summary of the issues to consider when determining tax domicile.

Domicile

Domicile is a complex legal concept which has several critical implications for Irish taxation. It is unrelated to tax residency. Domicile is the country which is considered a person’s permanent home and is distinct from legal nationality. At birth every individual acquires a “domicile of origin”. It is not possible to be without domicile and it is only possible to have one domicile at a time. It essentially indicates the country you regard as your permanent home.

Domicile of origin

Assuming an individual’s parents were married and living together at the time of their birth they acquire their father’s domicile. This can be case even if the father subsequently changes their domicile. If your parents were unmarried at the time of your birth you take your mother’s domicile. Until you reach 18 years of age you follow your father’s (or your mother’s if your parents were unmarried) domicile. The domicile of origin is generally clear.

Domicile of choice

A domicile of choice can be acquired where an individual can demonstrate they have abandoned their domicile of origin. However this is not straight-forward as the burden of proof always lies with the taxpayer to demonstrate they have in fact acquired a new domicile. If the evidence is conflicting or not decisive, the courts will normally decide in favour of the existing domicile. The domicile of origin is generally clear, and the main area of difficulty when dealing with domicile is the question of whether or not a person has acquired a domicile of choice.

A domicile of choice can be acquired by making a permanent home away from the individual’s domicile of origin. This requires that all ties are severed with the domicile of origin.  In order to become Irish domiciled an individual would need to take up permanent residence in Ireland with no intention of returning to the country of their previous domicile.

Actions that may indicate you have abandoned a domicile in your previous home location include:

  • Disposing of your private residence
  • Buying a new residence in your new country
  • Making a will under the law of your new country
  • Acquiring a burial plot in your new country
  • Joining local clubs and societies
  • Disposing of business interests in your previous country

These are just some of the possible indicators – there are more. Seek professional advice to determine your domicile. The facts and circumstances for each individual need to be considered.

Interestingly, an individual who is Irish resident but not Irish domiciled id taxed in Ireland on foreign source income ONLY to the extent they remit the income to Ireland. This is referred to as the “remittance basis” of taxation. This basically means that if you don’t bring the money to Ireland you won’t pay tax on it here. There is scope for planning to ensure this basis of taxation can be of benefit to non-Irish domiciled individuals. Get professional advice before you relocate where possible to fully benefit from this if you are foreign domiciled.


 

Important links: 

 

  #MapMyMove- Our coaching Services - Confused or lost and need some direction, book a session with us to help untangle the confusion and work out your route of immigration

   Budgets 

   Tax and Salary deductions: The Basics 

   PSRI, USC, Tax, Pensions and Customs and Revenue

   Habitual Residence, Means Testing, Benefits, Permanent residency and Naturalisation - What is Habitual Residence, Means Testing, Benefits, Permanent residency and Naturalisation

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