Dáil Éireann Debate, Tuesday - 16 June 2020
118. Deputy Ged Nash asked the Minister for Finance the estimated revenue that would be accrued from discontinuing the remittance basis of taxation for income tax and capital gains tax; and if he will make a statement on the matter. [11440/20]
View answer119. Deputy Ged Nash asked the Minister for Finance the estimated revenue that would accrue by supplementing the existing 183 and 280-day test for determining the tax residence of a person with additional criteria relating to a permanent home and his or her centre of vital interests; and if he will make a statement on the matter. [11449/20]
View answerI propose to take Questions Nos. 118 and 119 together.
I am advised by Revenue that an individual’s liability to Irish income tax is determined by reference to the source of his or her income and his or her Irish tax residence, ordinary residence and domicile status for a particular year.
An individual will be considered tax resident in the State if he or she is present in the State for:
- 183 days or more in a tax year; or
- 280 days or more in a tax year and the preceding tax year when taken together, with a minimum of 30 days in each year.
Once an individual has been tax resident in the State for three tax years, he or she will also be considered ordinarily resident from the fourth year.
Domicile is a complex legal concept and is not defined in tax legislation. This concept is a much more permanent one than that of residence. Every person must have a domicile and a person can only have one domicile at any particular time. An individual is born with a domicile of origin, usually the domicile of his or her father but it is possible for an individual to acquire a domicile of choice.
An Irish resident and domiciled individual is taxable on his or her worldwide income. Generally, non-residents are only taxable in respect of income from Irish sources. However, individuals who are not resident in the State, but who are ordinarily resident in the State, may also be liable to Irish income tax in respect of certain non-Irish sources. This is subject to any relief being provided by the terms of a relevant Double Taxation Agreement.
An Irish resident but non-domiciled individual is liable to Irish income tax on his or her Irish source income and foreign income to the extent that it is remitted to the State.
An individual who is not resident in the State, but who is ordinarily resident and not domiciled in the State, will be liable to Irish tax on his or her Irish income and foreign income to the extent it is remitted. However, income from an employment, all the duties of which are performed outside the State is not liable to Irish income tax, even if it remitted to the State.
An individual who is both not resident and not ordinarily resident in the State is liable to Irish income tax on his or her Irish source income only. This applies regardless of his or her domicile status.
As regards the Deputy’s specific question set out in question number 11449/20, the matter is quite complex but the following sets out a summary of the likely position.
An individual who is tax resident under either the 183 or 280 day test and who is also domiciled in the State is chargeable to Irish tax on his or her worldwide income and capital gains. This is subject to any provisions of a relevant Double Taxation Agreement. Thus, an augmentation of the residence rules would not yield any additional taxes on the basis that such individuals already have an unlimited liability to tax in the State.
An individual who is not tax resident under either the 183 or 280 day test and who is ordinarily resident and domiciled in the State will be taxable on their worldwide income with exceptions in relation to certain foreign source income. This is to ensure that, as far as possible, only sources of income for which a taxing right has been allocated to the State under the terms of a Double Taxation Agreement are within the charge to Irish tax. To the extent that such income is not within the charge to Irish tax, there is no requirement to report such amounts to Revenue. Thus, there is no way of quantifying any additional tax which might accrue to the State should the statutory residence tests be augmented as suggested by the Deputy. Even if such an augmentation were to be given legislative effect, the individuals affected are likely to be tax resident elsewhere and there is no guarantee that the State would be allocated a taxing right on such foreign sources of income. This could mean that no additional taxes might accrue to the Exchequer.
Non-domiciled individuals are subject to tax on what is known as the remittance basis of taxation. This means that they are taxable on Irish sourced income and on foreign sourced income to the extent that it is remitted to the State. A legislative change to the tax residence rules will not change the basis of taxation for such individuals and, thus, no additional taxes would accrue to the Exchequer. This is due to the fact that the charge to tax in such cases is driven by the individuals’ non-domicile status rather than their domestic residence position.
In relation to the Deputy’s question regarding the abolition of the remittances basis of taxation (question number 11440/20), it is not possible to provide an estimate of the revenue that would be accrued if this treatment discontinued, as there is no statutory obligation on those availing of the remittance basis of taxation to make an annual return of his or her un-remitted income and gains. It is also important to bear in mind that if the remittance basis of taxation ceased, the State may not have an automatic taxing right on the sources of unremitted income and gains in all cases. The provisions of any relevant Double Taxation Agreement in place between the State and either the source state or state of residence of the taxpayer would determine any such taxing right.
