The residency rules were last updated by the Fianna Fáil-Labour Government in the Finance Act 1994 following a comprehensive review of the matter by the Revenue Commissioners and my Department. Prior to this update, the rules were based on a mixture of statutory provisions, old case law and Revenue administrative practice. That was unsatisfactory. The new residency rules set out in the 1994 Act simplified and clarified matters and were welcomed generally. All income earned in the State is normally taxable here. Therefore, if an individual is employed in the State, tax is paid here on his or her employment income. If an individual is resident in another state, that person is subject to tax there and receives credit for any tax paid on such Irish income.
Under the rules set out in the Finance Act 1994, a person is regarded as resident in the State for tax purposes in the tax year if he or she spends 183 days in the State in that year or 280 days on aggregate in that and the preceding tax year. An individual who is present in the State for 30 days or less in the tax year will not be treated as resident for that tax year unless he or she elects to be resident. Also, a day will only count if an individual is present in the State at its end.The Cinderella provision to which Deputy Burton referred was made on foot of a suggestion by the former Deputy, Ivan Yates. As Fine Gael spokesman, he pointed out the anomalies which would arise if the provision were not made. Residency rules are common in most jurisdictions. The key rule involving 183 days which contribute to the term of residence in the State is mirrored in several other countries, including Australia, Austria, Canada, the Czech Republic, Denmark, Finland, Germany, Italy, New Zealand, Norway, Portugal and Sweden. The only OECD country where tax status is not based on residency is the United States of America. Every other country of which we are aware has a residency rule.
I have no plans to review further the tax laws on residency status. The current comprehensive system was set out in the Finance Act 1994 after detailed consideration by Government of all relevant issues. Last April, the United Kingdom published a background paper, Reviewing the Residence and Domicile Rules as they Affect the Taxation of Individuals. It was acknowledged in this paper that the jurisdiction's current rules on the determination of residence and domicile, which had developed over the past 100 years, were complex, poorly understood and unreflective of the reality of today's integrated world. The UK rules are the rules we would be operating if the 1994 changes had not been made. In the United Kingdom, one is not deemed to be resident on the day one enters or leaves the jurisdiction. One could arrive on a Monday and leave on a Tuesday without being deemed to have used up any days.
I am sure there are many reasons people maintain their tax residency outside the State. Every OECD country, with the exception of the United States, has residency rules. Our rules are appropriate and I have no intention of changing them.
