Dáil Éireann Debate, Tuesday - 14 June 2022
407. Deputy Thomas Pringle asked the Minister for Finance the tax rules regarding a person who works at sea in international waters for longer than 185 days per year; the tax-free allowances that are available; and if the person is exempt from paying income tax or social insurance contributions to any state (details supplied). [30458/22]
Amharc ar fhreagraIt would appear from the Deputy’s Question that the individual concerned is an Irish national who has retired in the State, having worked at sea in international waters for a number of years. During this period, the individual was resident in the Netherlands and worked with several different shipping companies which were registered in different countries. While it is not possible to give definitive answers based on the information supplied the following general information is relevant. If the person wants to clarify his or her tax treatment, he or she should contact Revenue.
Tax treatment of income in Ireland
An international seafarer who is resident and domiciled in the State will be subject to Irish income tax on his or her worldwide income, including income derived from the exercise of an employment on board a ship in international waters. Section 819(1) of the Taxes Consolidation Act 1997 (TCA 1997) provides that an individual is resident in the State for tax purposes for a tax year if he or she is present in the State for:
i. 183 days in that tax year, or
ii. 280 days between that tax year and the previous tax year, with a minimum of 30 days in either tax year.
With respect to tax incentives applying to those working in the commercial maritime sector, section 472B TCA 1997 provides for the Seafarers’ Allowance.
The Seafarers’ Allowance provides an allowance of €6,350 to individuals working in the shipping transport sector. Along with other conditions, an individual who wishes to claim the allowance must be at sea for at least 161 days in the course of the year and carry out their work wholly on-board a sea-going ship while on an international voyage. Further information in relation to the Seafarers’ Allowance is available in Tax and Duty Manual Part 15-01-30 - Seafarer Allowance on the Revenue website.
This incentive may only be claimed by Irish residents assessable to income tax under Schedule D or Schedule E (i.e. self-employed or an employee). In general, non-resident individuals are not entitled to any of the normal personal credits, reliefs, and deductions, including the Seafarers’ Allowance. However, in certain circumstances, full or apportioned tax credits, reliefs or deductions may be available under section 1032 TCA 1997. Apportioned tax credits are calculated based on the proportion which the income of the non-resident which is assessable to Irish tax, bears to their total worldwide income.
Tax treatment of income overseas
In general, the state where an international seafarer is liable to tax on income derived from the exercise of an employment on board a ship in international waters will depend on a number of different factors, including, but not restricted to the following:
- the domestic tax rules in the state of residence of the seafarer;
- the tax rules applying to the employment income of international seafarers in the state where:
- the employment is held and from where the employment income is paid
- the vessel is registered
- the vessel is managed.
On this basis, it is not possible to confirm that a person who works in international waters for more than 185 days in a year is exempt from paying income tax or social insurance contributions on their income to any state.
In cases where the employment income of the international seafarer is subject to tax under the domestic tax rules of two jurisdictions, the terms of a double taxation agreement (DTA) concluded between these jurisdictions may apply to alleviate double taxation. In such instances, Article 15(3) of the OECD Model Tax Convention provides that two jurisdictions may agree that remuneration which is derived from an employment exercised aboard a ship operated in international traffic is taxable in the country in which the place of effective management of the operator of the ship is located.
For example, an international seafarer who is resident and domiciled for Irish tax purposes will be subject to Irish income tax on his or her worldwide income, including that derived from the exercise of an employment on board a ship in international waters. If the seafarer is subject to tax on this income in another jurisdiction with which the State has a DTA, then the income may be relieved from double taxation in accordance with the terms of the DTA.
