Your potential liability to income tax in Ireland is subject to a number of considerations. In determining your income tax liability, the Irish Tax Authorities look at whether or not you are:

•     Resident in Ireland
•     Ordinarily resident in Ireland
•     Domiciled in Ireland

If you fall into any one, or more, of the above categories, you will have a liability to tax in Ireland. If you are not resident in Ireland, you may still have a liability to tax if the duties of your employment are carried out in Ireland, or if you have investment income arising in Ireland.

Resident and Ordinarily Resident

There are two alternative tests used for determining an individual’s residence for tax purposes. In the first test of residence, you will be treated as a resident in Ireland if you are present in Ireland for 183 days or more in a tax year. A tax year starts on 1st January and ends on 31st December.

If the first test does not make you a resident, the second test of residence is applied. Under the second test, if you spend 280 days or more in the tax year in question and the previous tax year taken together, you will be treated as resident in Ireland.

However periods of presence, which do not in total exceed 30 days in a tax year, are disregarded.

Example
For instance, if you were in Ireland for a full year, say 2003 and left permanently on 30th January 2004, you would be resident for 2003 as you would have spent more than 183 days in Ireland. You will not be regarded as resident for 2004 as your days in Ireland during 2004 did not exceed 30.

Ordinarily Resident
You will be given an ordinarily resident status if you have been tax resident in Ireland for three tax years consecutively. If you previously lived in Ireland and currently live  overseas, you will have shed your ordinarily resident status if you have lived outside for three consecutive tax years.

If you are now planning to return to Ireland, you can achieve significant tax savings through careful tax planning if you are an Irish citizen not ordinarily resident here, or if you are not domiciled in Ireland.

Income tax and the remittance basis

As a tax resident you would be liable to tax on income arising in Ireland if the source of your income is employment in Ireland, rent from property situated in Ireland, interest arising on bank accounts in Ireland etc. You may also be potentially liable to income tax in Ireland on worldwide income.

Remittance basis
 
The remittance basis may apply to overseas income, if you are:

(a) An Irish Citizen who is resident but not ordinarily resident in Ireland, or
(b)An individual who is not domiciled in Ireland

If you fall into one of the categories mentioned at (a) or (b) above, your tax liability will be on your overseas earnings, i.e., amounts of income remitted into Ireland from overseas sources, eg., 
•     From an overseas employer
•     Overseas bank interest
•     Overseas dividends and other investment income
 
Please note that the remittance basis of assessment does not apply to income arising in the UK.

Savings

All your savings prior to becoming tax resident in Ireland can generally be remitted into Ireland without incurring a tax liability. However, if interest (ie. income) is also  part of the savings account while you are resident in Ireland, you may have to incur  tax liability on the interest.

To avoid this, you can split the interest from the capital.

Allowances and Reliefs

If you do fall into the Irish income tax net, you may well claim certain allowances and reliefs. The main tax reliefs are summarised below:
•     tax free relocation costs
•     split year residence relief
•     relief under the double tax treaty
•     mortgage interest relief
•     rent relief
•     certain medical/dental expenses
•     certain tuition fees
•     permanent health insurance
•     pension contributions

Where possible, you can negotiate with your employer to pay your relocation costs, which in some cases, may be tax-free. If you have investment income arising overseas, you can claim relief available under the tax treaty (a tax treaty that exists between Ireland and the overseas country).

Personal allowances and income tax rates

Ireland operates a system of tax credits rather than personal allowances.

The income tax credits for 2003 are:
Single persons €1,520
Married couples €3,040
PAYE Credit* €800
* Not available to proprietary directors and the self employed

The income tax rates for 2003 are as follows:
Single persons
20% on the first €28,000
42% on the balance

Married persons (one spouse working)
20% on the first €37,000
42% on the balance

Married persons (both spouses working)
20% on the first €56,000
40% on the balance

Social Security and Levies

Employees
Apart from income tax, certain social security taxes have to be paid on earned income. There is an exemption bar though.

A health levy, charged at the rate of 2% on all income (without limit) also applies to those falling into the Irish income tax net, but those with aggregate earnings of less than €18,512 are exempted.

Self-Employed
Self-employed individuals are required to pay social security at the rate of 3%, plus the 2% health levy on all income without limit.