Relocating to Ireland: What does this mean for your tax situation?

Those of us living in Ireland are familiar with our payslips or our employees’ payroll systems. However, for those who are relocating or thinking about relocating to Ireland, this information will need to be fully understood to ensure smooth transition to the Irish tax system.

Firstly, the basics. The standard taxes due in Ireland include the PAYE (Pay as you earn), PRSI (pay-related social insurance) and USC (Universal social charge). An employee in Ireland is taxed on his/her salary, fees, wages, commissions and bonus, as well as any benefits from the employment. In other words, payments in cash form and non-cash benefits provided by the employer are taxable on the employee.
The criteria used to determine an individual’s liability to Irish tax are: their residence, ordinary residence and domicile status. It’s important to note that the Irish income tax year is aligned with the calendar year.
PRSI is Ireland’s equivalent of social security. The PRSI goes into a social insurance fund for social welfare payments and pension benefits. Currently you need to have paid 520 Class A PRSI contributions to apply for a pension. Therefore as the majority of those on secondment from abroad will not stay in Ireland for 10 years it is worthwhile for these employees to consider keeping their own national social security.
Tax–relief and exemptions in relocating to Ireland
There are a number of tax-relieving provisions available to employees coming to work in Ireland.
Firstly, the duration of residency in Ireland and work done outside of the country can all affect the tax implications for an employee. In other words, an individual, who can show that they intend to remain resident in the following tax year, is not taxable on earnings from an employment exercised outside Ireland in the part of the year before their date of arrival even if they are resident for the full tax year.


Other expenses and costs involved in relocation, which can be offset against tax include:
* Relocation expenses such as shipping, storage costs and costs associated with the purchase of a new home (e.g. stamp duty, solicitors’ fees) can be reimbursed tax-free
* Accommodation and subsistence costs for the first 12 months of an assignment, that is expected to last less than 24 months, can be paid or reimbursed tax-free
* Employer contributions to Revenue-approved occupational pension schemes. This exemption can be extended to foreign employer pension schemes in certain circumstances. Employee contributions to such schemes are deductible for income tax purposes, subject to certain income and age
related limits. There is no deduction for PRSI and the Universal Social Charge
* It is possible to obtain Revenue approval in respect of certain share schemes, e.g. Approved Profit Sharing Schemes and SAYE Share Option Schemes, which can result in tax savings for employees. All such share schemes are exempt from income tax but are subject to PRSI and the Universal Social Charge.
* SARP (Special Assignee Relief Programme) -there is currently a tax-saving opportunity, which applies to non-Irish domiciled individuals, or Irish domiciled individuals who have not been resident in Ireland for the previous five years. There are a number of conditions to be met, including that the individual must have worked for the group 6 months prior to arriving in Ireland. This relief operates by reducing the taxable employment income by an amount calculated as follows: (A – B) x 30% where: A is total remuneration subject to a cap of €500,000 and B is €75,000. SARP relief is available for a maximum of 5 consecutive tax years.
* Furthermore, employees who qualify for SARP can also recover the cost of one return trip for their family to their home country from their employer tax-free and can also have school fees (of up to €5,000 for each child) paid by the employer tax-free.
For more information on this and any other tax or pension issues, please get in touch today.