High rates of personal tax
You may have heard about the Corporate Tax rate in Ireland is very low at just 12.5% However, did you know that where personal taxes are concerned, Ireland is a High Tax jurisdiction. Once you have a salary or pension income in excess of €35,300 in Ireland, your effective tax rate is 52%. Income Tax is 40%, Universal Social Charge ranges on a scale from 0-12%, and PRSI (National Insurance) is 4% for those under age 66.
There are no ISAs, and the annual capital gains tax exemption is just €1,270.
Investment funds (as you would typically hold in an ISA) are subject to a flat rate of tax of 41% on both income and gains and a NOTIONAL Tax charge applies every 8 years even if no disposals are made. This means that tax free investments you may hold on the 31st December while UK resident are likely subject to a tax charge of 41% on unrealised gains from when you acquired them (even if they are in an ISA)
Investment funds popular with DIY investors in the UK like low-cost funds from Vanguard are not easily accessible to investors in Ireland and there is no commission ban on intermediaries so finding an adviser who works on a fee-basis in Ireland is virtually impossible. You will generally be sold a unit-linked investment bond paying upfront commissions of up to 5% and early surrender penalties for the first 5 years. This is exactly what the UK was like back in the late 1990s early 2000s before the Retail Distribution review and I know this for a fact as I worked as an Independent Financial Adviser in the UK between 1992 and 2007.
I’m a Certified Financial Planner in Ireland and have been developing tax efficient investment solutions for Irish Residents for the last 13 years. Irish Revenue issue an Ebrief on the 1st September this year which has once again thrown the taxation of investments in Ireland into a state of general confusion
So, our advice to investors who have lived in Ireland their whole lives is to think very carefully about DIY investing. For those moving to Ireland from overseas, it's simply not sensible or practical to assume that the approach one can take in a jurisdiction like the USA or UK will work in Ireland. Quite simply – it won’t and when you realise your mistake it will be too late.
For those moving to Ireland or contemplating moving to Ireland the single most significant step you can take is to get in touch BEFORE you move and certainly BEFORE you become tax resident in Ireland (tax year is to the 31st December and you need to be resident in the State for 183 days in the year you arrive to be tax resident). From a planning perspective this lends itself to arriving in late August or later and generally our advice is to sell everything you own before moving and restructure for Irish Tax.
Packaged Retail Insurance and Investment Product Regulations ("PRIIPS")
Due to EU regulations that have been written into Irish Law many of the solutions we propose for our clients are not accessible to DIY investors and require an intermediary to establish an investment account and appoint a Discretionary Investment Manager. The potential tax savings easily justify the additional costs as we set out in our guide which can be found here
Our tax guide for 2020 which needs to be comprehensively rewritten on the foot of the lastest Revenue e-brief can be found here
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