I moved to Ireland from the UK at the end of 2007 and I set out below in no particular order, my top tips for forward planning your finances as a Foreign National intending to move to Ireland.
Note that some of this analysis assumes that you are not an Irish National returning home.
The Three Big Questions relating to Foreign Nationals
- Where do you call home?
- Where your assets are physically located?
- What are your intentions in the future?
Individuals have become more mobile over recent years. Irish individuals increasingly hold non-Irish investments, whether holiday homes, stocks and shares or other investment assets in Europe and further afield and, according to the last census, around 20% of the population of Ireland are Foreign Nationals.
How do we deal with financial planning for non-Irish assets, and how do we advise non-domiciled individuals living in Ireland?
The starting point is the fundamental principle of Irish private international law that the law of domicile (lex domicilii) of an individual determines the succession of moveable property whereas the law of the country where the property is situate (lex situs) determines the succession of immoveable property.
In other jurisdictions, particularly civil law countries, either the habitual residence or the nationality of the individual determines the succession of moveable property. In some jurisdictions, this factor also determines the succession of immoveable property.
This can give rise to complicated issues from a legal perspective.
Domicile is a complex legal concept that is determined by reference to a person’s intention to permanently or indefinitely reside in a country together with their physical presence in that jurisdiction.
There is therefore a significant element of subjectivity, based on a person’s intentions. However, objective proof is sought in situations of doubt.
A number of factors which may assist in determining domicile are:
- Place of Birth
- Domicile of Parents
- Marital Status of Parents
- Any changes in parents’ domicile
- Declaration of domicile (for example statements in a will
- Execution of a Will under the laws of another territory
- Property owned by the taxpayer, and accommodation occupied by him or her on a regular basis. (it the accommodation permanent living accommodation or simply a holiday or occasional home?)
- What business connections does the taxpayer have with Ireland, or another territory?
- Where are the taxpayer’s closest personal, and social connections?
- How often does the taxpayer visit?
- Where do the taxpayer’s spouse and any children reside? Where are his extended family?
- How much time has the taxpayer spent in Ireland during the past 10 years?
- Has the taxpayer any plans to move permanently away from Ireland? What circumstances would trigger such a move?
- Has the taxpayer purchased a grave or made any burial arrangements?
A person may only have one domicile at any one time, although a domicile of origin can be displaced by a domicile of choice.
An individual will always be domiciled somewhere, even though it may be unclear exactly where that is.
There is no statutory test or definition of domicile, and it is purely a common law concept. An additional complication is the fact that the issue of domicile is not determined on universal rules. An Irish Court will determine a person’s domicile according to Irish law, while an English Court will determine the same issue based on English law. The result may not always be the same.
It is clearly important to seek advice prior to moving to Ireland
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Here are our top financial planning tips for Foreign Nationals considering moving to Ireland
1) Importing Cars
Vehicle Registration Tax (VRT) in Ireland is a significant tax payable based on the open market selling price (OMSP) of each vehicle. This isn’t the same as the price you paid for the car!
For example, a 2012 BMW 320 with 90,000 on the clock has a VRT of €2,190
The good news is that VRT can be avoided with some forward planning.
If you own a car you can bring it in to Ireland tax free provide that you meet the following conditions:
The vehicle must:
- be your personal property
- have been in your possession and used by you for at least six months before transfer of residence. Any possession and use in the State, even during times when you were living abroad, does not count.
- brought into the State within 12 months of the date of your transfer of residence
- be fully tax and duty paid.
Evidence required in respect of the vehicle will usually consist of:
- vehicle registration document
- certificate of insurance
- purchase receipt
- ferry ticket to show when the vehicle arrived in the State
- evidence of the vehicles use abroad, for example, service and maintenance records and evidence that motor tax has been paid.
The VRT relieved becomes payable in full if you sell or dispose of the vehicle within 12 months following registration.
You do not qualify if:
- you have been abroad on a task of any definite duration
- granted similar relief for a vehicle in the previous five years.
There is no limit to the number of cars you may bring into the State on a VRT exemption provided you meet the pre-owned and registered condition and you only need to keep the car for 12 months following registration in Ireland.
Continuing our VRT example above A 2012 BMW 320 currently costs about £8,000 (€8780) in the UK
You would need to factor in the transportation costs and storage for a year, but the opportunity cost at current interest rates of having €10,000 tied up in a car is only around €10 in bank interest. So, think about buying a second (or third car) and importing it, putting it in a lock up for year and selling it to a neighbour.
2) Bank accounts and Foreign Exchange
Its very easy to avoid the uncompetitive rates offered by High Street Banks when moving substantial amounts from one currency to another.
We recommend using a specialist currency broker
Whilst Revolut has the edge in terms of functionality, they are moving their operations to Dublin and therefore in order to benefit from Remittance basis planning (see below) we recommend opening an account with German Bank N26.
3) Investment Taxes and Domicile planning
The taxation of personal investments in Ireland is relatively complex with few tax shelters. Although we can provide a tax optimised solution for Irish residents (see tax guide) for those investors who are Foreign Nationals and who are non-domiciled (Father not Irish) there are some very substantial planning opportunities presented by the remittance basis of taxation. (see our remittance basis guide )
To be effective this requires forward planning and consideration of the following steps
- Liquidate all of your current investments before becoming Irish resident in order to “clean” your capital for remittance planning
- If one spouse or partner is non-domiciled, consider putting all investment capital into their sole name prior to moving to Ireland
- Remember overseas tax shelters (like UK Individual savings accounts (ISAS) for example) are taxable in Ireland
- Many forms of European Investment Funds (UCITS, FCPs, OEICS, SICAVs etc) are not eligible for remittance basis planning and are subject to potentially punitive rates of tax in Ireland (41% on both income and gains tax year 2020). You will need to sell these before moving to Ireland taking care to consider the tax implications where you currently live.
- Buying an Irish rental property for “investment” purposes could be a poor investment decision for many non-domiciles
4) Regular Savings
Our analysis of regular savings plans, in particular for children of Foreign National, suggests that Irish Unit Linked Savings plans are poor value when compared to regular savings funded by gifts from non-resident relatives.
Consider setting up an offshore regular savings plan funded by gifts from non-resident relatives as a particularly tax efficient form of saving.
5) Income Tax
Income tax in Ireland is at a rate of up to 55% (tax year 2020) on certain forms of earned income.
We met with one Foreign National who was taking up an employment contract with a large US multinational to work in Dublin. On reflection he would have been much better off working out of their Paris office.
Take tax advice before signing contracts of employment.
My own case study sets out some of the issues to consider in respect of planning around existing pensions when moving to Ireland.
- The Irish Lifetime Allowance of €2m is in addition to the allowances available in other countries. I therefore have a £1M UK Allowance and an Irish €2m allowance for example
- If you transfer a pension to Ireland from another country, although the initial value is discounted against the Irish Lifetime allowance, Irish Revenue argue that the growth on the Foreign Pension is set against the Irish Lifetime allowance. It may be more appropriate to leave benefits in the country of origin or transfer to another EU country instead of Ireland.
- You can continue to contribute to a UK Stakeholder pension and claim tax relief at source for up to 5 consecutive tax years after leaving the UK
- You can continue to pay voluntary national insurance contributions in the UK to top up your UK State Pension and also qualify for an Irish contributory State Pension
7) Health Care
Health Insurance in Ireland operates under a system known as lifetime community rating.
If you are aged 35 or older and do not have health insurance, your premium may cost you more due to Lifetime Community Rating legislation.
In Ireland, everybody is charged the same premium for a particular health insurance plan, irrespective of their age, gender and the current or likely future state of their health. This is called Community Rating.
On the 1st May 2015, the government introduced Lifetime Community Rating legislation. Under Lifetime Community Rating (LCR), community rating is modified to reflect the age at which a person takes out private health insurance. Late entry loadings are applied to the premiums of those who join the health insurance market at age 35 or over.
If you are 35 years of age or over and you do not have health insurance, it will cost you more due to Lifetime Community Rating.
If you take out private health insurance earlier in life, and retain it, you will pay lower premiums compared to someone who joins when they are older.
8) Wills & Estate Planning
Benjamin Franklin said; “There is nothing in life more certain than death and taxes.”
Estate Planning can be defined as; the orderly and tax efficient transfer of assets/wealth between individuals, and most commonly to the next generation.
Estate planning covers both gifts and inheritances. Trusts are equally relevant in both circumstances, as one of the main tools to facilitate estate planning arrangements.
The core elements of estate planning are legal effectiveness, tax efficiency and practicality.
For many individuals, estate planning can be very straightforward.
In other cases, complexities can arise, including divorce, second marriages, non-marital relationships and children, difficult relationships with children, concerns about in-laws, children in marital difficulties, children with significant debt, children with special needs, complex asset structures, assets in foreign jurisdictions and the impact of cohabitants legislation.
Non-domiciles are not subject to Irish Gift and Inheritance Tax until they have been Irish Resident for 5 consecutive tax years. Consider making gifts before being caught by Capital Acquisitions Tax.