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VOICE-OVER:
This podcast channel it’s about you, successful international entrepreneurs, successful ex-pats, successful investors. Sponsored by HTJ.tax
DERREN JOSEPH:
Good evening and good morning of the day. If you’re in the U S thank you for joining us today on htj.tax. Every week, we do live streams on tax related topics. And this evening we are honored to have with us Damien Malone, who is going to lead us on a presentation on Ireland taxes. And then we’ll jump into the questions that you sent us. So we do have that Q and A afterwards, just to remind you that this is being live streamed and it is being recorded. So if you’re joining us on zoom and you do not want your image to be captured, just keep your cameras switched off for those, and I’m going to mute, right? I’m also going to mute you. So please keep your mic on mute. If you want to ask a question, regardless of which platform you’re looking at us on, feel free to type in the box below, and we will handle the questions or comments in the order in which we receive them. Of course, I’m legally obligated to say that nothing we say here should be construed as advice. We are not giving you information, and you’re going to run off and do whatever we say, right? We’re having a general conversation about general principles. You can treat it as education, or you can treat it as entertainment. Now, when you are ready to, to make decisions that about you, your business or your personal tax situation, you need to retain someone who will know your situation inside out and can advise you accordingly. So again, we are not giving tax advice. So without further ado, I introduce you to Damien. Damien, over to you.
DAMIEN MALONE:
Hi guys, hope everyone can hear me. Okay. I hope my internet is good. I as a little mini crisis before we came on, we’ve a storm in my part of the world in Ireland and my internet was down. So hopefully it stays going and all that. If it drops off, I’ll have to reconnect on my phone. So I’m just going to share my screen with you all, just to get my slides up and will we get into, and we get into my piece and so hope you can all see and see my screen there out. So I’m Damien Malone, I’m the founder of Malone and Co. and we’d be by Dublin standards, considered a mid-size and accountancy and tax practice. And we’re based on the west side of Dublin. And we have, as of now, I think we have 28 staff soon to be Tarpley and in the, in the new year. And that’s a mix between the different disciplines that we, and that we service between general accounting, audit, tax corporate services and company secretarial. So that the title of our at chapter saved on U S X pot taxes in Ireland guys. And what I’m going to do is I’m going to give you a quick rundown of what the taxes in Ireland actually are to begin with. And I suppose then how day impact and somebody’s coming to live in Ireland. And for the first time that’s some, that’s not an Irish national. So our first tax is income tax, and this is really tax on peoples on the, on the income that they air on Ani, I suppose, investments that degenerate. So in Ireland, it’s called income tax, but really we have three different, I suppose, strands of direct taxes on people’s income. So the first is PAY, which is pay as you were. The second is universal social charge USC, which was introduced and in our recessionary, in our recessionary years when things were and were not so good and on the economic front. And the third is peer society, which is pain-related social insurance. So each of the tree are taxed completely independently to the other, and they all have their own, and I suppose their own calculation and their own calculation to be done. And I suppose we’ll come to that a little bit later, obviously, if you’re a, if you’re a self-employed person or if you’re an employee, there’s a different processes for how income tax is calculated and collected on your M on your pay corporation tax, which has been a big money spinner. And in recent times for the Irish Exchequer, with the amount of, I suppose, international business and international people that want to set up their business and investment interests to Arland, and our headline rate for that am is obviously the 12 and a half percent raise. And that’s generally covers all forms of trading income and there’s different tax rates then obviously for corporation tax far and passive our investment income as well, which we can put you on a bit later. Capital gains tax is where we am is the tax in Ireland. That’s triggered when moon and selves are disposed as of a asset at outer gain, of course. And the headline rate for that is Turkey 3% on profits made from, you know, from such gains. And there are quite a few exemptions to that I suppose, very in Salford as well for business people. And we get to that later as well, capital acquisitions tax. This is essentially gift on inheritance tax. So if you come into a gift and RFU are in receipt of inheritance, and this tax is what applies to that and to raise a doc similar to capital gains tax is target 2% again, with different and different calculations and different am, I suppose, levels at which the tax applies, depending on a variety of circumstances, value out of tax VAT. So for anyone living in America, who they probably, while they may not have experienced this before, but this is a tax that’s generally level levied on consumers on everyday goods and services. That’s their If someone was coming to Arland too, and some background noise there as guys, hopefully it’s spirit up there now. And if somebody was coming to Ireland for her to set up a business for the first time, and you actually, when you take on our assumed the role as a business owner, and more often than not, you will be obliged to collect VAT on behalf of the Irish government and, and or if it’s in Neu jurisdiction and you’ll become the VAT collector when you’re in business, Stan, Judy is a tax on legal documents and such as if he promoter to buy a house, you will pay stamp duty, your pay stamp duty on purchasing your house. And that’s essentially walked out his and we can, a couple of years ago, we introduced local property tax and that’s a tax on property ownership essentially. And depending on where your property is located and the value of your property, not determines and not determines that the level you pay and it’s a manual charge. So there’s the taxes that we encounter on a, on a, on a, on, on a periodic basis in Ireland on an annual basis as we go along. So what determines the charge to tax in Ireland? So obviously it’s based on a couple of these concepts that we have in tax and Forsman being residents and really to be classed as a, as, as tax resident in Ireland, you have to be here for 183 days or more in a calendar year are at between 280 days between two years. So if you’re not in Ireland in 2021, by, for 183 days or more at Butch, you are in Ireland between 2020 and 2021 for 280 days or more, you could still be classed as a resident and in Arland. And therefore that’s when residence tax kicks in. And again, where we have cases where an individual could have, and Coco satisfied a resident’s criteria of two jurisdictions are potentially more tend to look at various factors, such as, you know, where’s the persons, I suppose, center a Viper and economic interests and where they would have a permanent home available to them. So for anybody sort of floating around a place that is concerned about this and happy to hear, I suppose, and give our thoughts on that. If there maybe am considering either coming to Arland are, they’re spending a lot of time in Ireland and don’t want to trigger a and it tax and a tax residency scenario where the Irish state would have a claim under income or gains. We have this other concept then called ordinarily resident. And this is where an individual is resident in Ireland for three consecutive years. So if you’re a resident here for three years, you automatically become ordinarily resident, and it takes three years to lose your ordinarily resident status and the final concept. And what’s very important in Ireland and very advantageous as far. And for overseas people coming to live and work in Ireland for the first time is the concept of dominance audit. And then just domiciles. Generally, everybody has a domicidal generally, and where, you know, where you are, where you were born, or where your father was born. You would generally assume dosh and country as your country of domicile, and it is a difficult thing to change. And so if it’s a case, you, you know, you see, are you, you choose that you at you, you, you, you don’t want to be considered domiciles of a particular country. For whatever reason, you have to have a very compelling reason.There must be a lot of, I suppose, compelling evidence to indicate that that is your, that is your true, and that is your true position with that. So the M th th the domiciles piece leads into our next slide, which is on foreign income taxation in Ireland, and really disadvantageous arrangement that we have for overseas individuals that we call overseas individuals that we called to remit this basis of tax here. And this works by if you come and live and work in Ireland, but you’re not an Irish national, you’re not of Irish domiciles. You’ll only pay tax in Ireland on the money that you remit into Ireland. And that’s a very powerful relief that wants it’s utilized correctly and managed accordingly, and, you know, gives people a very good opportunity of accumulating significant wealth outside of the state while enjoying all the benefits of living and working in Ireland and evening availing of the, the Irish tax reliefs that are there on our resource income on that. So dot applies to income, and it applies to T to most, and to most gains as well from a capital gains perspective where you’re only liable to gains that you’re admit into Ireland and with that. And of course, as well, it generally only applies if you have value and wealth generated prior to in Ireland, you can generally, and you can generally bring that into Ireland without triggering the tax. And in Ireland on that. And I suppose there’s this distinction that, that you would generally like to, I suppose, see a client make between at income and capital phones, that they would have the income being the annual periodic income degenerate for their livelihood and, and their income or capital phones then being there essentially their accumulated wealth. And it should be purely able to distinguish, like for like in a case where a person is non domiciled in Ireland, but is residing here on availing of the remittance basis of taxation and final point, Dan, just from a capital acquisitions tax point of view. And if you’re going to be residing in Ireland for th for capital acquisitions tax to trigger at, you have to be resident for five consecutive years here to fall within the charge to tax them are if most consists of that, that the inheritance that you would make most consists of our situated property are the person given you and the deceased person that you were going to take in her comes from at must’ve been resident or ordinarily resident here as a day to day. So again, in most cases, most inheritances for people that have, that have been in Ireland within five years, wouldn’t be caught within the day, went into charge to capital acquisitions tax here. So just to talk a little bit about the, about the filing regime in Ireland and what that entails for someone who comes and lives and work in Ireland. So obviously for income tax and people who are at business owners are people who are implied, but would have other investments, sources of income have to file an annual tax return. And it’s, it’s called a form 11. In some cases, it’s actually called a form 12, which is just a shortened version of that. And, but that’s what the annual tax declaration form is. It’s 20 something pages to completion. It’s pointed a daunting exercise for someone who has never saw one before. So generally the return is due by the end of October for each proceeding calendar year. So up to up to about four or five weeks ago, my office would have been extremely busy completing all our client’s income tax returns far to 2020 years. So you have at the end of October and in the year after to file and pay your tax. So you actually do that and you actually do get quite a bit of leeway when it comes to actually settling up your affairs, which is sometime after the actual income can be errand in generations from a corporation tax perspective. So again, this would be a scenario where someone comes to Arland and decides to set up a company to, to, to, to run their business interests. True. And you generally pay your corporation tax once a year, and that’s generally under 20 chart day of the ninth month after the financial period end, we do have a preliminary tax regime in Ireland and dice, and really how this works is after your first year in either the income tax or corporation tax system. And you are supposed to make a preliminary tax payment and fart at two years. So it’s a way of getting it at a down payment in respect of the current year. And there’s a different rule for an income tax and for corporation tax. But just to take note of that, and that is a requirement after year one, and for people who established and set up a business in Ireland, they will have to register for VAT most likely. And if the services that are that they are providing are valuable. And if there are that the services are in excess of that, the registration thresholds, which are quite low VAT returns are reader submitted on a bi-monthly basis, four monthly, six monthly, are you going to fight to have them on an annual basis on what determines your filing period is that the level of liability that you have far down payroll returns. So if you set up a business and you employ staff, you have to register as an employer and you have to operate a payroll. We have big change with this over the last two years or so with the introduction of what was called pay modernization, which really brings operating payroll into, into real time reporting. So every time we do a payroll submission for a client, whether it be weekly or monthly, and the figures get communicates it to the tax office at that period, it used to be the case that was only once a year and we’d file what the actual and staff numbers and staff figures and tax declarations and so forth, or that has changed and reading that’s the way taxes going in and tax them rotten. And all the main tax EDS is going now, her is real time reporting of all taxes. We do have a somewhat the regime in Ireland, if you get into difficulty and, and are delinquent in your tax affairs over here. So if you file late, you can’t be surcharged on your tax liability. And if you delay by a, you know, managing more than a short period of time to can charge you interest, they can charge a fixed penalties, and that are predetermined around a bound based on the actual return that you didn’t file. And if you’re unfortunate enough to fall file and come under scrutiny from an audit perspective, and if you’re, if, if they audit you on, they get a settlement from you for more than 40,000, your name does get published periodically. And every couple of months, they publish the defaulters list as we call it in the, in the local media in Ireland. So just to be aware of that as well, and I have a slide on the social security system in Ireland, and I would have touched on peer OSI as a component of that, the overall income tax charge in Ireland, and that we paid through our, and through our payroll hunt or employees or directors, or do we play at the end of the year and Judy income tax system, if we’re self-employed, and there’s generally two components to this, if you’re on a payroll working for a business, or if you’re an employer and an employing staff that, so we have what we call employee peer recite and employer parasite at the employee parasites at adduction level on the employee themselves. There’s different rates of that, but the general rate is 4%. And if you take on an, on a staff in our lens, you do have to pay employer Paris. At this moment in time, we have two rates of that employer, peer reside debt, the high end, most common rate being just over 11%. And I think now that the lower rate is just nearly 9%. So it’s quite a significant extra cost and to employing staff in Ireland. And unfortunately, it’s only going one way because it’s due to go up again. And it’s due to go up again in, in the years ahead and separate to Don as well in Ireland. We are, and we are introducing auto enrollment into, into pension schemes for employees, which we haven’t had before. So if you’re an employer, you have to make a contribution to your employees, you know, private pension, and then also we’re bringing in mandatory sick pay. So in Ireland, a lot of, I suppose, smaller employers wouldn’t have a sick pay policy, farther, further employees, and the employees would have to depend on the state for that it’s going to become mandatory. So we estimate that in 2025, which is just over three years away and aside from inflation and everything else, the cost of applying staff is going to increase by about 16 to 18% to take account of all of this. So anybody thinking of setting up a business in Ireland that was implied staff should be mindful of that. So disappear aside what this stores, this goes into a, into a phone that foams up the different benefits that the Irish and the Irish state pay out on with different classes of this parasite, social insurance, depending on your, depending on your circumstances, and depending on the nature of your, your work and your, or your employment. The two main classes that I’m going to touch on one is the most common class, which is class day. And this generally applies to, and to all employees that are that aren’t business owners, essentially the class S and at the class classes and side of it. Then as far as essentially self-employed people and company directors that would have a controlling interest in their business.And so decent titles, obviously demand benefits are, if you’re out of work, you get job seekers benefit. It qualifies you for the state pension in Ireland, which is quite advantageous. And about 270 euros a week. Once you me et a certain number of know of contributions over the years far, this, you, you, you know, you qualify for an orange state pension, which is, you know, a, a relatively valuable thing. They’ve increased it at the claiming age, all that it’s now, and it’s now 66, and they’re, they’re fighting to bring it up to 68. But if you live through your a hundred, it’s not a bad return for someone who may come and live and work in Ireland for a period of their lives and the self employed people, basically the differences between what they get and what the debt and that employee employed persons would get. You don’t qualify as things down for illness benefit for carers benefits for health and safety benefit are for occupation and injuries benefits. And these are a range of benefits that’s there. And under the social insurance provision and formed in Ireland, that all it is here aside goes into that. And that’s levied on income tax levied on profits and levied on wages in Ireland. So my final slide is just some general points that just am to talk through and give my talks on. And just to make you aware if you’re not already, if you’re not already aware, and it impacts on any of you that are listening in. And so the first is the syrup release. So this is the special assignee relief program at relief. This came in some years ago on the purpose of this really is, you know, for Irish incorporated businesses, to be able to attract the type of talent that they need at the, I suppose, the opera managerial levels, because we do have quite a high income tax regime in Ireland, and it kicks in at an early stage. So if you’re a single person over tardy 5,000, you’re going to be paying close to 50% of your income over 35,000 and on, on, on the personal taxes in Ireland. So this relief has, has the effect of, and for higher paid and higher paid and executives who Coleman work in Ireland, a portion of their income above 75,000 is exempt from income tax. On the 75,000, the beginning point goes up to half a million. So for, as I say, highly paid executives, it’s one measure that’s there that can, I suppose, make Ireland some bit competitive and in a, you know, in a very competitive global space for top talent, and for top executives, we have a tree or corporation taxing exemption, which is beneficial, or can be very beneficial for entrepreneurial people that have an idea, and they want to come and live and work in our, instead of business up here with basically if you set a business open Ireland and pay staff and our employee staff and pay social insurance on the half of those, don’t have staff that you imply you can get a credit for that social insurance against your corporation taxpayers. So you can earn close to a million euros in your forestry years tax book profits, and you may not have to pay any corporation tax on that if you are implying staff. So again, quite a useful measure, that’s there for someone who has a business idea and that, you know, that is prepared to come, are bringing a level of investment into Ireland to get it off the ground. And we have what’s called benefit and kind in Ireland and BIK, but this is a tax on benefits that if you’re a business owner and you’ll have a, a company arrangement, and you can’t really use your company and cashier company profits to, you know, to pay for benefits on your behalf. And so obviously the likes of accommodation and vehicles and that sort of thing, we’ve a, a tax measure. That’s there to counter the effect of that, where essentially they tax you on the notional value of the benefits that you am, that you receive. Again, we do have some exemptions to that, that we would recommend, and most of our clients and avail of those exemptions, that’s there. And on the, the bigger ones being on the vehicle side of things, you can actually drive an electric vehicle in Ireland. There’s no benefit in kind tax on that and appalled at once. You don’t go above the car or the certain value. And so that’s quite advantageous for a business owner. And then we’ve, you know, we’ve a sequence of sort of smaller benefit and kind measure staff this time of the year, coming up to Christmas, we can give our staff and we can give ourselves a 500 Euro voucher, and there’s no tax implication on that, but important to note that if you are getting, if you are involved in the business, or if you are going to come over to take employment here, and you’ll have a package in front of you that has perks on the likes of health insurance and that type of thing, that there is this extra tax implication called benefit, and kind of will impact on your, on your net, take home, pay from your, from your overall package and an area that we, we would do a lot of with our clients is on the pension, the pension side of things. And we do have, and I suppose the most significant tax breaks, or at least some of the most significant tax breaks. That’s in the Irish system, far business people, and for highly paid employees are on the pension at the pension contribution side to chains. And particularly for business owners who would settle a as a limited company and they become director shareholders. And by utilizing what the measures that’s there and under executive pension schemes in Ireland, where they can extract a very, very significant level of the business annual profits into a, into a pension scheme that they can then in turn and accumulate value and wealth true, you know, with the objective of, and self-directing it down the road would be a common approach that most of our, most of our, I suppose, successful business owners would adopt with dosh. And as I say, it’s very tax efficient because you get tax breaks. If you pay the, if you pay the pension contributions yourself, you, you do get it as a break from the income tax subject to certain levels on that on even more so in a company structure, the company confirmed quite excessive levels of contribution, depending on your level of pension provisioning and your salary and your age, and some factors like that. And for business owners as well in Ireland, we do have a number of measures that are there to give relief for and people who are successful in business and successful in life that day, and that they can avail of these relieves on the sale of the business. So the first one is what we call entrepreneur’s relief. And this has the effect of, if you set up a business and sell it, you can, you, you only have to pay 10% capital gains tax on the first 1 million euros of proceeds of that sale. And again, subject to a number of conditions and the T’s and C’s and so forth, but youthful enough useful enough relief to have, and there’s no age limit of dash. And so anybody who sets up a business once you’ve worked in the business for January tree years, you can avail of this entrepreneurs. Or if someone, you know, if someone, or if you, if it’s a sellable business, retirement relief is M our Irish business owners who come near retirement stage on basically at not too dissimilar to entrepreneurial relief. Although there are some differences in the conditions and you can sell a business, or you can retire from the business Pam, and you can get up to 750,000 and without paying any tax whatsoever on that. And that retirement age is typically 55 Florida. And for, I suppose, businesses and for business owners that would have aspirations of transacting in dominions, as opposed to thousands, and an Irish holding company can be a very useful vehicle and a very useful structure for, for wealthy entrepreneurial people. And, you know, the main advantage of an Irish holding company structure is that you can sell your subsidiary, your subsidiary investment interest in businesses. And there’s no, and there’s no tax whatsoever at Irish holding company, Irish holding company level. And again, we would do a lot of work around Dr. Blackburn, and we come across clients who have very strong trading companies and likely to be sold at some point in the future. And, and any planning with, you know, with getting an Irish holding company in place, and so that they can sell their seller. Our plan have the th th the, the, the plan in place to sell their company in the years to come and without incurring a tax charge can also give a vehicle for our extracting and surplus profits out of surplus profits, out of this, you know, a good strong trading company where that, where the owners and the shareholders want, you know, want to reinvest those profits into something else separate to the trade of debt, the trade of the company. And so that concludes my slides guys, that gives you an, an overview of em, I suppose, that, that, that the tax regime in Ireland, and specifically the tax regime from a, I suppose, a business owner perspective, or for someone Coleman to take up employment in Ireland. So happy to go through and with Darren will any of the queries that came in and we give you our thoughts on us.
DERREN JOSEPH:
Right? Fantastic. Thank you, Damien, for that comprehensive overview as usual, we have been getting your questions, which we’ve added to the queue. So normally elbow previously, I would have gone through stuff in the US side, but I think that’s a bit redundant. So what I will do as we’ve been doing for the past two or three installments of this is just jumping into the Q and a part of it. So the first question that was submitted is how is crypto treated in Ireland versus the us? So I’ll just talk about it from, from the US perspective first, really quickly. So there to vote. First of all, in 2014, the IRS issued, I think it was notice 2014 dash 21. And then in 2019, there was an official revenue ruling. I think that was 2019, that’s 24. So basically it’s treated as property. So it’s not recognized as a security or whatever. So what I’m assuming now that you are looking at it as an investor, if it is your trader, the stuff that I’m saying may not apply. So I’m assuming that you’re an investor, right? So if you’re an investor, the list of let’s say taxable events has been expanded as a result of that revenue ruling in 2019. So everyone knew, obviously when you convert a crypto to Fiat, that will be seen as a taxable event right. But right now, as a result of the expanded rulings that we have, if it is that you are trading one crypto for another crypto taxable spending crypto to purchase goods or services may be taxable and encrypt crypto income, that may be taxable as well. So an it definition is pretty wide. And then in terms of how the crypto is valued to, for short to long-term capital gains, you are able, I mean, previously people would in the side of caution and everyone was using Pfeifle first in, first out, but the rules allow us use five for first, in first out life will last in, first out as well as high for highest in first out. So there’s some level of flexibility, but again, I’m talking about not traders. Traders is a whole different ball game. And that that’s said from the US perspective, Damien.
DAMIEN MALONE:
Yeah, very similar. I think Darren, so it would be a chargeable event for the capital gains tax transaction. And at selling crypto are trading one crypto for another, and in Ireland we would be, I would have taught it would be on the fee for method as well, and with dash.
DERREN JOSEPH:
Okay. Gotcha. And moving onto the second question again about crypto. What about tax planning strategies for crypto investors from a us perspective, especially now that we’re coming to the end of a calendar slash tax year? I think loss harvesting is probably the most popular method where you are able to offset losses against gains. So if it is that you are, you have any losses that are not yet realized. So whatever pointed you invested in may have gone down in value, and you may be holding it against some that may have gone up in value and you do want to cash on and do something with it or whatever, just remember that you were able to offset one against the other.And the wash sale rules that apply to securities do not yet apply to crypto. So you can maintain a position so you can book a loss. And then in X number of days or weeks, you early on in the new year, you can reacquire that token and the Wasserman was an apply. So you can enjoy that loss obviously strategy for in terms of the longer term strategies. We referring people to an attorney that we work with to talk about opportunity zone funds. So opportunity funds, but bear in mind that there’s a lockup period and it can be quite complex, but it is an option available. And of course, Puerto Rico, but we, if you in Ireland and you know, Puerto Rico doesn’t come in, but with the US the thing is with a US passport, you will be subject to as taxes, regardless of where you go. The only jurisdiction that you can still maintain a US passport or a green card and enjoy lower capital gains, generally speaking, as if you move to Puerto Rico, I know, and this, I know you didn’t ask this, but generally people frequently contact me and ask whether just finding an offshore company somehow allows you to mitigate any taxes from a crypto perspective. The answer is generally, no, it makes, there’s no way in which you can just form a company. And that somehow magically allows you to mitigate your capital gains taxes from a us perspective. So just to summarize some of the us perspective, we can look at a loss harvesting. You can look at opportunities, zone funds about something that matches your investment appetite. And if you willing to leave Ireland, this Puerto Rico, Damien?
DAMIEN MALONE:
Yeah. So you would call it jealous loss, harvesting loss. Crystallization is how I call it. So if there is, if there’s an opportunity there to crystallize any losses there to shelter is yet the depending on the level of holding that you have, we’ve came across some, and some people in Ireland who not like you have actually left and who else commends the process of residents planning to get out of, and, you know, to get out of being residents here. And that’s really what that, that’s really the way it’s, or it’s out if you want. And there’s no real way of avoiding it. And obviously Portugal Malta would be to, at two of the jurisdictions that we see, and some of the big crypto players and exiting, and from here in our experience as well. And, and that’s what we’ve came across.
DERREN JOSEPH:
Okay, fantastic. Thank you for that, Damien, next question. So have 1099 contractor. Okay. So just to put it plain terms, so everyone can understand what this person, what I believe this person’s asking, please, correct me if I’m misrepresenting your situation. Right. I just want to summarize it real quick. So you are an independent contractor. You work you’re self-employed you’re self-employed and you have moved from the US to Ireland where you intend to continue to be self-employed as you were, your clients are in the US. So the question is, what about social charges in Ireland? At what point does that become a concern for an independent contractor based in Ireland, Damien?
DAMIEN MALONE:
Yeah, so I think with that, if you’re, first of all, if you’re an independent contractor on doing more than, let’s say 40 K a year, I would probably be saying you should be a limited company in Ireland or failing dash. If you’re coming over and providing personal services as a registered solar trader, as we would call it in Ireland, I think you would be okay from the date in which you come into Arland. So if you come into Ireland early in the year, and you are a resident in Ireland, I think it would only be from the day you come into Arland. My reason I’m thinking on that is because prior to that, when you’re in America or wherever it is that you are, it’s classed as foreign income, and assuming you’re coming to Ireland, and you’re not an Irish national in the first instance, you’ll qualify for the remittance base of taxation. So unless you’re going to be remitting that money that you earned prior to arrival in Ireland, I think it would be okay when, as I say, for even, and relatively modest levels of income around the 40K or 45K mark, we would, you know, we would advocate that you’re probably better off having it, having a company structure. And if you had a company structure, you’d become an employee, that company, and you would only be, you know, you don’t, you, you, you, you could potentially look at split year relief as well, where you only elect to be resident in Ireland from the date of your arrival, on your urinary tax bill that are on your employment income from that date. And so they would be the options as I would see it with that.
DERREN JOSEPH:
Okay. Wonderful. Well, that answers your question. If not, let us know, moving on the next question. So someone is, this person is not a sole proprietor, but, or an independent contractor, this prison, an employee. And I guess just like, because I get this question a lot, I’m sure you do as well, Damien, because, you know, a lot of, especially the technology companies, they are extending apparently indefinitely, the remote work policies. So you don’t really need to return to the office anymore. So some people are working from different states and different countries as well. So this person is a full-time employee for an American employer, and they decide to relocate to Ireland and work remotely from Ireland, but then employee, what consequences would that be for the income that they earn? And I’m sure you’ve touched on this in the deck that you read, just, secondly, just to add to that part, is there any risk to the employer back in the US as well over to you?
DAMIEN MALONE:
Yeah, I think the employer would have employer obligations in Ireland. So if they’re going to be, if the person is going to be and living and working in Ireland indefinitely, I think that that, that the U S employer, the foreign employer would have to register in Ireland operator and Irish payroll under salary. And that’s all it is. And it’s quite common. We would do, we would have quite a significant volume of payroll clients, and that would fall into that category. And it’s, it’s, it’s, it’s, it’s, it’s fairly straightforward. You, you get the foreign employer, a tax reference number in art, and then just operate a payroll on that. And just from a legal perspective, not quite sure from a legal side, is it Irish employment law, or is it us employment law on that one? And that would be, that would be that, that would be something to keep in mind as well on a to, yeah.
DERREN JOSEPH:
Right. And, and to, I just want to add in, as you mentioned that now, is there any risk of, from at least from the Irish tax authority of this far in this US company, having permanent establishment or having a taxable presence in Ireland, maybe.
DAMIEN MALONE:
I think it would depend on what the person is actually doing as pink pink. Like if it’s just a person implied in a function of the business and it’s, I don’t think there’s any risk of a PE there, if the person like has, let’s say the, the ability and Atara he to conclude contracts and that sort of thing, I think there is. And I think there is potential scope there in the, in the double tax treaty where in that scenario, and potentially as a P could exist. And, but generally if you’re just performing a, whatever it is in general, I’ve min sales, R and D whatever the function is, it should, there shouldn’t be any concern for the foreign aid master.
DERREN JOSEPH:
Wonderful. So I’m going to skip the question up to that, because I think Damien answered that as well. Five minutes. Okay. Another one from the sole proprietor or the independent contractor. So what did they work in Ireland remotely for that indeed as an independent contractor and not as an employee, this is a previous person now, and they work for five months. So they don’t trigger one engine in 83 days or anything like that. They just work remotely for five months and then they leave. Are there any tax ramifications to that?
DAMIEN MALONE:
I think it would be, I think it will be very difficult for the Irish tax office in our hands, if that was to tell you them down on technically, and I suppose it is I resource income, but they’re not going to be resident here. They’re not going to be a resident here anyway. So I think there’ll be safe enough with that one.
DERREN JOSEPH:
Yeah. So, but they, I mean, it’s hard for anybody to figure it out, but the correct thing would the correct thing be for them to voluntarily walk themselves?
DAMIEN MALONE:
I think it depends on what their intention was on day one, if their attention was on day one, that they were only going to be there for less than the residents that let less than there. Yeah. The resident requirement. And I’m not sure, I don’t think they would have a, I don’t think they would have a registration requirement in that regard, but if they were coming to our lender, let’s say they signed the lease on the lease, indicated that they were going to rent somewhere for a year. I think they would have to register in Ireland. Then I think they would have to pay their toxic hardened Leandro. So I think the intention of the person would be an important factor in that, in that scenario. And if they’re strategically moving around and talking and dive in, yes, they could be. And I’m sure if the tax authorities catch up on them and they might have some difficult questions to answer, put it that way.
DERREN JOSEPH:
Okay. Understood. And on that theme of mobility, right. If I were to acquire a Caribbean passport, which I guess, you know, that can be purchased citizenship by investment, right. And I were to leave both the leave both Ireland and the us, would I be able to live? Tax-free, I’ll answer that from a US perspective, from a US perspective, as I mentioned earlier, the answer is going to be no, because as long as you hold on to that US passport or your green card, then you will be subject to taxes in your worldwide income, regardless of where you reside. So it makes no difference where you go. It makes a difference where you go. The only way around that is in addition to acquiring this Caribbean passport, did you talking about, you would also need to relinquish your us passport and or green card, and that, that applies to you. What about from an Irish perspective?
DAMIEN MALONE:
Irish perspective? It depends on whether they’re an Irish person or a non-Irish person. If they’re a non-Irish person on the go on a C-spine resident in Ireland and take a residence in the car and been there, they’re safe enough. If they’re in our assuming that they have no resource income, of course, if the virus source income such as rains or something like that, or I see one of the comments there, but having a holiday home, if it was a holiday home in Ireland, and there was rent and coming in on dot or whatever, and they did have to pay tax on that. But that should be the extent of what they would be caught in Ireland, far as regards their total worldwide income.
DERREN JOSEPH:
Okay. All right. Hope that helps this person. Moving to another set of questions. Now I am a USA citizen. My partner is Irish. We file Irish taxes, but I haven’t filed us taxes since 2016. My partner is self-employed. I receive X amount from business to make my PRSI contributions. Do I need to file us taxes? So you’d need to really speak about, to speak to an advisor, the new situation inside out, because it’s so different. There’s so many different categories of income, but generally speaking, just generally speaking, if you, for example, file married separately, which may be the case. If you are married to a non-US person, you would file as married, filing separately. The threshold is actually $5. The filing threshold is $5. So if you’ve made more than five us dollars for the year, then a tax return is due. Now of course, taxes may not be payable to the US because generally speaking, the taxes in Ireland may be higher than in the US but a tax return may still be due. And in that tax return is there’s a calculation of taxes payable, if any, but it’s also an asset declaration. So you’d need to declare a bank account that you may have in Ireland, or maybe even pension plan personal or whatever your pension plans may be, or investment plans. You may have an investment structure or whatever. So there’s the tax calculation, but there’s also the asset declaration to keep in mind. Now, if you have not filed for a while, there is a way of playing catch up. There’s a program, that’s an amnesty program for the US and it’s amnesty in all, but name it’s called the streamlined compliance procedure. So what it requires you to do is just file the last three years, which Juliet has already passed. So this, in this case, right now, we’d be talking at the time of filming. This it’ll be 2020, 19, and 18. And so even though you may not have filed for a year before that, that’s okay, because the statute of limitations says, look back is only three years. So you filed the last three years and the IRS agrees to turn a blind eye to the income that you remember. And before that, and you will you’d of course pay the taxes. Do if any, together with interest, but more importantly, you would legally avoid civil and criminal penalties that may apply. So it’s a, it’s a really, really, really good deal. So I encourage you speak to ourselves, or whoever you chose in tax team is about the streamline compliance procedure. So hope that helps moving down the list of questions that we have here. How is a holiday home taxed? And I asked, where is it? Okay, so if it’s a holiday home and it’s being rented out when, when you’re not enjoying it, of course, from a US perspective, of course, the US is going to tax. You were riding come regardless of where the income is derived, but where you are. So that holiday home will be subject to US tax reporting and tax calculations, Damien?
DAMIEN MALONE:
Yeah. So if you have a Irish holiday home and you rent today, you’re always going to pay tax in Ireland on, on, on the rent. You will also have to pay your office, your local property tax. And so depending on where the holiday home is, the rates that the local property taxes have done open the last while are going up from next year, actually. So it wasn’t so bad and open till now, but there, there, there is a bit of a jump in it. And so it depends on the value of the property. If it’s, you know, if it’s a couple of hundred grand, it’s generally a couple of hundred euros a year, but as you get closer up to the male, and as you go beyond the mill, it is quite a burden on a property. And so keep that in mind, when you file an annual return to pay the tax on your rent and in Ireland and US, I would work if you have a letting agent, and if you have a letting agent in situ managing the rents for you, they will generally withhold 20% of the gross rents as they’re obliged to do. And the tenants are supposed to withhold 20% as well, but very few tenants would be aware of that obligation and open till at SU once your level of rental profit that you, that you make from letting out Irish property, doesn’t go above tardy 5,000 a year. You’re not going to be taxed on any more than 20 something odd percent on that. Or if it does go above 20 or sorry, tardy five times, and you will jump up the 40 something percent on the balance thereafter. So that would be far investors on, there are quite a few international investors that would own multiple properties in Ireland. So, and the tax is quite high on us.
DERREN JOSEPH:
Okay. Thank you for that. Moving on to the next question that we receive. If you receive an inheritance from someone in the us, how is this going to be taxed? So from a us perspective, it’s pretty easy because in the US we have a state taxes and they’re levied on the estates. So this is the, the responsibility of the whoever’s managing the assets of the person who has passed away. They’re responsible for the state taxes, someone who is receiving doesn’t normally pay any inheritance tax. Now there are some exceptions at the state level, whether the federal level, no, and I’m assuming that you are in Ireland. So the state issues won’t apply. So that answer is it from the US point of view, what about Ireland, Damien?
DAMIEN MALONE:
So in Ireland, if you’re a us person that has been living in Ireland, you would have to be living in Ireland for more than five years than resident here for top of the acquisitions tax to apply. So if you haven’t been one within the last five years, you should be okay. And assuming there’s no other situated assets and assuming that the person who passed away and as a U S citizen themselves, you would be out at the Nash at just to, just to point out the capital acquisitions tax in Ireland, how that works is we’ve created different categories. So we’ve captured create B and C depending on your relationship with the person who, who has either passed away in the case of inheritance is of a nerves or who’s gifted, and who has made you a gift that determines at the treasure hold and the group that you fall into. And each group has a as a tax-free threshold essentially. And so you don’t pay tax on it, you’ll receive a gift or inheritance at both that level in your category. That’s how it works in Ireland.
DERREN JOSEPH:
Okay, understood. So just, just to be clear, the tax is the responsibility of the person receiving it. No.
DAMIEN MALONE:
Yes. If they’re in receipt of it, yes.
DERREN JOSEPH:
Gotcha. Thank you for that. All right. Moving onto the next question. Can you work remotely, if you own a holiday home without triggering the Irish income tax, as long as you don’t stay longer than five months in your holiday home in Ireland, Damien?
DAMIEN MALONE:
I remember it’s five months in one year, but if you spend five months in 2020, and five months in 2021, you are going to be resident in Ireland by virtue of the lookback. So always watch for that. But if you, if you were to reword the question a different way, and if you said you’re only going spend three months in your holiday home in Ireland, and in both years, then technically you’re not going to be tax resident in Ireland. And my only sort of the defining the license is hardly for you to jump on. That was, that’s assuming you are a tax resident somewhere else, and you’re not actually a resident anywhere. And in an unlikely scenario where the Irish tax authorities got winded out or got visibility on it and took a case again yet to make deem your tax residents in Arland and by virtue of Ireland being your center of vital and economic interests and all the dat, and by having this holiday home available to you for three months of the year. And so that would be my only proviso on that. But no, generally, if you, if you manage your days, keep a good log of your days and you are tax resident elsewhere. You shouldn’t have any problem in that regard.
DERREN JOSEPH:
Okay. So just to be clear, as long as they do not pass three months over 20 years.
DAMIEN MALONE:
It’s actually even a little bit more so it’s 140 days each year on average, and you could do 150 to 150 days, one year and 129 days the next year, or vice versa. And you would be okay, so it’s 280 days between the two to two years. But as the question was asked on five months, you would actually be slightly over. So I think maybe four months, you’re probably okay. As well or use tree, what you’re probably okay with for,
DERREN JOSEPH:
Okay, wonderful. Thank you very much for that. So for those who want to follow up with Damien, Damien what is the best ways that someone could find him?
DAMIEN MALONE:
Find me on IrelandAccountant.ie email info@irelandaccountant.ie, on LinkedIn you’ll find my profile. If you Google my name, you can follow our social media and channels and all that as well between Facebook and Twitter, Twitter, and whatnot on a course by good old email as well. So more than happy to respond to any email inquiries that you have, if anyone didn’t want to ask it a question on the chat.
DERREN JOSEPH:
Fantastic. And for those who want to share this, this’ll be available for viewing any she did on tax as well as on YouTube. And for those who prefer podcasts, we are available wherever you find your favorite podcasts on iTunes, SoundCloud, Spotify, Amazon, basically, wherever you find your favorite podcasts, you can find us there as well. Thank you for joining us. See you next time. Bye-bye
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