Destination Ireland - Issues to Consider Before Relocating
We’ve listened to and read various commentary over the past 18 months as to the opportunities that exist for Ireland Inc in the context of Brexit and companies who as part of their Brexit contingency plan, look to move part of their global operations to Ireland.
Inevitably as part of this matrix, the ability to relocate key employees comes into focus. Often missing from the narrative is the personal impact of relocation for those employees. Independently, Ireland has long been a new home for people relocating here for lifestyle reasons, notably, from the US but also from EU jurisdictions and more recently from further afield including China who have been attracted by Irish culture, the way of life and our education system.
John Gill examines some of the key issues people need to consider when relocating to Ireland.
The Right to Reside
For EU / EEA nationals, their ability to live and / or work in Ireland is straightforward. Their right to relocate and reside here derives from the fundamental freedoms enshrined in EU law. As part of Brexit negotiations to date, it has been indicated that the longstanding Common Travel Area between the UK and Ireland which allows citizens of the two jurisdictions to live and work freely in the other jurisdiction will continue to apply post Brexit. However, for all non-EEA nationals moving to Ireland, they must obtain permission to remain in the State for any period over and above the short stay 90 day visa. When relocating for work, the right to reside will be inextricably linked to an employment permit granted by the Department of Business Enterprise and Innovation. This often comes in the form of a Critical Skills Permit and entry visa and separate permission to remain in the form of a stamp endorsement in their passport. Such stamps indicate a type of immigration permission and the conditions attached to it. The stamp endorsement for critical skills applications generally comes in the form of a Stamp 1 or Stamp IV. The nature of the stamp endorsement will dictate if your time in Ireland will also constitute reckonable residence for the purposes of a subsequent citizenship by naturalisation application.
For lifestyle relocators from outside the EEA, typically their right to reside requires proof that the individual has an independent means of wealth and by their presence, they will not become a “burden on the State”. They are typically granted a Stamp 0 endorsement which must be renewed annually. Although this does provide some flexibility for the relocating individual moving here for lifestyle reasons, it does not provide the security of long term residence status. Accordingly our experience indicates that such persons look to the immigration incentive programmes offered by the Government, namely the Immigrant Investor Programme and the Start-Up Entrepreneur Programme. It is important to note that in each case, these programmes do not confer citizenship but do grant a long term right of residence for successful applicants, with actual residence in Ireland under the programmes constituting reckonable residence for a subsequent citizenship by naturalisation application.
Once you have established your right to reside in Ireland, you need to understand how you will be taxed when resident here. Without elaborating too much on the core Irish tax constructs of domicile and residence, typically a non-Irish (non-domiciled) individual who is tax resident in Ireland, is taxed on what is known as the remittance basis of taxation which means that they are taxed on Irish source income and Irish capital gains as they arise, but only on foreign income and gains to the extent that such income / gains are remitted into the country (with some limited exceptions). This provides a very favourable tax deferral basis unlike the position that applies for Irish resident and domiciled persons, who are taxed on an arising basis on their worldwide income and gains wherever located. If structured correctly, the remittance basis will mean income and gains on investments (e.g. a foreign investment portfolio) held outside of Ireland will not come within the charge if the person is here on a short term basis. The remittance basis does not apply to employment income, where the duties of employment are exclusively exercised in Ireland. However, there is relief for relocating executives in the form of the Special Assignee Relief Programme (“SARP”).
Whilst taxation in respect of a personal income source is relatively straightforward, the landscape for high net worth individuals moving to Ireland who have structured wealth is entirely different. By structured wealth, we are referring to individuals who prior to their residing in Ireland, have established either offshore trusts or corporates to hold and protect their wealth for the long term. When it comes to taxing offshore wealth, there has been a significant change in the Irish tax environment over the last number of years. Under Irish tax legislation, there are specific anti-avoidance rules, the purpose of which (arguably when first created) was to attribute the income and gains of offshore structures to Irish resident and domiciled individuals. Over the past number of years, these anti-avoidance provisions have been extended in most cases to apply in respect of Irish tax resident individuals regardless of their domicile status and as recently as 2017, there have been further changes to the “motive defence” which offers a carve out to the application of these provisions in certain circumstances.
The impact of these tax changes therefore demands careful planning by resident non-domiciled individuals prior to relocating to Ireland and establishing tax residence here.
Quite apart from the above required income / capital gains tax planning, one of the often overlooked consequences for non-domiciled persons becoming resident in Ireland is that, after five consecutive years of tax residence, any subsequent gifts or inheritance that they receive may fall within the charge to Capital Acquisitions Tax which is a combined gift / inheritance tax regime. There may be an out, depending on the nature of the assets and timing of benefit, if the disponer concerned is domiciled in a state of the United States, but this is specifically a function of the way that the Irish / US Inheritance Tax Double Tax Treaty operates. Unfortunately, it is the case that there are only two such treaties that Ireland has that deal with inheritance tax, one being with the US and one being the UK and so therefore the primary domestic charge to Capital Acquisitions Tax can arise for any other foreign individuals, once they have been long term resident in Ireland. Again, it merits careful planning to overcome this issue.
Practical Relocating Issues
Once a person has secured their right to reside and once they have planned properly from a tax perspective, other issues they will need to consider include where they will live and where their children might attend school. Many people who move here are confused with the nuances of the Irish property system, one example being that the asking price is very often simply a statement of intent rather than the sale price actually sought. Further for residential letting, although strides have been made in regulating the market, the letting market often appears less sophisticated than some of its European counterparts such as Germany where the culture of letting is more firmly established. It is important therefore for people to get legal advice on the implications of any such purchase / tenancies to ensure they are appropriately structured or provide the most flexible secure arrangements the tenant requires.
Schooling can also be a major concern. Ireland has one of the youngest populations in Europe with this resulting in a drain on the public school system. Indeed the private school system for primary to secondary level education is already heavily oversubscribed with competition for places very severe. One of the criteria for children to be admitted into a school in Ireland is based on their residential address. Children are expected to be living within a certain mile radius of the school they apply for, which in turn impacts on where a family may choose to reside long term.
At Matheson Relocation, we work closely with a dedicated partner, to address these and other practical issues including the co-ordinating of banking, insurance and private healthcare arrangements.
Ireland has and will continue to attract foreign direct investment and by implication Dublin and the other urban centres in Ireland will continue to be a home for relocating executives. Indeed, on the wider level, it is the experience of this writer that Ireland continues to be a favourite destination for individuals to relocate to for lifestyle reasons. Over the last number of years, we have seen people decide to move to Ireland because of concerns about geo-political risk in other jurisdictions and this issue is not confined to the more exotic jurisdictions. We need to look no further than the UK with Brexit as an example of the impact of political decision-making on private wealth and corporates.
Where people do decide to relocate, inevitably there will be a wide range of questions to be addressed. At Matheson Relocation our goal is to address the full range of issues to make that transition seamless. For further information on this please click here.