Tax Implications of Emigration

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| Lisa Cosgrave

In recent years, we’ve seen many retired pensioners relocate, particularly in instances where their children have moved. For example, it may be the case where their children went to Australia and are now married and have their own family there. In this case, we examine the tax implications of an individual moving to a different country and how their Irish state pension, and commonly rental income from their Irish residence, is taxed. While the below applies to Australia, the same can be applied to many other countries provided there is a Double Tax Treaty in place with Ireland but the treaty should be examined in detail and tax advice should also be sought from the country the individual moves to.

To summarise, they will remain liable to Irish taxes on their Irish rental income even when they are residing in Australia no matter how long they are there and therefore will need to continue to file Irish tax returns for rental income. The pension income will only be taxable in Australia where the individual is a non-Irish resident, so assuming they are moving in the latter half of 2023, they will be non- Irish residents from 2024.
 
In order to determine the tax implications of the various sources of income we must look to the individual's residency status. 
 
2023 - Irish resident, ordinarily resident and domiciled
The individual is moving to Australia later this year, therefore he/she will remain an Irish tax resident, ordinarily resident and domiciled for 2023 and therefore is liable to Irish tax on worldwide income. He/she may however also be subject to Australian tax. It is important to note that we are Irish tax advisors and cannot advise on Australian taxes and therefore recommend seeking the advice of an Australian tax advisor.
 
Split-year relief under Section 822 can apply on private pensions, however, it generally only applies where the pension is their only source of income which is not the case here.
 
Where there are Australian taxes, we look to the Australia Ireland DTA to identify if there is relief available for double taxation on the Irish rental income and pension. When you look at the DTA - the reference to resident means tax resident. DTAs are designed to alleviate double tax that may arise under domestic legislation. They do so by either:

  • Exempting the income from tax in one of the countries (i.e. the exemption method), or;
  • Allowing the tax payable in one country (which has primary taxing rights) as a credit against the tax payable in the other country (which has secondary taxing rights) (i.e. the credit method).


A country has primary taxing rights if the source of the income or capital gains is within its borders.
 
Secondary rights are those which a country has where the source of income or capital gains is outside its borders and some other country has the primary taxing rights.
 
Article 7 of the DTA refers to income from real property (also referred to as immovable property here), it states income from real property may be taxed in the Contracting State in which the real property is situated. Therefore the rental income is only taxable in Ireland.
 
Consideration needs to be given to the new rules for non-resident landlords in Ireland which come into effect from 1 July 2023. The amendment in the Finance Act provides that collection agents who act for a non-resident landlord may deduct withholding tax. This is currently at the standard rate of 20% from rental payments to non-resident landlords and must be remitted to Revenue. If the collection agent complies with the requirements they will no longer be the chargeable person in respect of the rent. The landlord can file their tax returns in their personal capacity for their rental income. Alternatively, tenants who pay landlords directly can withhold and remit the tax. The new system on ROS for the collection agents and tenants is expected to go live on 1 July 2023.
 
In terms of the pension, Article 19 states that pensions (including government pensions) and annuities paid to a resident of one of the Contracting States shall be taxable only in that State. Therefore, the pension will be taxable primarily on where the individual is resident. Therefore, for 2023 it will be taxable in Ireland.
 
Irish Occupational Pensions are chargeable to tax in the State under Schedule E by virtue of Section 779, regardless of the residence position of an individual.
However, where an individual:
· is in receipt of an Irish occupational pension (other than a Governmental or a Local Authority pension),
· is not resident in the State for tax purposes; and
· is resident in a country with which Ireland has a DTA for the relevant tax year, generally under the terms of most DTAs, the pension will be taxable solely in the country in which the individual is tax resident. 
 
Upon receipt of an application for a PAYE Exclusion Order in such cases, the Pensions Article of the appropriate DTA should be examined and a PAYE Exclusion Order issued where the agreement relieves the individual from the charge to income tax in the State in respect of his/her occupational pension. Therefore, for the subsequent years in which the individual is not an Irish tax resident, he/she will not be subject to Irish taxes provided that he/she obtains a PAYE exclusion order. 
 
2024 - Non-Irish resident, ordinarily resident and domiciled
For 2024 and subsequent years, the individual will be a non-Irish resident, ordinarily resident and domiciled in Ireland. 
 
He/she will, in that case, be subject to Irish tax on worldwide income except:
Income from a trade or profession no part of which is carried out in Ireland; Income from a non-public office or employment where all the duties (except incidental duties) are exercised outside Ireland; and
Other foreign income provided it does not exceed €3,810 (if exceeds €3,810 then the full amount is taxable).
 
In this case, as per the above the individual will be liable to Irish tax on the rental income but will not be subject to Irish tax on the pension income if he/she obtains the PAYE exclusion order. By reason of the DTA the rental income is taxable under normal rules as the DTA overrides the above.
 
The above assumes that he/she does not return to Ireland for greater than 30 days or that he/she could remain an Irish resident under the 280-day rule. 
 
2027 - Non-Irish resident, non-ordinary resident and domiciled
When the individual becomes both non-Irish resident and non-ordinarily resident and Irish domiciled he/she will then only be taxed on the Irish source income (including income from an Irish public office and income derived from any trade, profession or employment relating to duties carried out/exercised in the State). 
 
To summarise, he/she will remain liable to Irish taxes on Irish rental income even when he/she is residing in Australia no matter how long the individual is there as it relates to immovable property in Ireland and therefore will need to continue to file Irish tax returns for rental income. 
 
As mentioned above, it is important to note that we are Irish tax advisors and cannot advise on Australian taxes and therefore recommend seeking the advice of an Australian tax advisor.

Please note that the information above is accurate as of the date of publication.

If you require assistance or advice in relation to any of the above matters, please contact our team on 053 91 000 00 or email [email protected].

The contents of this article are meant as a guide only and are not a substitute for professional advice. The authors accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article.



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About the Author

Lisa is a key member of our tax technical support team, providing advice on all tax heads in response to queries submitted. In addition, she provides support within the tax department on company/business valuations, tax planning, restructuring and exit planning solutions for a range of clients, liquidations, and company secretarial issues. She also has experience in financial reporting and audit. A Chartered Certified Accountant and Chartered Tax Advisor, Lisa trained and worked in practice for six years prior to joining OmniPro, where she gained experience in financial reporting, tax compliance across all tax heads and audit. She has experience with a range of small and medium sized businesses assisting them with their financial reporting obligations and tax compliance across all areas

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