Q&A:Q I am a retired person returning to Ireland after 40 years of economic exile. My wealth is in the US where I still have a home and from where I draw a pension.
I am building a home in Ireland and intend to live here, for the most part. I have a will in the US but I'm anxious about double taxation, death duties and general issues of residency and domicile. I have not been able to find anyone knowledgeable here to advise me. What would you suggest?
Mr. C.L., Cork
There can be, as you are discovering, significant differences in tax treatment depending on where one is tax resident or domiciled. There are also important differences between the two concepts themselves.
For someone born, reared and living in Ireland, the situation is simple; you are both resident and domiciled here - unless you are born here to foreign nationals who are only temporarily located here.
In the cases of people who are moving across national boundaries, the lines are blurred. When such migrations are relatively short-term, a person would tend to retain domicile in the country of their birth while quite possibly becoming tax resident in the state to which they have relocated.
It is possible to move domicile but it is clearly not as simple as deciding off the top of one's head where one wishes to be domiciled - as this would open the prospect of wholesale "tax tourism". In general, you can only move domicile when you move countries with the intention of living there permanently.
Having said all that, your situation seems to give you the option of choosing domicile. While you have not disclosed your age, you clearly have spent half your life or more in the United States.
On the other hand, you were born here and have now returned with a view to living in the State for most of the time - although I get the impression you will also be commuting back and forth to the US.
It appears to me that in those circumstances, you can opt to be domiciled either in the US or in Ireland. Which you choose then comes down to the tax treatment in either state.
Any of the larger tax practices in the State should be able to advise you on the tax liability you face in either state depending on which domicile you choose - even if it would be reluctant to actually offer you advice on the issue of domicile itself.
Alongside domicile, you also have to consider the issue of residency (in tax terms). In Ireland, a person is deemed to be a tax resident of the State if they spend a certain number of days here in any given year.
If you spend 183 days or more physically in Ireland during any given year, you are tax resident here for that year. Equally, if you spend 280 days in Ireland over two consecutive years (including a minimum of 30 days in each year), you are deemed to be tax resident.
For reasons unknown to me, when calculating the number of days spent in the State, it is where you are at midnight on the particular day that counts.
If you are tax resident in Ireland for three successive years, you will be deemed to be "ordinarily resident" here. The significance of that is that even if you left again, you would remain liable to tax in Ireland on worldwide income for three years following the year of your departure - unless you specifically opted to transfer tax residency elsewhere by contacting local revenue officials.
So what does it matter? Well, for people both domiciled and resident in Ireland, Irish income tax is due on all income worldwide. If, however, you are tax resident here but not domiciled in Ireland, you are liable to income tax only on income arising here or in Britain - and also any other foreign income remitted to Ireland.
For people who are neither domiciled nor tax resident here, only income earned in Ireland is liable to Irish income tax.
When it comes to wills and inheritance, the key is residence and the general rule is that assets are liable to Irish inheritance tax (capital acquisitions tax) if the donor or the beneficiary are Irish resident.
Otherwise, only property located in the State is liable to Irish inheritance tax. Thus, if you were to remain domiciled in the US, the Irish home you are building would come under Irish inheritance tax rules but not your US assets.
Finally, there is a double taxation agreement between the US and Ireland, agreed in 1997, which is designed to avoid incidences of double taxation. It can be found on the Irish Revenue site at http://www.revenue.ie/index.htm?/services/tax_info/dtas/usa.htm.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2 or by e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice.
Due to the volume of mail, there may be a delay in answering questions. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.
