SSIAs

If I open one of the Government savings scheme accounts and I am non-resident when the account matures but keep putting in my contribution, do I avail of the whole scheme at the date of maturity?

Mr M.D., e-mail

This is the one great inequity of the scheme, apart from the oft-mentioned gripe that such schemes benefit the better-off who are in a stronger position to save. Basically, once you lose you qualifying status - i.e., you are no longer resident or ordinarily resident in the State - you lose your right to hold or contribute to one of the special savings incentive accounts (SSIAs).

As soon as your status changes, your account must be closed; no further contributions are permitted. Worse still, because you are deemed to have closed your account before the five-year savings term has expired, you will be taxed on all the money in the account at the standard rate, plus 3 per cent - currently a rate of 23 per cent in total. This means the capital you invested, which will have come from after-tax income, the Government contribution of 25 per cent and the interest earned to date on the account all become liable to tax despite the manifest unfairness of it.

After all, in today's mobile world, where we are all told by our employers and by government that we need to be flexible in employment, it is quite likely most of the savers find themselves in this position through no fault of their own. Still, those are the rules.

Residency

I have been a resident in the Republic for the last five years and intend to stay here for another one or two years. After this time, I intend returning home to Northern Ireland.

Since I intend leaving before the five-year time period, can you tell me if I can still open an SSIA account? Would I still be eligible to make payments from the North?

Mr P.C., e-mail

This is an area we have tackled several times before, which is not surprising as it is one of the more complex areas involved in this issue. Essentially, you can only have open, and contribute to an account, as long as you are resident in the State. Resident in this context means resident for tax purposes.

However, it is possible to be resident for tax purposes even when you are no longer living in the State. This is described as being ordinarily resident and it qualifies you to hold and contribute to an SSIA.

Once you have worked in the State for three years, you become ordinarily resident here from the start of the next tax year. You remain ordinarily resident in the State for three years subsequent to your leaving its physical boundaries - provided you still pay income tax here on your earnings. Before you get too worried, there are exceptions for those earnings related to employment carried out wholly outside the State and there is an allowance for a small additional amount of income, which is not taxed here.

So, in your case, it depends. It depends on when you open your account and on whether you retain ordinary residence status subject to your leaving the State and whether that status continues for the balance of the five-year term of the saving scheme.

Non-resident accounts

We have lived, been domiciled and worked abroad (US, Middle East, etc.) for 14 years and invested in a non-resident's account with an Irish bank during that time. This account was opened in the 1970s and, like thousands of emigrants to America for centuries, we originally thought this was good for the Irish economy (as well as giving ourselves a small but safe return). Now with all the scary news regarding non-resident accounts, we regret our investment decision.

I now plan to return, live permanently and probably work in Ireland. Could you please advise: [SBX] When should we close our non-resident account, for e.g., is there a time limit cap for returning emigrants when they must close such accounts, or should we close it before returning? Are there any tax implications with the Irish tax authorities if the account is not closed and withdrawn before returning? [SBX] For returning emigrants, is there an agreed timescale for tax liability cessation in the country they are leaving and commencement when one starts to live in Ireland? Also, am I correct in assuming that since the Irish tax system is more punitive and now calendar-style, is it best to return after 183 days of the particular year you're planning to change? In other words, when returning for good, when does one's Irish tax obligation begin, not only for Irish earnings but also for worldwide income?

Mr D.C., e-mail

Okay, let's take this one step at a time, starting with the issue of non-resident accounts. As I read it, you were perfectly entitled to hold a non-resident account. You were out of the State and the account was here. There has been some brouhaha over these accounts but that relates to people who purported to be living outside the State when, in fact, they were happily residing within its borders. Those account holders have until this November to make a declaration to the Revenue Commissioners and avail themselves of less stringent penalties than normal.

As to when the account should be closed, there is no need to close the account, only to notify the relevant financial institution of your change of status. The point of non-resident accounts is that you are not liable for Deposit Interest Retention Tax (DIRT). Once you return home, you will be liable to DIRT on interest accruing to the account but you do not have to close it or withdraw the money . . . unless you want to.

On the wider question of tax treatment of returning emigrants or, indeed, people coming to Ireland for the first time, these are detailed tax issues on which you might want to seek professional guidance. Every time I write this, someone responds to tell me how simple the whole thing is . . . and they are invariably accountants or solicitors.

Basically, you pay Irish income tax on worldwide income once you become tax-resident in Ireland, something you can opt to do on your arrival or something the tax authorities may determine you are, especially if you are working here. There is a double taxation agreement between Ireland and the United States but I am not aware of any measure that determines, for emigrants, when jurisdiction for taxation ceases in one state and begins in another - over and above the residence issue already mentioned.

As to when you should return during the tax year, you should note that you would receive a full year's tax allowances in your year of arrival, even though you will be taxed only on your income from the time you become resident in the State. The benefit would be reduced this year as we are working a nine-month tax year to facilitate the switch to calendar year taxation, and tax allowances have been adjusted accordingly.

Still, if it was I and I was considering such a major move, I would get professional advice.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, D'Olier Street, Dublin 2 or 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 queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.