US/Ireland Tax Treaty: What You Need to Know About Expat Taxes

EUS/Ireland Tax Treaty

Americans who choose to expatriate to Ireland may be attracted by its country charm and beauty or by the renowned friendliness of the locals. But what are the tax implications of living among the Irish? Read on — we’ve outlined the most important facts about expat taxes that you need to know, including the US/Ireland Tax Treaty.

Being a US Citizen Living in Ireland: Taxes and More

As a US citizen living in Ireland, you must continue to file US expat taxes.  You must include worldwide income on your US expat tax return, including income that is subject to tax in Ireland.

If you’re considering a move to Ireland, check out this tax guide to learn cost-saving tips when it comes to filing your US expat taxes.

US Expat Taxes in Ireland

Your US taxes may be reduced by tax credits and deductions related to income earned in Ireland. The following may relieve some of the double taxation that results from having to pay tax to two countries:

Determining Residency in Ireland

You become a resident of Ireland when you spend at least 183 days there in a tax year (January 1 to December 31), or a total of at least 280 days in the current tax year and the preceding year.

Foreign Income Taxation in Ireland

Irish residents who are domiciled in Ireland are taxed on their worldwide income. According to Irish tax law, you are domiciled in the place you consider your permanent home, the place you will always return to. If you move to Ireland, but intend to eventually return “home” to the US, you will be treated as a resident – but not domiciled in Ireland.

Residents of Ireland who are not domiciled there are taxed on a “remittance basis.”  Essentially this means you are taxed on income earned in Ireland and on employment income earned elsewhere and remitted to Ireland.  Investment income received from Irish sources is subject to Ireland tax. However, if you retain your domicile outside of Ireland and retain investments elsewhere, your investment income is not subject to Ireland’s taxes unless you actually bring it into Ireland. This can be an advantage for the expat who has US investment income and keeps a US domicile. No double taxation!

Ireland Income Tax Rates and the SARP Program

Ireland applies its two tax rates for single filers as follows:

Tax base (EUR) Tax (%)
0 – 35,300 20%
35,301 and over 40% on base exceeding 35,300

For married taxpayers, the rate increases to 40% on income over 44,300 Euros.

The Special Assignment Relief Programme (SARP) program began in 2012 and allows expats on foreign assignment to exclude 30% of some employment income from tax. The program is available to those with assignments between 2012 and 2022. To qualify, you’ll need to meet requirements for the length of your assignment, minimum basic salary, and the amount of time you worked for your employer before your assignment in Ireland. You do lose some Irish tax credits when you choose SARP, so it would be wise to evaluate your options before you elect SARP.

Ireland – US Tax Treaty

The US and Ireland have operated under the Ireland – US tax treaty since 1949. The current treaty was signed in 1997. It seeks to set maximum tax rates for certain income, provide for freely sharing of information, and protect its citizens from double taxation when they reside in the other country.

Ireland Tax Due Date

If you have employment income in Ireland, your income tax is deducted from your pay. That’s the same as the US, but here is where it’s different: the deductions from your pay are already adjusted with the tax credits and rates you qualify for! So there is no need to file a tax return. When employment begins, you should file a Certificate of Tax Credits and Standard Rate Cut Off Point so that all tax credits and tax rates are properly applied. But don’t forget – you will still need to file US expat taxes by June 15th each year (or request an extension until October 15th).

However, if you are self-employed in Ireland or receive investment income there, you are considered to be under the self-assessment tax system and must file an annual tax return. This return is due October 31st each year.

Social Security in Ireland

All employees and self-employed workers pay 4% into Ireland’s PRSI system on all income earned in Ireland.  Employers also contribute to the Pay Related Social Insurance system at various rates.

Other Taxes in Ireland

A Universal Social Charge (USC) replaced Ireland’s legacy income and health levies in 2011. You pay the USC if your gross income is more than €13,000 per year. It is calculated on a weekly or monthly basis. Someone who is permanently domiciled in Ireland may be subject to a domicile levy. There are income and asset thresholds that must be met before this levy applies.

A capital acquisitions tax applies to gifts and inheritances of resident domiciles of Ireland, and those who have lived in Ireland for at least 5 years. Certain thresholds must be met before CAT applies.

The standard VAT or sales tax rate in Ireland is 23%. Though, not everything is taxed at that high rate. Fortunately, most food, children’s clothes and some medicines have a 0% rate, and certain services are subject to reduced rates of 9% or 13.5%.

A broad range of legal and commercial documents are subject to Ireland’s stamp duty.

Live in Ireland and Need Help with Your US Expat Taxes?

Greenback can help you learn even more about the US/Ireland Tax Treaty. Our team of expat-expert CPAs and IRS Enrolled Agents are here to help make filing your taxes as hassle-free as possible – get started with us today!

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