Non-ordinary residence, equity sale & CGT

K

Kludge

Registered User
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Hi folks,

I'm considering taking professional advice on my situation, but wanted to ask here first - I've done the relevant searches both here and on Revenue, but I am confused.

I've got a bunch of US shares and I understand that, because I'm not ordinarily resident in Ireland during this calendar year, I am not liable for Irish CGT if I sell them before December 31. Further detail is below.

My situation:

- I've recently ceased employment with a US multinational, and I am currently unemployed and travelling. In 2005-2009 I was working for them in Dublin, and 2009-2013 I was working for them in Sydney.
- During 2013 I am not ordinarily resident in Ireland, having been resident in Australia for the last three full years (2010, 2011, 2012) after first going there in 2009. By the end of the year, I will not have spent more than 90 days or so in Ireland during 2013.
- I am an Irish citizen so I'm domiciled here in Ireland, never having applied for permanent residency in Australia.
- I currently hold equities - non-Irish equities, awarded by a non-Irish entity, held in a non-Irish brokerage - in my former company, to the value of ~US$250K. No options; I only hold share units.
- These equities were entirely awarded, and 50% vested, while I was resident in Ireland during 2005-2009. The other half vested in the period 2009-2013.

My intent:

- To return to Ireland and become resident and employed during 2014.
- To leverage my non-ordinary residency during this year 2013, in order to sell a large portion of my equity and avoid liability to Irish CGT to the largest extent possible.

My questions:

1. Am I liable to Irish taxation of any kind on the equity grants that were vesting while I was living in Australia but still technically ordinarily resident in Ireland, during the years 2010, 2011 and 2012?

2. If before the end of this calendar year I sell the majority of my equity holdings, will these proceeds be exempt from Irish CGT because I am non-ordinarily resident?

3. If the answer to question (2) is 'Yes', am I then potentially subject to any subsequent taxation when I attempt to repatriate the proceeds of the share sale??

***

Thanks for any advice you guys can offer. Apologies if anything is unclear.
 
Hi Kluge,

What type of award did you get the equities under? Was it share options, RSUs, free shares etc?
 
Hi; thanks.

I was awarded a bunch of units under an RSU scheme which vested over four years.

I was also awarded a bunch of share options which were also restricted inasmuch as they also vested over 4 years.

These two grants were made on commencement of employment in 2005.

Subsequently (in 07, 08 and 09) I was granted some other performance-related options which also vested over four years.

The large majority of my options and units vested while I was ordinarily resident in Ireland. About half of these vestings, however, were 'foreign' inasmuch as they weren't connected with duties of the employment being exercised in Ireland.

I exercised all of my outstanding options earlier this year, as they were expiring due to my resignation. So now I only hold units.

The more I research this the more confusing it becomes.
 
I'm considering taking professional advice on my situation, but wanted to ask here first - I've done the relevant searches both here and on Revenue, but I am confused.
Click to expand...

You really do need to get professional advice. This is one of the most technically complex questions I've even seen dealing with shares awarded due to employment in Ireland, vesting to an ordinary resident person.

There is also the issue of the anti-avoidance for temporary non residents.
 
Thanks Joe. You're right; I'll talk to someone.

Problem for me is that I don't think I paid any income tax on the vestings. I thought it was taxed at source by my company/their brokers whereas it seems that I needed to self-assess all the way along - not sure this was made clear enough to my young self in 2005! As a result, I may now be liable for considerable interest and penalties.

I don't think the anti-avoidance clause applies here; that only seems to apply if the individual's holding is either 5% of the market value of the issued share capital of the company, or greater than €500,000. My holding doesn't meet either of these criteria.
 
Complex alright. The historical income tax issue further complicates matters.

The anti avoidance refers (I think) to avoiding tax in general. From a tax point of view you may be deemed resident in Ireland if you have no other residency for tax.
 
Joe - Clearly not clued-in enough to have all this boxed off long ago!

Luternau - surely I am resident in Australia for tax during 2013? I was working there earlier this year.
 
Ya well first place to start would be to see was it an approved scheme or not?

In relation to CGT, at a rough guess the shares related to the exercise of duties of employment in Ireland would be taxable in Ireland, but thats a guess not advice.

I'm sure our good friend Mandelbrot will be along shortly.
 
surely I am resident in Australia for tax during 2013? I was working there earlier this year.
Click to expand...

I would assume so, but your post made no reference to declaring the gain to the Australian revenue-only Revenue in Ireland.

It is unlikely you have no liability to some form of gains tax/or having to declare the gain to some country. The issue is complex.
 
@Luternau, I don't know if you are giving a professional or laymans view.

There is a provision in the tax code which can through up an anomaly. Non domiciled individuals qualify for the remittance basis of taxation so in some cases the gains may fall out of assessment. I think that there are rules to ensure that this does not happen with shares issued in relation to employment. Immovable property is taxed firstly in the country that it is situated in.
 
I am speaking as a lay person, and certainly not giving advice.

However, I had some 1st hand experience of falling between two countries for gains tax and the gain was deemed assessable in Ireland.

For the avoidance of doubt, I am not advising anything and re-iterate this is a complex matter.
 
Thanks. Yes, I am in the process of ascertaining the exact nature of the schemes under which the grants were issued, and will be talking to a professional. However I would still appreciate yizzer insights!


It seems from my scanty research that tax in Ireland may still be due on option vesting/granting events that take place during an Irish tax year in which the beneficiary is not resident in Ireland.

From slide 5 of a doc from the Irish Tax Institute's education portal - I'm not allowed to post the link:

"In the case of share options granted in relation to Irish employments / Irish performed duties of employment, section 128 charge will apply even if the individual is no longer Irish tax resident when the options are exercised."

But then one of the subsequent slides, with regard to options granted in relation to foreign employment, says:

"Gains which are attributable to any periods in which the duties of the employment were exercised in Ireland are taxable under section 128 TCA [...]
If none of the duties referable to the grant of the options are exercised in Ireland, Revenue will not impose any charge to tax. Individual must be non-resident and employment not within charge to Irish tax."


There's an ambiguity here in the distinction between Irish and foreign employment. My direct employer was an Irish company, but the US parent company, the one granting me options, was obviously foreign. Which rules apply in my situation?

Further assumptions and queries:

1. On a semantic point I think that by the term 'grant', Revenue here means 'vest', i.e. the event at which the option becomes available for exercise.

2. My understanding is that income tax is incurred when options are exercised - not when they are granted/vest. CGT becomes payable later, on any profit gained by selling the share.

3. If this is true then I was not liable to pay any tax on the numerous small option grants that were made under a vesting schedule during my employment.

4. I exercised all my options earlier this year. The first ITI quote above suggests that I must pay income tax on the portion of the paper profit attributable to grants made during periods in which the duties of my employment were exercised in Ireland. But it only refers to 'residence'. What if I am not ordinarily resident?

5. And am I liable for 2013 income tax on the portion attributable to periods in which the duties of my employment were exercised outside of Ireland?

6. And finally, is there any potential CGT benefit in selling my newly-acquired shares now, while I am still not ordinarily resident in Ireland? I guess I'll leave the answer to that one to a pro!
 
Joe_90 said:
I'm sure our good friend Mandelbrot will be along shortly.
Click to expand...

Thanks for hyping me up Joe, but I think this is the kind of query that shouldn't really be attempted to be answered in a forum like this... (Since its quite unique and someone else could assume the same treatment will apply to them). Someone needs to get paid to figure this little puzzle out, and they'll need access to all sorts of specific personal information and documents...

OP, be sure and let us know how it works out for you though?
 
Thanks guys; yes I surely will let you know how it pans out. I am still waiting for confirmation on the nature of the schemes.

Can I ask for your opinions on the meaning of this paragraph from page 4 of the Revenue's CGT booklet, regarding temporary non-residence?

"Gains accruing to an individual on the disposal of certain shares, or rights to acquire certain shares, during a period of temporary non-residence may be chargeable to Capital Gains Tax where that individual was resident and domiciled in the State at some stage prior to departure from the State."

What's this all about? Do you think it refers to normal residence, or to ordinary residence?
 
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