AS far as I know, you are not liable to a clawback of
Stamp Duty unless you sell your house within five years of purchase. However, if you do decide to rent out the rooms, you will be liable to pay tax on your rental income at your marginal rate. By moving abroad, your house is no longer your
Principal Private Residence. Consequently if you sell your house in the future and make a capital gain, you will only be entitled to partial exemption to Capital Gains Tax. (You will not be able to claim full exemption to CGT as during this period of absence you would be using your premises for commercial purposes).
Had you been married, and your wife stayed in the house, your wife could claim the house as her
PPR and therefore be exempted from Capital Gains Tax on the disposal of the house. In addition, rental income on the house, subject to a maximum of €7,620 can be earned tax free under the Rent-A-Room Scheme.
As regards living abroad, the rules of residency are as follows:-
An individual's residence is determined for each tax year separately. An individual will be resident in Ireland if he/she is either:-
a) is present in Ireland for a total of 183 days or more during that tax year, or
b) is present in Ireland for a total of 280 days or more in the current and previous tax years, provided that where an individual is present in the State for only 30 days or less in a tax year (i) he/she will not be Irish resident in that year, and (ii) no account will be taken of that period in calculating the aggregate of 280 days over two tax years.
An individual is present in Ireland for a day if he/she is in Ireland at the end of the day i.e. if he/she is in Ireland at midnight.
An individual may elect to be Irish resident for a tax year if:-
a) he/she is not resident in Ireland in the tax year, and
b) he/she satisfies the Revenue that he/she is in Ireland with the intention of and in such circumstances that he/she will be resident in Ireland for the next tax year.
While living abroad, whilst you would not be resident in Ireland, you would be described as "Ordinarily Resident." The rules on ordinary residence are as follows:-
An individual's ordinary residence is determined for each tax year separately. An individual is ordinary resident in Ireland for a tax year if he/she has been resident in Ireland for each of the last three years. An individual does not stop being ordinarily resident in Ireland unless he/she has been non resident for the preceding three tax years.
However an individual may elect to be Irish for a tax year if:-
(a) he/she is not resident in Ireland for a tax year, and
(b) he/she satisfies the Revenue that he/she is in Ireland with the intention and in such circumstances that he/she will be resident in Ireland for the next tax year.
An individual might want to be Irish tax resident for the following reasons:-
i) To qualify for full tax credits
ii) To avail of Ireland's network of double taxation agreements
iii) So that the individual and his/her spouse can qualify for joint assessment. The Irish Revenue view is that both must be Irish resident to qualify.
An individual who is non resident in Ireland but is ordinarily resident in Ireland is liable to Irish tax on his/her worldwide income except for
i) Income from a trade, profession or employment which is carried on outside the State
ii) Other (non-Irish) income which in any year of assessment does not exceed €3,810.
Section 822 Taxes Consolidation Act 1997 provides that an individual can be treated as Irish resident for part of a year only, in certain circumstances. As you are tax resident in Ireland in 2006, plan on leaving the State for more than one year, you will meet the conditions to qualify for the split year residence concession. The effect of this will be that you will be treated as resident only up to the date of departure as far as employment income only is concerned. This means that your employment income will be exempt from
Irish tax from that date. In order to avail of this arrangement it is necessary that you satisfy your local tax office of your intention not to be resident in Ireland for the tax year following your departure. In this regard a statement from your employer or a copy of your contract of employment indicating the length of time you intend to spend working abroad should be submitted in support of your claim. The tax office will then issue what is known as a PAYE exclusion order to your employer authorising him/her not to deduct tax from your salary. An exclusion order will operate from the date of your departure and will be effective for as long as you remain non resident and the duties of your employment continue to be exercised abroad. Although you will be deemed non resident from the date of your departure you are nevertheless due full personal tax credits for the complete tax year. In those circumstances you may be entitled to a tax adjustment, taking into account the unused portion of your tax credits.
Once authorised not to deduct tax under the PAYE system your employer will no longer be able to deduct P.R.S.I. You may nevertheless continue to be insurable in Ireland. In such cases it will be necessary for you to remit PRSI directly to the Department of Social Community and Family Affairs. For convenience, a copy of the exclusion order will be sent directly to that Department’s PRSI Special Collection Section, Social Welfare Services Office, Cork Road, Waterford. Tel. 051 356000, This will enable that Department to take up the matter either with you directly or with your employer.
Regardless of your residence status you will have a liability to Irish tax on the rent you receive from letting your home.
For further information please see this Revenue guide. http://www.revenue.ie/leaflets/res1.pdf