Tax implications of offshore account

J

jrewing

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My wife has an offshore bank account, a legacy of working abroad for a number of years. She has been a full-time resident here in Ireland for over a year now, and uses BoI for her day-to-day banking.

I only realized yesterday when I saw her statement from the offshore account that of course she has not paid DIRT on the interest on this account. This has not been done deliberately, it was an oversight.

1. Is it illegal to hold such an account ?
2. How should we go about paying the DIRT to the Revenue Commissioners to rectify the problem ?
 
It's not illegal but it must be declared. I think that she may be liable for income tax rather than DIRT on any interest. She needs to figure out what her past liabilities are and make a return/payment. She may need independent, professional advice.
 
If she has been abroad for more than 3 years she became "Non Ordinarily Resident" and as such has no liability to tax on the interest up to the time she returned home. If she is back only for a year then provided she does a tax return she should only have one years liability. Best get professional advice though as the residency regulations are a nightmare.
 
She was never resident in Ireland until late last year.

I think we will do a tax return for her for 2006, to account for the interest earned from the day she got residency here. Similarly, 2007 interest will be covered in next year's return.

I think the easiest will be for her to close that account this year to stop this dragging on. DIRT is less penal (and less paperwork) than paying tax at the marginal rate and filing returns etc.
 
jr, if she only moved to Ireland in late 2006, she probably was not resident in Ireland during 2006 at all.
 
I didn't think it was illegal. I thought it was more a case that you would have to pay tax on bringing the money into ireland. Especially since, it seems, the money in the offshore account was probs earned off shore.
 
If the money was proceeds from an employment carried out exclusively overseas whilst non resident there should be no tax implication in moving the capital into Ireland.
 
Nige said:
jr, if she only moved to Ireland in late 2006, she probably was not resident in Ireland during 2006 at all.
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She worked here in PAYE job from October 06, so I would presume that she was resident. Am I correct?
 
Generally you are "resident" for tax purposes for a particular calander year if you spend more than 183 days in the jurisdiction. A "day" is counted if you were in the jurisdiction at midnight at the end of that day if I remember correctly

So most likely she spent less than this time here and could claim non-resident status for the whole of 2006. There's a pdf doc on www.revenue.ie that outlines exactly what consititutes being "resident" and "ordinarily resident" for tax purposes. It also outlines how various tax is treated in situations where someone moves mid year. A quick search should find it.

Note: This is my understanding of how it works from when I looked into similar issues. No guarantee of correctness.
 
Hello

Even if she is tax resident now and not ordinarily resident she is only liable to tax when/if she remits the money to Ireland. She will have no tax liability for the first three years as long as she does not remit the money to Ireland. She remains non ordinarily resident for three years after coming to Ireland.

Its also possible from your post that she is not domiciled in Ireland.
If this is the case she will never have an Irish tax liability on that money as long as she does not remit the money to Ireland.
 
APHRODITE said:
Its also possible from your post that she is not domiciled in Ireland.
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Sorry for being ambiguous. My wife and I moved to Ireland in late 2006 (I am Irish) and we are planning to stay here long-term.

Thanks for all the opinions so far.
 
It seems as follows :

2006
Your wife may or may not be tax resident (depending on her wishes)
If living in Ireland for less than 183 days she is normally not tax resident BUT she may elect to be tax resident if she can demonstrate that she intends staying in the country for the foreseeable future and if its beneficial to her to be tax resident.
She was not Ordinarily resident
She was not domiciled

She is therefore taxable on Irish & UK Source Income.

2007
She is tax resident
She is not Ordinarily resident
She is not domiciled

She is taxable on Irish & UK source income only and other foreign income to the extent it is remitted to Ireland in the period.

If I were your wife i would allow my savings to accumulate tax free in the off shore account for as long as possible.

I hope this helps.
 
What rate of tax does somebody who is tax resident in Ireland pay in Deposit interest earned in an offfshore bank account?
I would have assumed you pay 20% DIRT, not 41% Income tax.
 
taxbill said:
What rate of tax does somebody who is tax resident in Ireland pay in Deposit interest earned in an offfshore bank account?
I would have assumed you pay 20% DIRT, not 41% Income tax.
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No, if it's not an Irish account, you are liable to tax at your marginal rate.
 
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