Tax minimisation for US resident moving to Ireland

BryanMM

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I'm Irish and have been living in the US for a few years and am US tax resident. I am moving back to Ireland next year. I have two Irish investments - a Quinn Life Freeway fund and an Irish Life Consensus fund. The capital gains on the Freeway is Euro 7,000, the capital gains on the Consensus is Euro 14,000. I am registered as non-resident for both products.

Capital gains tax in the US is 15% and, in Ireland on these funds is, I think, 33%.

Therefore, I want to cash in the Consensus before I leave the US and pay 15% rather than 33%.

As for the Freeway, I have about 5,000 in losses from an ill-advised Bank of Ireland purchase a few year ago (I sold the shares in 2010) and that, combined with the 1270 personal allowance should mean that I can cash in the Freeway next year, when I'm back in Ireland and Irish tax resident, and pay less tax than I would if I cashed it in while living in the US.

I'd appreciate comments on any flaws in this plan. Am I missing anything?

Can I double the personal allowance of 1270 by putting the Freeway fund in the joint names of me and my wife before I sell?

I don't really follow the distinction between a 41% and 33% rate on certain ETFs, but am I right in thinking it has no relevance and neither of these products are ETFs.

Thanks in advance.
 
Hi Bryan,

Your first problem is accounting for your Irish investments to the IRS in the USA.

"All US persons are obligated to report worldwide income by filing annual income tax returns. US persons are defined as citizens of the United States, green card holders and taxpayers living anywhere in the world. Additionally, reports on your foreign bank accounts must be filed annually for information purposes."

You need to file annually in the US and your Irish Investments should be included in your US return. Unfortunately, the US don't recognise what the Irish investments are and so they end up getting lumped in with all sorts of tax nasties, like hedge funds etc.

It doesn't matter that the Irish funds haven't paid any income and that's the problem. US funds are required to distribute income so that it can be taxed annually. The Irish funds typically don't pay income, but you still have a tax liability.

To avoid this complexity, you should really have sold the Irish investments before moving to the USA. Now you could end up paying tax in the USA and in Ireland. These funds are taxable in Ireland at 41% exit tax. They are not liable to capital gains tax in Ireland.
 
Thanks Marc

I'm not worried about US tax, that's been taken care of. One question though, you say that I could end up paying tax in the USA and Ireland. Do you think that if I sold the Consensus fund while US tax resident, I could be liable to tax in Ireland? I don't follow this, could you clarify?

Thanks again,
 
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