Tax residency status question

Discussion in 'Tax' started by dovetail, 20 Dec 2018.

  1. dovetail

    dovetail Registered User

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    Hi All,

    Scenario: A PAYE employee working for an Irish company, pays Irish income tax but travels extensively with overnight stays out of the state, with the result that they spend less than 183 days a year in the state, which I guess means that they are technically non-resident for income tax purposes (even though income tax has been paid in full through the PAYE system). They have been doing this for more than 3 years now. They have a permanent address in Ireland.

    Q1. technically what is the correct term of their the status for income tax purposes?
    Q2. Should they be paying income tax?

    Thanks in advance for any help with the answers.
     
  2. DB74

    DB74 Frequent Poster

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    1,591
    Roughly how many days do they spend in the State every year
     
  3. Gigi Buffon

    Gigi Buffon Registered User

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    3
    Hello, I'm not Irish but I think it will be the same EU wide. I found myself in the same situation a few years ago and I asked professional advise back in Italy where I'm from. Despite I was mainly living in Ireland I was travelling a lot and was not present for 184 days in Ireland or for 184 days in Italy or anywhere else (I was not even spending 280 days or more in Ireland over a period of two consecutive tax years) so technically I was not tax resident in any of these countries and nowhere else. I was in a sort of a limbo situation, but only apparently. I was told that in any specific year I had to be tax resident somewhere, and you cannot be "non-tax resident" anywhere and pay no tax, that would be too easy. So the most clear cut point that applies to 99.99% of the population is where you live for 183+1 day that will make you tax resident in that country and have to apply the tax rules of that country, double taxation agreements and so on, otherwise there will be other elements that the tax systems can use to determine your tax residency, like for example where are your most tight connections ? where do your wife and children live and go to school, where do you have most interests, properties (even a car registered in one country counts), company, company that you work for and ultimately your nationality. If this is still not clear after applying these elements (you may have multiple nationalities) then it's down to the countries that claim your tax residency status to agree on that. At the time I was paying taxes in Italy as I had a property in Italy and Italian only citizenship, and was renting a place in Ireland. I was not living for 184 in a particular country

    Gigi
     
    dovetail likes this.
  4. RedOnion

    RedOnion Frequent Poster

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    2,593
    Yes, in all probability.

    Regardless of whether they are Resident, ordinarily resident, or non-resident, they must pay tax on all Irish source income if any part of their job is carried out in Ireland.

    There is a PAYE exclusion order, but the conditions are strict and I can't see them applying in this scenario.
    https://www.revenue.ie/en/jobs-and-pensions/tax-residence/what-is-a-paye-exclusion-order.aspx

    Regardless, it appears they are Irish domiciled, so would pay Irish tax on any income remitted here.

    It'd be interesting to hear if all their travel is to 1 place, as they could become subject to taxation in that country too.
     
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  5. dovetail

    dovetail Registered User

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    Apologies for late reply. Spends approx 120 days in Ireland. Approx breakdown for the rest of the year = 20 days within EU/30 days non EU/195 days in China. Under existing and new tax rules for China, is not currently obliged declare worldwide income.
     
  6. dovetail

    dovetail Registered User

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    34
    Last edited: 27 Dec 2018
    The PAYE exclusion order sounds interesting. But it seems that all 3 points below noted on revenue.ie must apply for this exclusion:
    ———————-
    • you are employed abroad by an Irish employer
    • all of your employment duties are carried out abroad
    • and
    • you will be non-resident in Ireland in the tax year
    ————————
    Some of the duties are carried out at the head office in Ireland at various points of the year. So I guess based on that fact, then the PAYE exclusion could not apply in this case.

    Further information to above initial scenario that I set out, the employee was born in Ireland, holds only Irish nationality and citizenship. Only owns a house in Ireland, and spent most of his life in Ireland.
    Works for an Irish company, pays Irish tax, gets paid net income into an Irish bank account. Just spends a lot of business travel time, predominantly in China.
     
    Last edited: 27 Dec 2018
  7. dovetail

    dovetail Registered User

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    34
    Apologies for late reply and for forgetting to include quote with previous post above :)

    Spends approx 120 days in Ireland. Approx breakdown for the rest of the year = 20 days within EU/30 days non EU/195 days in China. Under existing and new tax rules for China, is not currently obliged declare worldwide income as Ireland is the nominated tax residency.
     
  8. dovetail

    dovetail Registered User

    Posts:
    34

    Apologies for late reply and for forgetting to include quote with previous post above :)

    The PAYE exclusion order sounds interesting. But it seems that all 3 points below noted on revenue.ie must apply for this exclusion:
    ———————-
    • you are employed abroad by an Irish employer
    • all of your employment duties are carried out abroad and
    • you will be non-resident in Ireland in the tax year
    ————————
    Some of the duties are carried out at the head office in Ireland at various points of the year. So I guess based on that fact, then the PAYE exclusion could not apply in this case.

    Further information to above initial scenario that I set out, the employee was born in Ireland, holds only Irish nationality and citizenship. Only owns a house in Ireland, and spent most of his life in Ireland.
    Works for an Irish company, pays Irish tax, gets paid net income into an Irish bank account. Just spends a lot of business travel time, predominantly in China.