Taxable or not for Non-dom ?

[arasar]

If a person who is non-domiciled and tax resident in Ireland transfers 10,000 Euros of their foreign income to their account with Interactive Brokers Ireland, and they are instructed by Interactive Brokers Ireland to send the money to a bank account in Germany that is in the name of Interactive Brokers Ireland, is this transfer considered to be a remittance of foreign income to Ireland for Irish tax?

In other words, will this transfer of 10,000 be considered to be a remittance of foreign income by this person to Ireland, and fully taxable at their top rate of tax, even though the funds were sent to a bank account in Germany?

 

[Brendan Burgess]

Hi arasar

For any cross-border issues, you need specialist tax advice.

Answers provided on askaboutmoney or any other online forum may guide you to the relevant legislation and Revenue manuals, but you should not rely on them.

Brendan

 

[arasar]

Hi Brendan

I have not seen this issue covered in any legislation or Revenue manuals and so I thought that some people on here might know the correct answer

I would assume that the transfer is considered to be a fully taxable remittance of 10,000 to Ireland even though the money was sent to Germany

Interested to hear though if anyone is certain about the correct answer

 

[Farma1]

I believe that you are correct. If you were to treat it otherwise you'd need specialist advice as stated. If you're making more than 10k on foreign income then you are definitely in the bracket that should pay for advice and save 1000s over time.

 

[arasar]

Does anyone have any idea about the correct answer to this question?

I have asked several AI and they all give different answers.

Some say that a transfer of €10,000 of foreign income to Interactive Brokers Ireland will be a remittance of foreign income to Ireland. And others say that it will not be a remittance to Ireland because the bank account where the €10,000 is sent is in Germany.

Are there any tax advisers or accountants here who deal with non-domiciled persons and the remittance basis?

Or anyone else who may know the correct answer?

 

[TomEdison]

If a person who is non-domiciled and tax resident in Ireland transfers 10,000 Euros of their foreign income to their account with Interactive Brokers Ireland, and they are instructed by Interactive Brokers Ireland to send the money to a bank account in Germany that is in the name of Interactive Brokers Ireland, is this transfer considered to be a remittance of foreign income to Ireland for Irish tax?

My gut says yes, it is. For a definite answer I think you'd need to read the full terms of the contract between the taxpayer and Interactive Brokers ireland and look at the exact details of the broker's banking affairs, but from the taxpayer's point of view what is going on is that he has transferred 10K to his account with his Irish-incorporated, Irish-based, Irish-regulated, broker. The broker is a subsidiary of a foreign parent, but I don't think that makes any difference. The broker has chosen to utilise a bank account in Germany and has told the taxpayer to lodge the funds there, which the taxpayer has done, but that's the broker's choice. The German bank account is (presumably) controlled by the Irish broker but that is nothing to the taxpayer; his interest is his right to the proceeds of an account with his Irish broker, and where his broker conducts its banking affairs is neither here nor there.

So my view is; you lodge funds from overseas with your Irish broker; that's a remittance to Ireland beause what you now have, instead of a claim against a bank in Umbrellastan where you used to keep the money, is a claim against your broker in Ireland who invests the money at your direction. I don't think this is affected by the fact that your broker conducts its banking affairs outside Ireland.

 

[arasar]

You may be right but most of the AI take the opposite view and that the actual sums of money have to be actually received in the state for it to be a remittance of foreign income.

"However, section 71(2) TCA 1997 provides that section 71(1) shall not apply to any person who satisfies Revenue that he or she is not domiciled in the State. Where section 71(2) applies, section 71(3) states that “the tax shall, subject to section 70, be computed on the full amount of the actual sums received in the State from remittances payable in the State, or from property imported, or from money or value arising from property not imported, or from money or value so received on credit or on account in respect of such remittances, property, money or value brought into the State in the year of assessment"

The debt is certainly against Interactive Brokers Ireland, an Irish company, and Irish regulated, but if the funds are actually received in Germany or in Switzerland, or in any other country outside of Ireland, then the funds have never actually moved into Ireland or been received in Ireland.

Sending money to a bank account with an Irish IBAN is very clearly a remittance of money into Ireland, but it is difficult to see how sending money to a bank account with a German IBAN could be seen as a remittance of money into Ireland.

So do you also think that any dividends received from foreign shares are automatically remitted to Ireland by a non-domiciled person when they are received in the IBKR Ireland account of a non-domiciled person?

There must be many non-domiciled persons in Ireland who have accounts with IBKR Ireland, so it is quite surprising that no tax advisers or financial advisers in the media or internet, or Revenue Ireland, have ever commented on this issue.

 

[TomEdison]

Sending money to a bank account with an Irish IBAN is very clearly a remittance of money into Ireland, but it is difficult to see how sending money to a bank account with a German IBAN could be seen as a remittance of money into Ireland.

If I send my money from my bank account in France to my bank account in Germany, that's clearly not a remittance of money to Ireland.

But if I send the money from my bank account in France to your bank account in Germany, and you're an Irish resident, it's not so clear. The money in your bank account is not mine; it's yours. If I've done this purely to make a gift to you I don't think we have a problem, but if you're a broker what I have actually done is convert my old asset — a bank deposit in France — to a different asset — a claim against you for the proceeds of investments that you make on my behalf.

Consider this: if I bought a house from you in Ireland but paid the purchase price, at your direction, to your German bank account, that would clealry be a remittance to Ireland; I've used my money to buy an Irish asset. Similarly, if I pay you to do work for me in Ireland, but lodge the money to your German account, that's a remittance; I have used the money to buy services rendered in Ireland. So the fact that the money was lodged to a German account doesn't automatically dispose of the issue. The question always is, what am I getting in return for the payment to the German account? If what I'm getting is an Irish asset, or services provided in Ireland, well, that would be a remittance.

You can argue that we should ignore the services provided by the broker, and simply look through the brokerage account at the underlying assets. If OP instructs IBKR to buy only foreign securities, has he remitted the money to Ireland? But if you think the answer is "no" then, logically, that answer holds good even if the broker's bank account is in Ireland, and that's where I pay the money, because we're looking through the brokerage account at the underlying assets, remember?

There must be many non-domiciled persons in Ireland who have accounts with IBKR Ireland,

Must there? I'd imagine most non-doms continue to use the broker whose services they availed of before coming to Ireland — at least, for their non-remitted funds. If there's even a slender risk that using an Irish broker would involve remitting your funds (and there is because, even if you think the broker using a German bank account works to avoid remittance, you wouldn't expect Irish brokers ordinarily to use foreign bank accounts to receive client funds) then why would you run that risk?

 

[Bronte]

Does anyone have any idea about the correct answer to this question?

It might help if you told us why you need to transfer money this way, the purpose.

I’m Irish, non resident, I frequently transfer money from one EU country to Ireland, to pay bills, property purchase, property sale, renovations, and back the other way over the years. Bank to bank. There are no tax implications on those, as for example my Irish rental income is taxed in Ireland.

 

[arasar]

Consider this: if I bought a house from you in Ireland but paid the purchase price, at your direction, to your German bank account, that would clealry be a remittance to Ireland; I've used my money to buy an Irish asset. Similarly, if I pay you to do work for me in Ireland, but lodge the money to your German account, that's a remittance; I have used the money to buy services rendered in Ireland. So the fact that the money was lodged to a German account doesn't automatically dispose of the issue. The question always is, what am I getting in return for the payment to the German account? If what I'm getting is an Irish asset, or services provided in Ireland, well, that would be a remittance.

Most AI suggest that for a remittance to occur, foreign income must physically or constructively enter the State.

In this situation :

1. Location of Funds: The transfer is executed from a foreign bank account to a bank account physically located in Germany. Because the receiving financial institution and account are situated outside Ireland, the funds have not been "received in the State".
2. Corporate Identity vs. Bank Location: The fact that the legal owner of the receiving account is an Irish-incorporated entity (Interactive Brokers Ireland Limited) does not automatically turn a offshore bank transfer into an Irish remittance. Revenue practice and Irish case law look to the location of the asset (i.e., the physical location of the bank account holding the funds) rather than the tax residency or incorporation of the beneficiary company.

Your examples are clear examples of services being received in Ireland. If you pay €1,000 to someone to do work on your Irish property and pay the money to a German account, you have clearly received a service in Ireland.

Where section 71(2) applies, section 71(3) states that “the tax shall, subject to section 70, be computed on the full amount of the actual sums received in the State from remittances payable in the State, or from property imported, or from money or value arising from property not imported, or from money or value so received on credit or on account in respect of such remittances, property, money or value brought into the State in the year of assessment".

 

[arasar]

It might help if you told us why you need to transfer money this way, the purpose.

I was looking for a suitable broker as a non-domiciled person and IBKR are mentioned as one of the best in many of the reviews. But when I saw that IBKR was registered in Ireland I thought that there may be some problem with using them as a non-domiciled person in Ireland. The fact that they hold all customer deposits outside of Ireland though suggests that using IBKR is no different from using an offshore broker in Switzerland.

 

[Bronte]

Sounds very complicated. Doubt you should rely on AI or this forum to decide what the legal and financial tax implications apply.

 

[ClubMan]

Sounds very complicated. Doubt you should rely on AI or this forum to decide what the legal and financial tax implications apply.

I’m Irish, non resident, I frequently transfer money from one EU country to Ireland, to pay bills, property purchase, property sale, renovations, and back the other way over the years. Bank to bank. There are no tax implications on those, as for example my Irish rental income is taxed in Ireland.

Did you get tax advice that reassured you that you had no tax issues with your cross jurisdictional money transfers?

 

[Bronte]

Did you get tax advice that reassured you that you had no tax issues with your cross jurisdictional money transfers?

I don’t need to. Nothing complex or illegal or iffy about any of my transfers. Just been thru, last year, very complex legal and tax procedures here, requiring declarations of assets, bank accounts, credit card statements. The level of detail was very stressful, luckily I keep everything, what they were looking for didn’t surface. For example, as stated on here I’ve done a major renovation project in Ireland, the tax authorities here were wondering about the bank transfers from here, to a child in Ireland doing the renovations for me. I could clearly document all bank transfers in and out, plus I sent them a very full A4 binder of receipts. Which matched expenditure and bank transfers. My lawyer told me they wanted the cc statements to see if I was withdrawing cash in large amounts. (I never take out cash).

With the hiring of professionals, lawyers, one of who was English as she is experienced in people in my situation. I’ve always been able to do Irish tax returns, including CGT, but as tax has got more complex, as has my finances, I’ve both an Irish accountant and an accountant here. I’m now more simplified, particularly here, in anticipation of a permanent move home.Though I might go tax resident elsewhere. But I’ve a preference for Ireland because it’s easier for me, it’s in my mother tongue and there are certain tax advantages I wish to take advantage off.

The tax authorities in many jurisdictions share information, it’s unreal what they see. In the past thru the company my husband worked for our tax returns were handled by initially EY, then PWC, followed by Deloitte. And about 15 years ago there was a special tax audit on the certain company salaried employees, unusually I went to that Deloitte meeting, because I handle tax/finance/legal as my husband hated it. We passed, others did not.

The OP is doing something complex, unusual, unclear. He needs specialist advice.

 

[TomEdison]

Most AI suggest that for a remittance to occur, foreign income must physically or constructively enter the State.

Seriously, this is not an area where you should pay any attention to, or place any trust in, what "most AI say".

[Tax generally is not an area where you should seek advice from AI bots, not least because AI bots have a bias towards telling you what you want to hear, which is pretty much the last quality you want in a tax adviser.]

"The remittance basis" is common shorthand for a bunch of rules set out in Taxes Consolidation Act 1997 s. 71 that covers a lot more than just strict remittance. Did your "most AI" mention this at any point? I'm guessing not, but it's a pretty fundamental point.

The remittance basis will mean that a non-domiciled person is chargeable to tax if they remit their money into Ireland. But, because of the rather expansive set of rules just mentioned, they will also be chargeable to tax in a variety of other situations which do not involve any money being remitted to Ireland. For example, if I use my foreign funds to buy valuable items in, say, Paris, and those iterms are then imported into Ireland, that's a "remittance" and will be taxable. Or, if I pay somebody in Paris as a result of which I receive services in Ireland, or get value of any kind in Ireland, that's a remittance.

So, you pay money into a bank account in Germany. An adviser who's not an AI bot will immediately ask, why? What happens as a result of you paying that money? What did you pay it in for? What happens is that shares or securities end up in your Irish brokerage account. That's what you need to focus on.

So the question really comes down to this; if foreign shares or securities end up in your Irish brokerage account, is that you receiving property, services or value in Ireland? Or, even more simply, is putting shares into an Irish brokerage account considered, for the purposes of s. 71(3), to be "importing" those shares?

I'll be honest with; I don't know the answer to that question for certain. My sense is that it is, and I've set out a few reasons abvove why I could be wrong.

Sorry I can't be more help. But I hope I have at least pointed you towards the question you need to ask. For the love of God, don't as an AI bot.