I want to give you some Tax Tips when coming to Ireland. What I mean by coming here is staying here for a prolonged period. As such, you’ll become resident here.
The idea for this came from a recent meeting I had with a Swiss couple. The lady, who we’ll call Mary, is from the locality. Her and her husband Frank plan to move here in 2030. Frank is in the army in Switzerland and Mary works in IT. Both will have pensions. They are married and have been living over there for the last 30 years.
The main areas we discussed at our meeting were
- Background
- Capital Accumulated
- Income Levels
- Tax Rate
- Planning Tips
- Summary
Background
They both have private pensions. Frank will get the state pension of €28,000 in 2030 and Mary won’t get that until 2037 when she is 65. They have money invested in investment bonds which will mature in the next few years. They own a house and 3 apartments. Between now and 2030 they will continue to rent the apartments. Before coming here, they may sell one of the properties but will have rental income when here.
Both will get tax-free lump sums from their private pensions when drawing them down.
They intend to move here permanently in 2030. Therefore, they’ll become resident and domiciled in Ireland that year. Residence depends on the number of days you are here. But domicile is a legal concept that I can best sum up as where you intend to live on a permanent basis.
Capital Accumulated
Capital accumulated before coming to Ireland isn’t a problem. Their sources of capital will come from.
- Asset sales – sale of property
- Investment bond proceeds
- Pension lump sums
- Accumulated savings
When I say it isn’t a problem, I mean that there are no Irish tax implications. This is wealth they have amassed over many years when they were not resident here. As a result, bringing this money to Ireland isn’t an issue.
The key is that they sell the property in a tax year when they are neither resident on domiciled here. They would need to sell the property in any year up to and including 2029.
Income Levels
The following are pensions that they expect to have from 2030 onwards.
| Year | Mary | Frank |
| 2030 | €22,000 | €41,000 |
| 2031 | €38,000 | €61,000 |
| 2032 | €38,000 | €42,000 |
| 2033 | €38,000 | €31,000 |
They own the rental properties jointly so we will assume a rental profit of €12,500 each.
2030
For 2030 their combined total income will be
| Frank €28,000*, €41,000 & €12,500 | €81,500 |
| Mary €22,000 & €12,500 | €34,500 |
| Total | €116,000 |
The reason for the Asterix after Frank’s state pension income is that income isn’t liable to tax here. It’s an army pension, so a government pension and Frank will pay tax on that in Switzerland. Most taxation agreements between countries have a clause relating to government pensions. When Mary gets her state pension in 2037, she will pay tax on that here as it isn’t from a government job.
As a result, Frank’s taxable income here in 2030 will be €53,500 and their total income will be €88,000.
Using 2024 Tax rates, tax bands, and credits their liability would be
| Total Income | €88,000 |
| First €84,000 X 20% | €16,800 |
| Balance €4,000 X 40% | €1,600 |
| Total Tax | €18,400 |
| Less Tax Credits | |
| Married | €3,750 |
| PAYE X 2 | €3,750 |
| Net Tax Liability | €10,900 |
PRSI & USC
In most cases, there will be no PRSI on foreign pensions but there would be USC. But there would be no USC charge on state pensions. That’s not an issue for Frank as his state pension is only taxed in Switzerland. When Mary gets her state pension in 2037, she won’t pay USC on that. Likewise, Irish residents don’t pay USC on State pensions.
Both will pay PRSI on the rental income up to the age of 66. So, for 2030 the PRSI charge will be
| €25,000 | 4% | €1,000 |
And the USC charge for Frank, using 2024 rates, will be
| First €12,012 | 0.5% | €60 |
| Next €13,748 | 2% | €275 |
| Next €27,740 | 4% | €1,110 |
| Total €34,500 | €1,445 |
Mary’s USC will be
| First €12,012 | 0.5% | €60 |
| Next €13,748 | 2% | €275 |
| Next €8,740 | 4% | €350 |
| Total €34,500 | €685 |
Total USC and PRSI costs are €3,130 and increase the tax liability from €10,900 to €14,030.
Tax Rate
You’ll see from the figures above most of their income was liable at 20%. Only €4,000 was liable to the top rate. But what is their effective tax rate?
If we divide their final tax liability of €14,030 by their total income of €88,000, we get 15.9%. So, say 16%
This effective rate will fall in future years assuming their income stays the same. They wouldn’t pay PRSI at 66. At 65 they would get the age tax credit of €490. Small I know but it all helps! Plus, from age 70 onwards reduced rates of USC apply if their income is €60,000 or less. That €60,000 applies separately for both spouses.
In 2031 their effective tax rate will increase. Their combined incomes will hit €124,000. But they will still maximise their lower rate bands for a married couple that currently is €84,000.
In the years ahead, the lower rate bands will likely increase. In 2023 the maximum lower rate band was €73,600 so it has increased by over €10,000 in two years. Plus, the tax credits increase most years too.
Planning Tips
As mentioned above, maximising the lower rate band reduces their effective tax rate. The key to this is having an equal split of income, as much as possible.
If only one spouse owned the rental properties, then putting them into joint names would be wise. Likewise, if the rental income is increasing, they would be paying the top tax rate here, plus USC & PRSI. Selling a property before coming here is worth looking at. For example, if they sell their home in Switzerland, that could be free from Capital Gains Tax. That’s on the assumption that a similar principal private residence exemption exists there.
In Ireland up to the first €200,000 of a lump sum from your pension is tax-free. Between €200,000 and €500,000, the rate is 20% on the lump sum. If no such benefit applies in Switzerland, they could draw down the pension when residents here. They would need to take specific pension advice on this.
To be resident here they will need to be in Ireland for 183 days in 2030. It is possible to maximise your tax credits in the year of arrival by claiming split-year treatment. The plan would be to come later in the year in 2030 and elect to be resident.
Say they arrive in September of 2030 they wouldn’t be here for 183 days and as such wouldn’t be resident. If they elect to be resident, then they would get full tax credits for the year. Some of the income earned before coming here isn’t taxed here. So, their taxable income would be lower but yet have full credits and lower rate bands. Again, this would need closer examination nearer to the date to see what incomes they have.
Double Taxation Agreement
Our meeting was a 1-hour chat, and the main purpose was to make an introduction and give them some general tax tips. Closer to the date of moving they will know better what incomes they will have in 2030. Reviewing the double taxation agreement between the two countries will make sense then.
Mary and Frank will pay Swiss tax on their rental income. Most tax treaties tax income from property in the country where the property is. As a result, primary taxing rights are with the country where the property is. But, when they are resident and domiciled in Ireland, they will pay tax on their worldwide income here. Therefore, they pay tax on the rental profits in two countries. To eliminate double taxation, they’ll get a credit for the Swiss tax on the rents against their Irish tax.
Summary
In fairness to Mary and Frank, they are planning their finances before the big move. A lot can change between now and 2030 but having a general idea now of how the numbers work is a great benefit. The basics are that you pay tax here on your worldwide income once you are resident and domiciled. But there are always exceptions. Hence the recommendation is to have a closer look at the double taxation agreement.
Maximising the lower rate band will help reduce their effective tax rate. No PRSI from 66 and only 2% USC from age 70 all help to keep the taxes down. Paying €14,000 out of €88,000 leaves them with a net €74,000. Over €6,000 per month is a very good income when you don’t have a mortgage and no dependents. Even with Irish prices! I’d be happy with it.
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