Scope of the remittance basis in Ireland

Individuals who are resident in Ireland are usually liable to tax on their worldwide income. However, non-Irish domiciled individuals ("Non-Doms") are liable only on the remittance basis in respect of income arising outside Ireland ('foreign income'). Prior to 1 January 2008, the remittance basis did not apply to UK income, (in what was plainly a contravention of EU law). Crucially Ireland does not impose any form of Remittance Basis Charge or seek to withdraw personal allowances from remittance basis users. Similar treatment formerly applied to Irish citizens who were resident but not ordinarily resident in Ireland, but this has been withdrawn from 2010. In effect, this means that the foreign income of a Non-Dom will only be taxed to the extent that sums representing such income are brought directly or indirectly into Ireland in the form of cash or its equivalent (e.g. cheques which are subsequently cashed here). Bringing income into Ireland in non-cash form (e.g. using sums representing income accumulated abroad to acquire a painting which is subsequently imported into Ireland) would not of itself count as a remittance. However, if such sums were applied in acquiring a painting which was subsequently sold (whether in Ireland or abroad) and the cash proceeds were received in Ireland, those sums would fall into charge at that point (see the UK case of Patuck v Lloyd 26 TC 284). It is worth noting that foreign income can include employments to the extent that the duties are performed outside Ireland, if the employer is also based outside Ireland. In general, sums which represent foreign income or gains which arose prior to the individual becoming resident in Ireland, will be regarded as non-taxable and may be freely remitted in cash form to Ireland. In the situation where funds are remitted from an account consisting of both non-taxable and taxable elements, it is normal Revenue practice to match remittances firstly with the taxable element. Any problems which this approach might generate can normally be eliminated through the adoption of suitable banking arrangements. Non Dom Gifts Where the legal entitlement to sums representing foreign income or gains is transferred unconditionally outside Ireland by a Non-Dom to a third party, then a subsequent remittance of such income by the third party is not caught (since, at that point in time, it is no longer income of the Non-Dom). This principle can equally apply to transfer to spouses, though care must be taken to demonstrate that a genuine gift with no element of reciprocity is involved (as illustrated by the UK cases of Carter v Sharon 20 TC 229 and Grimm v Newman [2002] STC 1388). It may be prudent to be able to demonstrate that there are sound non-tax reasons underpinning the gift, in view of Ireland's very widely-worded General Anti-Avoidance Rule. A payment out of foreign income to a third party (e.g. a gift) which is made in Ireland by, or at the behest, of the Non-Dom will be treated as a remittance. Anti-avoidance rules also are in place designed to prevent Non-Doms applying foreign income to make repayments abroad of loans or debts incurred in respect of money which has been brought into Ireland. The rules do not apply however to payments of interest on any such loan or debt if it was incurred abroad. Where the Non-Dom uses an overseas credit card to pay for goods or services in Ireland and subsequently discharges his debt to the credit card company out of foreign income, this may constitute a remittance under general principles or, failing this, may be caught under the foregoing anti-avoidance provisions, although the position is not entirely free from doubt.