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Tax > Income Tax > Flashcards

Income Tax Flashcards

1
Q

What are the different income categories under Schedule D? (Case I - Case V)

A

Case I: Self-employed trading income
Case II: Self-employed professional income
Case III: Foreign income
Case IV: Deposit interest income
Case V: Irish rental income

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2
Q

What are the income categories under Schedule E and Schedule F?

A

Schedule E: Employment/Pension income
Schedule F: Irish Dividend income

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3
Q

What are 4 common tax exemptions and their income limits?

A
  1. Age Exemption: Over 65s with income less than €18,000 (single) or €36,000 (married).
  2. Artists Exemption: Income up to €50,000.
  3. Providing Childcare Services: Income less than €15,000.
  4. Rent-a-Room Relief: Income up to €14,000.
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4
Q

What are 4 common tax deductions (tax reliefs at the marginal rate)?

A
  1. Pension Contributions
  2. Nursing Home Expenses
  3. Permanent Health Insurance (PHI) Premiums
  4. Employing a Carer for an Incapacitated Person: Maximum of €75,000
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5
Q

What are the income thresholds for different tax categories? (Single, Single Parent, Married (1 earner), Married (2 earners))

A

Single: €40,000
Single Parent: €44,000
Married (1 earner): €49,000
Married (2 earners): €80,000

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6
Q

What are some common non-refundable tax credits (5) and their amounts?

A

Single Person: €1,775
Single Parent: €1,650 (additional)
Married Couple: €3,550
Employee: €1,775
Earned Income: €1,775

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7
Q

What are some non-refundable tax credits (3) that provide relief at 20%?

A
  1. Medical Expenses
  2. Non-Routine Dental Expenses
  3. College Fees
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8
Q

What are some common refundable (2) tax credits?

A
  1. PAYE Paid on Salary
  2. DWT (Dividend Withholding Tax) Paid on Irish Dividends
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9
Q

What are the tests for determining residence for income tax purposes?

A

Residence is determined by two tests: Only need to pass one test to be deemed resident.

  1. 183-Day Test
  2. 280-Day Test
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10
Q

What is the 183-Day Test for determining residence for income tax purposes?

A

183-Day Test:
Present in Ireland for 183 days or more in the tax year: Resident
Present in Ireland for less than 183 days in the tax year: Non-resident

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11
Q

Front: What is the 280-Day Test for determining residence for income tax purposes?

A

280-Day Test:
Present in Ireland for 280 days or more in the current and preceding year (with a minimum of 30 days present each year): Resident in current year
Present in Ireland for less than 280 days in the current and preceding year: Non-resident in current year

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12
Q

What is the concept of domicile?

A

A concept of one’s “permanent home”.

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13
Q

What is a Domicile of Origin?

A

Assumed from the domicile of their father (or mother if unmarried).

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14
Q

What is a Domicile of Choice?

A

Choosing a domicile different from that of origin.
Must prove the intention to remain in the country permanently or indefinitely.

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15
Q

What is the liability to Irish income tax for individuals who are resident and domiciled in Ireland?

A

Resident and Domiciled (Irrespective of Ordinary Residence):
Taxable on Worldwide Income

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16
Q

What is the liability to Irish income tax for individuals who are resident but not domiciled in Ireland?

A

Resident and Non-Domiciled (Irrespective of Ordinary Residence):
1. Taxable on Income arising in Ireland
2. Taxable on Foreign employment income relating to performance in Ireland
3. Taxable on Other foreign income remitted to Ireland

(Remit = send (money) in payment or as a gift)

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17
Q

What does it mean to be non resident but ordinarily resident in Ireland?

A

Non-Resident: The individual does not meet the criteria to be considered a resident in Ireland for the current tax year.

Ordinarily Resident: The individual has been a resident of Ireland for the past three consecutive years and, therefore, is considered to have an enduring connection to Ireland.

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18
Q

What is the liability to Irish income tax for non-Irish residents who are ordinarily resident and domiciled in Ireland?

A

Taxable on Worldwide Income, except for:
1. Foreign trade/profession (fully carried out abroad)
2. Employment fully carried out abroad
3. Other foreign income, provided it does not exceed €3,810

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19
Q

What is the liability to Irish income tax for non-residents who are ordinarily resident and non-domiciled in Ireland?

A

Taxable on Irish income and foreign income remitted to Ireland.

The following income is not liable to Irish income tax, even if remitted:
1. Foreign trade/profession (fully carried out abroad).
2. Employment fully carried out abroad.
3. Other foreign income, provided it does not exceed €3,810.

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20
Q

What is the liability to Irish income tax for non-residents who are also non-ordinarily resident in Ireland, irrespective of domicile?

A

Taxable on Income arising in Ireland

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21
Q

Are non-residents entitled to Irish personal tax credits?

A

Non-Residents may be entitled to Irish personal tax credits if they are EU nationals.

If Irish income > 75% of worldwide income: FULL tax credits
If Irish income < 75% of worldwide income: PARTIAL tax credits

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22
Q

What are the criteria for the Domicile Levy to apply?

A

The Domicile Levy applies to an individual who:
1. Is domiciled in Ireland
2. Has worldwide income > €1 million
3. Has an income tax liability < €200,000
4. Has Irish property market value > €5 million on 31st December

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23
Q

What is the amount of the Domicile Levy and how is Irish income tax treated in relation to it?

A

The Domicile Levy is €200,000.
Irish income tax paid is allowed as a tax credit against the levy.

The domicile levy is a specific tax measure implemented in Ireland aimed at individuals who are domiciled in Ireland but may not be tax resident there for a given tax year.

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24
Q

What is Split-Year Residence Relief?

A

An individual can be treated as Irish resident for part of a year only.
This relief is favourable to the individual in both the year of arrival and the year of departure.

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25
Q

How is a non-resident individual treated for Split-Year Relief upon arrival and departure in Ireland?

A

Deemed resident only from the date of arrival or departure.
Relief: Not taxable on pre-arrival/post departure foreign employment income.

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26
Q

What are the benefits of Split-Year Relief for a non-resident individual arriving in/departing Ireland?

A

Avail of a full year’s standard rate band and tax credits.
Relief: Tax bands and credits are not apportioned to part of the year.

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27
Q

What are the conditions to avail of Split-Year Relief in the year of arrival?

A
  1. Non-Resident in the preceding year.
  2. Arrive in Ireland in the current year.
  3. Resident in the current year (more than 183 days).
  4. Intend to be Resident in the following year.
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28
Q

What are the conditions to avail of Split-Year Relief in the year of departure?

A
  1. Resident in the current tax year (more than 183 days).
  2. Intend to be Non-Resident in the following tax year.
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29
Q

What must tenants do to ensure income tax is collected from non-resident landlords?

A
  1. Withhold tax at the standard rate of 20% and pay it to Revenue.
  2. Pay the net amount (80%) to the non-resident landlord.
  3. Issue Form R185 to the landlord.
30
Q

How is the landlord taxed on rental profit, and what credit is available?

A

The landlord is taxable on rental profit with a tax credit for the 20% withheld by the tenant.

31
Q

How can an Irish collection agent help non-resident landlords avoid the need for tax withholding by tenants?

A

The landlord can appoint an Irish collection agent to avoid the need for tax to be withheld by the tenant.

  1. Gross rent is paid to the agent.
  2. The agent is assessable on the rental income.
  3. The agent files a return and pays income tax on behalf of the landlord.
32
Q

How is foreign investment income taxed in Ireland and what is the exception?

A

Foreign investment income is assessable in the tax year that it arises.
Taxed under Schedule D Case III.

Exception: EU Deposit Interest (where tax is filed and paid on time) is taxed under Schedule D Case IV.

33
Q

How is EU deposit interest taxed based on compliance with filing and payment requirements?

A

Taxpayer has paid tax & filed return on time = Taxed under Case IV at DIRT 33%.

Taxpayer has NOT paid tax & filed return on time = Taxed under Case III at Higher Rate 40%.

34
Q

How is non-EU deposit interest taxed based on compliance with filing and payment requirements and the taxpayer’s marginal rate?

A

Taxpayer has marginal rate of 20% & paid tax & filed return on time =
Taxed at DIRT 33%.

Taxpayer has NOT paid tax & filed return on time = Taxed at Higher Rate 40%.

Taxpayer has a marginal rate of 40% & has paid tax & filed return on time = Taxed at Higher Rate 40%.

35
Q

How is UK dividend income taxed for Irish residents?

A

Irish residents are taxable on the net amount received from UK dividend income.

36
Q

How is UK interest income taxed for Irish residents?

(Interest income is earned from debt instruments ex. Bonds, loans, fixed deposits etc)

A

UK interest income is liable to Irish tax if the recipient is an Irish resident.

37
Q

How is foreign rental income treated for Irish tax purposes?

A

Foreign rental income follows the same rules as Irish rental income (Case V).

38
Q

How is relief for foreign tax on foreign income provided based on the existence of a Double Taxation Treaty (DTA)?

A

If no DTA = Tax Deduction

If DTA exists = Tax Credit (Non-refundable)

39
Q

How are Case III losses treated for tax purposes?

A
  1. Set against profits in the same category.
  2. Carried forward against future profits in the same category.
40
Q

How are foreign rental losses treated under Case III?

A
  1. Foreign rental losses are the most common.
  2. Only allowable against foreign rental income.
  3. Carried forward against future foreign rental income.
41
Q

What is the background of the Special Assignee Relief Programme (SARP)?

A

Several multinational companies (MNCs) have been attracted to Ireland due to the low corporate tax rate and favourable corporate tax regime.

However, the Income Tax rates are comparatively higher than most other countries, making it less attractive from an employee’s perspective.

42
Q

What is the purpose of SARP?

A

SARP provides a relief from income tax for relevant employees who are assigned to work in Ireland from abroad.

It incentivises MNCs to send high-earning employees (“special assignees”) to Ireland.

43
Q

What tax deduction can a relevant employee take under SARP?

A

A relevant employee may take a tax deduction of a “specified amount” for the first 5 years from their employment income.

44
Q

How is the “specified amount” for SARP relief calculated?

A

The “specified amount” is 30% of employment income between €100,000 and €1 million.

This specified amount is exempt from income tax but is still liable to USC and PRSI.

45
Q

How does employment income affect tax savings under SARP?

A

The higher the employment income of the employee, the higher the tax saving.

46
Q

How can SARP relief be granted?

A

Relief may be granted through the payroll (real-time) or by the employee making a claim for a repayment at the end of the tax year (retrospective).

47
Q

Who qualifies as a relevant employee under SARP? (3 qualities)

A
  1. Is Irish Resident
  2. Performs their employment in Ireland with a “relevant employer” or “associated company”
  3. Has “relevant income” from the relevant employer or associated company of at least €100,000
48
Q

What are the additional qualifications for a relevant employee under SARP?

A
  1. Employee Requirement: Was a full-time employee of the “relevant employer” for 6 months immediately before arrival and worked abroad.
  2. Arrival Requirement: Arrives in Ireland 2015–2025, at the request of the relevant employer, to exercise or take up employment in Ireland.
  3. Employment Duration: Performs duties of employment in Ireland for a minimum of 12 consecutive months.
  4. Certificate: Certifies with Revenue their compliance with conditions within 90 days of arrival in Ireland.
  5. Residency Requirement: Was non-resident for the 5 tax years immediately preceding the tax year in which they first arrive.
49
Q

What qualifies as a relevant employer under SARP?

A

A company that is incorporated and tax resident in a DTA/Info-sharing country.

50
Q

What qualifies as an associated company under SARP? (2 conditions)

A

A company associated with the relevant employer where:
1. Either company has control over the other, or
2. Both companies are under the control of the same person or persons.

51
Q

What is considered “relevant income” under SARP?

A

Used only to assess whether a person can qualify for SARP.

Income > €100,000 where the employee arrives in Ireland between 2023-2025.
Income > €75,000 where the employee arrives in Ireland prior to 2023.

52
Q

What is excluded from “relevant income” under SARP? (6 exclusions)

A

Effectively only the base salary as it excludes:
1. Benefits-in-kind (BIKs) and perquisites
2. Bonus
3. Commission
4. Termination payments
5. Shares or share-based remuneration
6. Payments in relation to restrictive covenants (money paid as compensation or incentives to adhere to specific restrictions typically imposed on current or former employees, business owners, or partners. Ex. Confidentiality agreements)

53
Q

What is the minimum number of qualifying days required for Foreign Earnings Deduction (FED)?

A

The employee must work in a relevant state(s) for a minimum of 30 qualifying days within 12 months.

54
Q

What constitutes a “qualifying day” for Foreign Earnings Deduction (FED) and what can be included?

A

A “qualifying day” is one of at least 3 consecutive days carrying out the employment where the employee is present in a relevant state for each of those days.

Qualifying days can also include:
1. Weekends and public holidays (unavoidable part of a business trip).
2. Days spent travelling directly to/from relevant states.

55
Q

What is the relief available under FED?

A

FED available is the lesser of €35,000 or “Specified Amount”.

56
Q

How is the “specified amount” for FED calculated?

A

Specified Amount = (D/F)*E

D: Number of “qualifying days” worked in a “relevant state” in the tax year
E: Employment income (Including share-based remuneration/options but excluding BIK)
F: Total number of days employment held in the year

57
Q

When does FED not apply? (5 cases)

A

No FED where the following reliefs apply:

  1. Special Assignee Relief Programme (SARP)
  2. The remittance basis of taxation
  3. Key employee R&D relief
  4. Cross-border worker relief
  5. Split-year residence relief
58
Q

How are termination payments taxed?

A

Payments received on termination of employment.

Taxable under Schedule E.

59
Q

What are examples of termination payments? (3 examples)

A
  1. Compensation payments (“golden boots”).
  2. Ex-gratia redundancy (“golden handshakes”).
  3. Pay in lieu of notice (not provided for in contract).
60
Q

What payments on termination of employment are treated as normal remuneration and not as ‘termination payments’?

A
  1. Holiday pay
  2. Pay in lieu of notice (provided for in contract) (when their employment is terminated without the provision of the required notice period.)
61
Q

How is statutory redundancy treated for tax purposes?

A

Statutory redundancy is fully exempt from income tax.
It has no impact on the exemptions covered in this topic.

62
Q

How are termination payments treated for tax purposes?

A

Termination payments are deemed to be received on the date of termination.

They are assessed in the corresponding tax year.

A certain portion of termination payments are exempt from income tax.

63
Q

What are the methods to calculate the tax-exempt portion of a termination payment and what is the lifetime exempt limit?

A

3 formulae used to calculate tax-exempt portion:

  1. Basic Exemption
  2. Increased Basic Exemption
  3. Standard Capital Superannuation Benefit (SCSB)

Individual will use the formula that gives the highest tax-exempt amount.

Lifetime tax-exempt limit of €200k.

64
Q

How is the Basic Exemption for termination payments calculated?

A

€10,160 plus €765 for each complete year of service.

65
Q

How is the Increased Basic Exemption for termination payments calculated?

A

Increase in the basic exemption by an additional €10,000.

Only available if the individual hasn’t made a lump sum termination payment claim in the previous 10 years.

Reduced by the entitlement to future tax-free pension lump sum by up to €10,000.

66
Q

How is the Standard Capital Superannuation Benefit (SCSB) for termination payments calculated?

A

Formula: (A*B/15) - C

A: Average of last three years’ remuneration to date of termination.
B: Number of complete years of service.
C: Tax-free lump sum entitlement from pension scheme (Actuarial Calculation).

67
Q

What are the rules for drawing a lump sum from a pension on retirement?

A

Individuals may drawdown a lump sum from their pension on retirement.

The maximum Tax-Free Lump Sum (TFLS) that can be taken in a lifetime is €200k.

This is separate from the €200k lifetime limit for tax-free termination payments.

68
Q

What are the tax rates on pension lump sums?

A

Maximum of up to €200k: Tax-Free.
Between €200k - €500k: Standard Rate 20% (Schedule D Case IV).
Above €500k: Marginal Rate 40% (Schedule E).

69
Q

What are the tax rates on ex-gratia lump sums on death/disability?

A

Maximum of €200k: Tax-Free.
Above €200k: Marginal Rate 40% (under Schedule E).

70
Q

What are the conditions to be met by an employee to avail of the Key Employee Engagement Programme (KEEP)?

A
  1. Employment Status: The employee must be a full-time employee for a minimum of 30 hours per week, employed for a continuous period of 18 months.
  2. Share Options: The share options must be granted during the period of employment and cannot be in replacement of remuneration.
  3. Company Criteria: Only shares from qualifying companies can be involved, and these shares must be ordinary shares.
  4. Holding Period: The employee must hold the options for at least one year.
  5. Limitations: There are caps on the market value of share options that can be granted annually, over three years, and in total per employee.

Tax (18 decks)

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