What does Domicile mean from a tax perspective?

It is very important not to confuse domicile with the residence. Domicile is a much more permanent concept than a residence. Domicile is a legal concept and can be broadly defined as an individual's natural home. Usually, a domicile is a place where the person was born and raised. It is worth noting that an individual can only have one domicile at any given time.

There is no statutory definition of domicile in Ireland. According to the Revenue Commissioners in Ireland, domicile “broadly means living in a country with the intention of living there permanently.” Your domicile can only change if you clearly state and demonstrate that you are going to permanently live in another country and cut ties with your original domicile.

Case study - Domicile

John was born and raised in the UK. He has adult children living in the UK, he owns property in the UK, as well has a shareholding in a business in the UK. However, John wishes to move to Ireland and become a tax resident there. From a tax perspective, John’s domicile is in the UK. He was born there, raised there, and also has family, property, and business interests there. As the UK is John’s domicile, he would be able to register himself as a non-domiciled Irish tax resident, once he has spent the required time of 183 days in a year in Ireland.

Charge to Income Tax when Resident - Non domiciled in Ireland vs domiciled in Ireland

Non domiciled in Ireland: In the event that you are not domiciled in Ireland, and will not be unless you have the intention to remain in Ireland indefinitely as your permanent home, then you are only liable to Irish tax on Irish source income and gains. With regards to foreign income and gains, these are only liable to Irish tax if they are remitted into Ireland. For remittances of foreign incomes, the tax will be assessed on the full amount of actual sums received in Ireland at the prevailing Irish rates. Foreign income or gains which are not brought in to or spent in Ireland is not subject to Irish tax.

In the event that it is an individual’s first time moving to Ireland, funds accumulated from income earned abroad prior to 1 January in the year in which the individual first becomes tax resident, are considered remittances of capital and not income. As such, the funds will not be liable to income tax even if remitted after the individual becomes a tax resident.

Domiciled in Ireland: In the event that the individual is Irish domiciled, on becoming Irish tax resident again, they would be taxable on their worldwide income. This would apply from the first year of becoming a tax resident again.

To read about the benefits of becoming a non-domiciled Irish tax resident click here.

If you are returning to Ireland and want to learn more about tax residency, click here.