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GAZETTE
AUGUST/SEPTEMBER
1994
N ew Res idence Provisions
Finance Ac t , 1 9 94
by Rory O'Riordan*
The Finance Act 1994 has
significantly reformed legislation on
fiscal residence. The changes have
brought in new rules determining
residence for individual tax payers.
The new rules do not affect corporate
residence which continues to be based
on the location of "central
management and control."
Individual liability to taxation in the
Republic is determined by
RESIDENCE, ORDINARY
RESIDENCE and DOMICILE.
RESIDENCE
The law regarding Residence has now
been codified in Sections 149 to 158
of the Finance Act 1994 in regard to
Tax on Income and Capital and for
Gift and Inheritance Tax. The Act
introduces a definition of residence
based exclusively on physical
presence. The new rules have done
away with the old "place of abode"
rules which resulted in many non-
nationals inadvertently becoming
resident in Ireland as a result of
acquiring a holiday home. Under
the new rules Irish RESIDENCE
will now only be acquired
as follows
(A) Presence in the State for a
period of 183 days or more in
any tax year.
An individual will be regarded as
resident for a year of assessment
if he spends a total of 183 days or
more in the State in that year.
This will include all visits,
including holidays, weekends, etc
and will be aggregated in applying
the test. The Act also goes on to
state that the count for the
purposes of the physical presence
test on the number of days for
Rory O 'Riordan
which an individual is in Ireland
is the END of the day. It will thus
be possible to make numerous
trips from outside Ireland to
Ireland on a daily basis without
becoming resident for tax
purposes.
Example 1 -
Arrival in Ireland on the
1st of July 1994 and
departure on the 31st of
December 1994. (184
days). Resident for tax
year 1994 - 1995.
Example 2 -
Arrival in Ireland on the
1st of July 1994 and
departure 21st October
1994 (123 days) not
resident for 1994 - 1995.
(does not reach the 184
days rule).
(B) Presence in the State for a
period of 280 days or more in
the current and preceding
tax year.
The Finance Act 1994 provides
that an individual will be regarded
as resident in Ireland for a year of
assessment if he is present here
for 280 days or more in the
current year and previous years of
. assessment. The Act goes on to
provide that where an individual
is present here for 30 days or less
that person will not be regarded
as resident in Ireland for that year,
and such days will not be included
as part of the aggregate for
this test.
j
Therefore, in an on-going
situation an individual can spend I
up to 139 days in Ireland in a tax
year without becoming an Irish
resident, the previous limit was
90 days.
Example -
Arrival in Ireland on the
1st June 1994, departure
20th November 1994(173
\
days) - not resident for tax
year
1994/1995;
Arrival in Ireland on the
j
1st June 1995, departure
j
15th November 1995 (168
j
days) - resident for
1995/1996-as
the
aggregate number of days \
for tax year 1994/1995 and
tax year 1995/1996 is 341
days which exceeds the 280
day rule.
Split Year
Many countries including Ireland have
operated a "split year system" for
immigrants whereby taxable income
on determined not for the tax year as a
whole but for the period between the
commencement of residence and the
end of the tax year concerned. This
system has now been codified on a
statutory basis for individuals taking
up residence in Ireland. In other words
income will be assessed for the
actual period of physical presence in
the country rather than the entire
tax year.
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