A lot of people are interested in tax residency in Ireland for digital nomads. The reason is that they know that a lot of the biggest companies in the world have their (European) headquarters there. Companies like Meta (formerly known as Facebook), Apple and Google have their European headquarters in Dublin. It won’t surprise you that this is mainly for tax reasons. However, this begs the question if it is also interesting for you as a digital nomad to set up your tax residency in Ireland?
Living in Ireland
Ireland is part of the European Union. However, it is not part of the Schengen Area. In any case, this means that citizens of another country of the European Union can travel visa free to Ireland. Even more, you can even go and live there without the need for a residency permit. You will need to apply for a residency card though, but in principle this will automatically be granted.
If you don’t hold a European passport, you will need a visa in order to live long term in Ireland. You can find more information about the different options on the website of the Irish Department of Foreign Affairs.
Irish tax rules
In order to decide if tax residency in Ireland for digital nomads is a good pick, you need to understand the tax rules.
Tax residency in Ireland
In order to assess if you qualify as a tax resident, Ireland looks at the amount of days you spend in the country.
You will qualify as a tax resident if you spend more than 183 days in the country during the tax year (which follows the calendar year).
Furthermore, you also qualify as a tax resident if you spend at least 280 days in the country combined over the current and the previous tax year. However, this only applies if you were in Ireland for at least 30 of those days in the current tax year.
You can already become a tax resident in a year you don’t meet the required amount of days if you will become a tax resident the year after.
Apart from becoming a tax resident in Ireland, you also need to know how to cease being a tax resident. If you have been a tax resident for three consecutive years, you become an ordinarily tax resident. This entails, that if you leave Ireland afterwards you still might need to pay taxes there for three more years. However, if you actually live abroad and perform your activities outside of Ireland, the impact might be limited. Nevertheless, you should be aware of this.
If you are not domiciled in Ireland, which most likely will be the case if you aren’t born there or hold an Irish passport, you will only pay income tax on local source income and income remitted back into Ireland.
Tax residency in Ireland for digital nomads: tax rates
Ireland applies a two tier progressive tax rate. You pay 20% on the first €40.000 in income and 40% on everything above that. Both professional income and investment income (e.g. dividends) are added up to determine your taxable basis on which these rates apply.
The tax rate for capital gains equals 33% (increased to 40% in some cases).
Tax residency in Ireland for digital nomads: social contributions
Social contributions for self-employed individuals amount to 4%. On top of that, there is also a universal social charge (USC). The applicable rates are progressive and thus depend on your income level. If you earn less than €12.000 per year, you don’t pay the USC. As from €12.000 the rate starts at 0,50% and goes up to 11% if you earn over €100.000.
Setting up a company in Ireland
We mentioned that a lot of big international companies have their (European) headquarters in Ireland. So, how much corporate taxes do you pay in Ireland?
Well, it depends. Ireland applies different rates depending on the nature of the income of company. On income from your actual activity, you will pay 12,5% in taxes. On passive income or investment income, you pay 25% in corporate tax. For capital gains, the rate is 33%. The big savings the mastodont tech companies come from the patent box regimes that Ireland provides. Unfortunately, this mostly doesn’t apply to the average digital nomad.
If you pay out a dividend, the standard withholding tax amounts to 25%.
Tax residency in Ireland for digital nomads: conclusion
Tax residency in Ireland for digital nomads is worth looking into. However, there are countries where you could further optimize your taxes compared to Ireland. Nevertheless, the biggest issue for nomads will probably be that you need to actually spend a decent amount of time in Ireland to become a tax resident there.