The world is more globalised than ever, and it is becoming more common to live and work in a country that is not your home. When it comes to investing, this can lead to a lot of confusion as to what nation your investment tax liabilities, such as capital gains tax, are due.
After reading this blog post, you will be clear as to what tax authority you will owe capital gains tax on profits made from your investments in the likes of stock, ETFs, and crypto.
To begin to understand if you owe tax to the Irish government or not on your investments, it is first important that you understand what the following statuses mean under Irish law; Resident, Ordinarily Resident and Domiciled.
Resident, Ordinarily Resident, and Domicile
Resident: you will be a tax resident in Ireland if you have been in the country for 183 days or more in a tax year.
Also if you have been in Ireland for 280 days in a tax year plus the previous year (with a minimum of 30 days in each year) you will also be considered to be a tax resident in Ireland.
Ordinarily Resident: You become an ordinarily tax resident in Ireland on the 4th year, after 3 consecutive years of being a tax resident. If you then leave Ireland it will take 3 years to lose your ordinarily tax residency status.
Domicile: is to live in a country with the intention of living there permanently. Everyone has a ‘domicile of origin’ at birth (usually the domicile of the father).
You can change your domicile to another country if you do not intend on returning to the country of your original domicile and intend to remain in your new country of domicile.
Based on each of these statuses you will be able to ascertain where you should be paying your tax liabilities on investments.
Where do you pay tax on Investments if you are a resident in Ireland?
Resident and Domiciled: If you are a resident and dispose of your investments at a profit. Then the capital gains tax is due to the Irish tax authorities.
Resident but not domiciled: you must pay Irish capital gains tax on the disposal of assets situated in the state. Also, you must pay Irish Capital Gains Tax on gains/profits that have been remitted to Ireland from worldwide.
Where do you pay tax on Investments if you are ordinarily resident in Ireland?
If you have lived in Ireland for three consecutive years you will become ordinarily resident. If you subsequently leave Ireland you will continue to be ordinarily resident for a further three years.
If Irish domiciled: you will be liable to Irish capital gains tax on worldwide profits while you remain ordinarily resident in Ireland.
If not Irish domiciled: you will continue to be liable for Irish capital gains tax while you remain ordinarily resident on just gain/profits which are remitted to Ireland.
Where you pay tax on Investments if you are neither resident or ordinarily resident in Ireland?
If you are neither a resident nor ordinarily resident in Ireland, then you will not have to pay capital gains tax on investments (stocks & crypto) to the Irish tax authorities.
There are only certain assets you must are obliged to pay Irish CGT on and that is land and other property in Ireland , assets of a business carried on in Ireland and unquoted shares.
Filing a Capital Gains Tax Return
In summary, you must assess your residency position on capital gains at the date of disposal. This will dictate whether you are due to pay Irish capital gains tax or not.
If after reviewing your residency position, you realise that you will need to prepare a capital gains tax return in Ireland. There is no need to worry. The CG1 form is relatively easy to prepare, even though the form looks a bit daunting at first sight.
Check out my free CGT guide and that will take you through how to complete a CG1 form step by step.
Disclaimer: This blog post is for informational and educational purposes only and should not be construed as financial advice.