A welcome change was introduced by the Minister for Finance at the Committee Stage of the Finance (No 2) Bill 2008. Tax will be payable by certain taxpayers on a remittance basis, rather than on an actual or arising basis, with effect from 1 January, 2009.  


Under the proposed amendments, the remittance basis will apply to individual taxpayers who:

  • are not domiciled in Ireland
  • are resident in Ireland
  • were resident in a jurisdiction with which Ireland has a double tax treaty, but not within the European Economic Area (“EEA”), prior to becoming resident in Ireland
  • work in Ireland for at least a three year period
  • are paid from abroad.  

Prior to becoming resident in Ireland, the individual must have been employed by a foreignincorporated company which is resident in a jurisdiction with which Ireland has a double tax treaty, but not within the European Economic Area. There is no specified time period during which the individual must have been so employed, which means that, effectively, a newly recruited employee could be sent on mobility to Ireland.  


The method of granting the remittance relief involves the taxpayer first accounting for tax (generally under the PAYE system), and then seeking a repayment to the extent that the remittance basis is applicable. This is obviously not as attractive as a straightforward award of a relief, because of the administrative tedium of applying for a repayment, and the attendant cash flow costs for the taxpayer. The legislation specifies that an application for repayment of tax can be made at the end of the tax year in which the remittance basis is available.  


The employee who is eligible for the remittance basis in respect of employment income can apply to the Revenue Commissioners to compute tax on the greater of the following:

the sum of any employment income earned, received or remitted in that tax year  

  • an amount equal to €100,000 plus 50 per cent of any employment income in excess of €100,000. When doing this calculation, any amount paid under PAYE is to be treated as a remittance. The category of remittances further includes any property imported, or money or value received on credit.  

The difference between the tax liability computed on this amount, and the tax previously paid (if greater) will be repaid to the individual taxpayer.  


The draft legislation refers to residence and domicile, and makes no reference to taxpayers who are currently able to claim the remittance basis of taxation on the basis of not being ordinarily resident. Therefore, the remittance basis of taxation applicable to employment income will not apply to the “returning Irish” i.e. those who emigrated, and returned to Ireland.  


The aim of introducing the remittance basis is undoubtedly to make Ireland more attractive as a jurisdiction for foreign direct investment. After all, executives are also taxpayers and they look to the personal rates of taxation, as well as the extremely competitive 12.5 per cent rate of corporation tax, as a key factor in deciding where to locate a business.  

That much is easy. What is more opaque are the policy considerations behind limiting the remittance basis for employment income to companies with a residence link to jurisdictions with which Ireland has a double taxation agreement, but excluding the EEA. Currently, the jurisdictions which come within this category are: Australia, Canada, Chile, China, Croatia, Georgia, India, Israel, Japan, Korea, Malaysia, Mexico, Macedonia, New Zealand, Pakistan, Russia, South Africa, Switzerland, Turkey, United States, Vietnam, Zambia. Other jurisdictions will be added to this list, as Ireland is actively improving its double taxation network.  


Clearly, the Department of Finance is listening to lobbyists and advisers who have consistently urged reform of the remittance basis of taxation since the swingeing limitations were introduced in 2006. Will the current amendments do the job?

They are certainly a step in the right direction. The relief is firmly geared towards higher earners i.e. the more income in excess of €100,000, the more valuable the potential relief. Lower earners i.e. those in receipt of less than €100,000, are effectively ineligible for the remittance basis in relation to employment income. All in all, a subtly calibrated effort on behalf of the Department of Finance, but not a particularly generous one.