FAQ's - Ireland

Irish tax residents fall under a self-assessment system of taxation with the onus of completing a tax return falling on the individual. Self-assessment customers are required to file Form 11 or the shortened version Form 11E which is mandatory for individuals with significant income from non PAYE sources or who are deemed to be a chargeable person.

Self-employed individuals will complete a Form 11 tax return. In general most PAYE workers are not required to file a Form 11 but are required to do in certain circumstances where non-PAYE income received is more than €50,000 gross per year or higher than €3,175 per month.

A Form 12 tax return is completed by those whose primary source of income comes from PAYE income. In general most PAYE workers do not have to complete a Form 12 as they do not meet the criteria required to file a tax return.

Revenue randomly select PAYE workers and issue Form 12’s for completion regardless of your income threshold. 

When a couple first marries they continue to be taxed as two single individuals under the Irish tax system. If the tax paid by both individuals is higher at the end of the year than if they were taxed as a married couple a tax refund will fall due. An Irish tax refund would occur in this instance where one spouse was on a different tax rate than the other and there were unused tax credits as a result of the new union.  

Yes, Revenue allows the following options for married couples under the Irish tax system:

• Joint Assessment/Aggregation.
• Separate Assessment.
• Separate Treatment/Assessment as Single Individuals.

The most common form of taxing married couples in Ireland is joint assessment and is generally the most beneficial financially for same. One spouse will assume the responsibility for the joint tax liability and is generally referred to as the assessable spouse. The other spouse is referred to as the non-assessable spouse.

The Assessable Spouse

1. Will have their combined income assessed for Irish tax purposes. 
2. Receives standard tax rate banks and combined tax credits.
3. Is required to file a joint Irish tax return and include all details pertaining to the married couples combined income.

Yes, the couple must elect to have themselves registered for joint assessment before April 1^st.

Yes, the married couple can elect to have their reliefs and tax credits split between them but it should be noted that employment expenses and PAYE tax credits are not eligible for transfer.

Revenue will issue two tax certificates to a married couple where both spouses are in employment.

Yes, a married couple can choose to be taxed separately and  file separate Irish tax returns if required. This is known as ‘Aggregation.’

Under the aggregation method the following credits are divided between spouses:

• Married
• Age
• Blind
• Incapacitated Child

Where there are unused credits or standard rate bands (excluding the increase to the standard rate band) this can be transferred to the other spouse in the following tac year.

What is Separate Treatment for a married couple?

Separate treatment or Single Treatment is not to confused with Separate Assessment. Under the separate treatment each spouse is considered an individual and are taxed under the same method as a single tax payer.

Under this method each spouse:

1. Have an obligation to file a personal Irish tax return.
2. Is assessed on his/her own income.
3. Is treated as a single person and therefore receives the equivalent tax credits and rate bands as a single tax payer.  
4. Has no right to claim relief for payments made by the other spouse.  

This is a common situation that we are seeing more and more of lately. From your resident countries point of view this is perfectly fine but there are two situations here which should be noted:

Firstly: when you include your foreign rental income with your annual resident tax return there are often a number of deductions which are not deducted as each tax system have their own rules and regulations concerning what are allowed as deductibles. Unless the person preparing your resident return is familiar with the foreign tax system and speaks the language they will not know what costs can be written-off. This is also the most in-efficient tax method for declaring your income as in addition to the above you will also be subject to your rate of income tax which in many cases can be above 40% (UK) or 41% (IRE.)

Secondly: while the above situation will meet your tax obligations in your resident country you are not meeting your tax obligations in the overseas country which leaves you exposed to fines, penalties and interest being imposed by the foreign tax office. 

If you receive rental income abroad your first obligation is to the tax authorities where the income was received. The main objective with any tax return is to reduce your taxable income by as much as possible. Once the taxable sum is achieved tax is paid based on the income tax rate applicable to non-residents (if different than the resident income tax rate.)

If a tax liability is due a payment is made to the tax office. It is at this point that the DTA (if available) would come into force which would ensure that you do not pay tax twice on the same income.

Declaring income in the overseas country first is the most Tax Efficient way of ensuring your taxes are in order.