Brexit: possible tax implications for remittance basis taxpayers.

Dublin is proving to be a top destination for UK financial institutions (including banks and fund managers), some of whom have already committed to moving certain operations to Ireland.  Once the BREXIT situation becomes clearer it is expected that more UK financial institutions will make their final decisions as to whether they will move part or all of their business operations to Dublin.  

The aim of this blog is to highlight a potential risk for Irish tax resident/non-domiciled individuals who avail of the remittance basis of taxation and therefore have a reduced exposure to Irish taxation.  A remittance can occur by one’s own actions or inadvertently by the actions of one’s bank or financial institution.  

By way of background, the remittance basis will only apply if a non-domiciled individual has income from a foreign source or makes a gain on the disposal of a foreign asset. In broad terms, for there to be a remittance into Ireland, it is necessary under Irish tax law for there to be a receipt of money (actual or constructive) in Ireland, which represents, or derives from, the foreign income or gains in question. 

If the financial institutions move operations to Ireland, for example, back office administration functions, clearing house functions and/or fund management, this may inadvertently result in a taxable remittance to Ireland, for example, by:

  1. the new Irish financial operation clearing funds that you hold abroad,
  2. your investment funds being managed from Ireland
  3. the location of your bank account moving to Ireland

If you have not already done so, it is recommended that remittance basis taxpayers undertake a review of their foreign banking and investment arrangements, so that there are no inadvertent remittances of funds to Ireland as a result of any operational changes undertaken by financial institutions.

The remittance basis of taxation is a complex subject and a blog such as this can do no more than highlight an issue that need to be addressed.

If you would like to discuss Brexit, remittance basis of taxation or international tax, please contact Imelda Prendergast on 01-439 4200.

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