Tax residence

After 25 years in the United States, my wife and I retired here about two to three years ago. However, I still return to the US and work about four to six months per annum. Where are my tax obligations now? What is meant by dual residence and can it be legally applied to choose the less punitive tax area for semi-retirees like myself?

You often advise seeking professional advice but experts in this area are hard to find, especially for individual and low-income earners. Moreover I find tax consultants/inspectors etc, whether here or in the US, whether private or government, have many differing and even opposing views in this whole area. Is this your experience?

Finally, where can a layperson read up on this area?

Mr S.H., Mayo

Dual residence crops up in the double taxation agreement between the United States and the Republic. It covers those people who, by virtue of their physical home, business or certain other situations can be considered residents in both states.

The terminology of the agreement is the usual dense legalese and there are restrictions on this dual residence with regard to certain income, so it is unclear whether you would come within the description. Sorry to have to say it, but the only person who might give you a definite answer on that one is a tax lawyer, but we will return to the subject of experts later.

In any case, even if one does qualify as a dual resident, one still does not get to choose in which state one pays tax. There is a descending order of priority. Top of the list is permanent accommodation. One is considered resident in the state where one has a permanent home. If you have a permanent home in both the US and here, you are considered to be a resident of the state with which you have closer personal and economic relations.

Only if it cannot be determined in which state you have greater interests or if you have no permanent home in either does the decision process move on. In succeeding order, the deciding factor is: [SBX]

the state in which you have an "habitual abode"; [SBX]

the state of which you are a national (citizen); [SBX]

whatever the tax authorities of both states decide.

As you can see, the one person who does not have a say as to which state they choose to get taxed in is the taxpayer.

Now, there are large gaps in the information you provide, including whether you have permanent homes in both jurisdictions and whether you have any economic interests over here. Having said that, it would appear from the above that you would be taxable in Ireland.

However, if the work you undertake in the US is of the nature of independent professional services - which is what it sounds like to me from the limited description - you fall under yet another section of the agreement. This section seems to say that if you have a fixed base in the US for the purposes of carrying out your work there, you would be taxed on that income over there and it would be offset against any tax liability here.

There is also a catch-all phrase towards the start of the agreement that states, notwithstanding the signing of the agreement, states can tax their citizens as though the agreement had not come into force . . . nice one, eh?

As you can see, without more information it is impossible to state definitively where you will be taxed. The purpose of the agreement is more to ensure that you are not taxed twice rather than to allow you avail of a more favourable tax regime.

In broad terms, if you are resident in Ireland you are taxed on all income earned here and in Britain AND all other income brought into the State. Of course, if you are domiciled here as well as resident, all worldwide income is due for tax here. You say you returned to retire here after 25 years, which means you could have US and/or Irish citizenship and judging domicile could be tricky.

At a guess, unless you have a base in the US that you use while working there each year, I would say you would be taxed here, but that is just a guess.

And that brings us back to our experts. You're right that it is extremely difficult to get definitive and uniform answers out of experts in any area of finance, especially tax. There are several reasons for this. First, as your own position shows, there are as many individual circumstances as there are experts. The law is a fixed thing and a reading of any given piece of legislation rarely allows for a definite conclusion in all but the most straightforward of cases.

As you can see from the wording of the double taxation agreement with the US - which is available on the Internet at www.revenue.ie under publications - there are invariably general catch-all phrases, the precise import of which can only be decided by pursuing cases through appeals and possibly even the courts.

This rarely happens, and without specific precedent, it is very hard even for experts to know which way a Revenue appeals commissioner or even a judge will rule. An expert opinion is precisely that, an opinion, albeit based on expert reading of very particular and detailed documents.

The second reason comes down to a definition of expert. Most people tend to use an accountant or a tax lawyer for all their affairs, regardless of the precise nature of those affairs. But within these groups, there are areas of expertise.

Some will be experts on US/Irish situations, others on UK/Irish conundrums or EU rules or whatever. Tax law is too intricate and wide a body of work for any one person to be expert across the range. Small outfits or sole practitioners may give more personal service than larger groups but you need to ensure they know their way around the intricacies of the law as it affects your particular situation. It may even be that you need different lawyers/accountants for advice on different issues.

On the question of reading up in the area of personal finance, a number of publications are brought out by various writers in the area, as well as by the Taxation Advice Bureau and some financial institutions. As general readers they have varying strengths but most are just that, general readers. They'll give you an overview but you almost always find yourself having to go back to primary sources - i.e. the legislation - or those ubiquitous experts for the full picture on any issue.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 11-15 D'Olier Street, Dublin 2, or e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.