Irish citizens who have emigrated return in their thousands every year. They are coming home to retire, for children to attend school or college, and some are returning to buy their first home. About 30,000 Irish citizens returned here in the 12 months to April this year, it was 29,600 the year before.
They may have amassed significant savings overseas, pension entitlements; they may even have bought a house. But what happens when you come back to the old sod – can you preserve the wealth you gained abroad?
People who emigrated to the United States returning to retire make up the bulk of Stephanie Wickham’s clients. As a chartered accountant and tax adviser with Expattaxes.ie, her podcast is popular with those planning to return. Her biggest tip for homeward-bound emigrants with savings, pension, property and other income is to plan ahead.
“Make a list of the things you need to think about and address them one by one,” says Wickham. “None of them are insurmountable but if you hit them all when you get here, it’s going to make the move very stressful.”
The first thing to sort is your PPS number – do you have one, can you find it or do you need to get one?
“This can be an absolute ‘chicken-and-egg’ nightmare for people,” says Wickham. “You can’t get a bank account here because you don’t have a PPS and you can’t get a PPS because you don’t have a bank account. This type of bureaucratic issue can drive people insane.”
Those born in Ireland from 1971, those who worked here after 1979 or someone in receipt of an Irish social welfare payment will have a PPS number. You’ll find it on an old payslip, or contact an Intreo Centre or social welfare branch who can help you find yours. If you don’t have a PPS number you must wait until you are back in Ireland to get one, using your own address or a utility bill signed by the person you are staying with to apply for it.
Savings
Some coming home will have accumulated cash savings. “It often causes a lot of stress for people, ‘Can I bring my money home?’” says Wickham.
As a general rule, these savings can be transferred to Ireland without any tax implications, she says. Currency fluctuations, however, can have a big impact on your pot. Using a currency broker, instead of transferring the money through a high street or online bank, can pay off – particularly for large sums.
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“You can tell a currency adviser the rate you want to achieve and they will purchase for you at that rate,” says Wickham. “Achieving a positive rate on your foreign exchange can save you thousands if you get it right, but a lot of clients, particularly if they have lived in the US for a few years, may not be familiar with the difference foreign exchange can make.”
Taxing times
Returners who have US citizenship, for example, will continue to have US tax filing obligations when they return to Ireland, while also coming into the Irish tax net. This double obligation can come as a surprise.
“What they often miss is that, if you are taking a US social security pension, which a lot of them have, Ireland will tax it when you come back,” says Wickham. “It can cause problems, particularly when you die and the estate is being wrapped up.”
Some of those she advises would have US pensions in the region of $20,000-$30,000 a year, depending on their contributions. “An individual like that is going to have an Irish tax liability of a couple of thousand euros a year,” she says.
The amount will depend on their tax credits and their age.
They must register for income tax in Ireland. “US taxes are generally due in April for the previous year, but the Irish system is October. Clients get nervous about managing it,” says Wickham.
Getting the help of a professional in Ireland who is willing to talk to a US counterpart can be helpful, particularly in the first years after a move.
Home from home
If you own a property overseas – the home you lived in or one you rented out – you’ll need to understand the tax implications of selling it or renting it out. Some 6,400 people moved to Ireland from Australia last year. Take an Irish person who owned a property there before deciding to move back home. They’ve decided to retain the property and rent it out.
“Broadly speaking, Australia will continue to tax the rental income and an Australian tax return would be required,” says Wickham. “When you become an Irish tax resident – and that is such a key point to be aware of – Ireland also has the right to tax the rental income. However, you will get credit for the Australian tax.
“There are rules in Australia that if you sell the property and you are not living in it any more, Australia can apply a higher rate of capital gains tax there.”
The tax domicile of the taxpayer can change things. For example, if someone is returning to Ireland but is married to an Australian citizen who has this rental income, their tax domicile can mean that Ireland won’t tax the Australian income if the income isn’t brought here, says Wickham.
The remittance basis of taxation means that if you are not domiciled in Ireland you only pay Irish tax on the foreign rental income you bring into Ireland. “That can save quite a bit of money for people,” she says.
The UK has a similar scheme but it is being abolished in April next year.
Immigrants should consider whether they actually want to be an overseas landlord, says Darach Honan, director of Honan Financial Services.
“Those returning should consider whether they would benefit more by investing in a truly passive, global equity fund for the long term rather than holding property abroad, which may cause headaches,” Honan says. “Over the past 20 years, a well-diversified global equity fund has outperformed most property investments substantially.”
If the property you own overseas was your family home and you are thinking of selling it, principal private residence relief will exempt you from capital gains tax, says Wickham.
“We think of that in an Irish context, but it applies to properties sold worldwide,” she says.
If the home you lived in was also rented out for a period, the timing of the sale is important, she says. Consult a tax adviser in Australia, who might advise selling it before you return: “On the Australian side, the tax rate can get higher if you sell it after you have left.”
Private pension
With a private pension, returning emigrants should ask themselves, can I bring it back and do I want to bring it back? Having a pension in a foreign denomination brings some currency risk; there could be movements in the foreign exchange between now and when you draw down.
Returners should also examine the tax advantages of leaving the pension in their adopted country compared to bringing it back. Legislation introduced last year allows a lump sum to be taken from a foreign pension scheme and be taxed in the same way as it would in an Irish scheme – so up to €200,000 is tax free, with an additional €300,000 taxed at 20 per cent.
About 20,500 people moved to Ireland from the UK last year. Those who were returning emigrants with a UK state pension can continue to build up their entitlements even after they have left, says Darach Honan. “This is a large opportunity for anyone who has worked there to build a secure, government-backed pension income.” Some have built up entitlements to the full UK and the full Irish state pensions.
People with a private pension can consider transferring it to a qualifying recognised overseas pension scheme.
“In general, if you plan on living the rest of your life in Ireland, moving your UK pension pot may be suitable as it can give you more control over how it is invested and more flexible access to it,” says Honan. “It’s lower risk to hold your pension in the same currency as you will be using it.”
The options of transferring a pension from the US or Australia are more limited and so many people returning to Ireland leave them in situ and claim them as they fall due, says Honan.
Returning from tax-free jurisdictions
Working in the Middle East may enable you to earn tax free but it can leave you without a pension fund on returning to Ireland, says Honan.
“Those returning should consider aggressively funding their pension pots when coming back,” he says.
The impact of tax on their earnings here can come as a bit of a shock and pension contributions can be an easy sell to returners appreciative of the tax savings, according to Honan.
Doctors or teachers returning, for example, will have years less service in the public-sector scheme than their colleagues. “They will often have a bit of catch-up to do. I would very much encourage them to maximise their pension contributions or do an AVC [additional voluntary contribution] when they come back,” Honan says.
“People joining later should definitely be funding AVCs – it’s nearly necessary to max out your AVCs in order to get a good pension and be able to get out the door a bit sooner in your early 60s rather than in your late 60s when your pension kicks in.”
If you have had life assurance, critical illness cover and mortgage protection overseas, don’t cancel too hastily, he adds.
“A huge mistake would be to cancel the policies before replacing them in Ireland. Avoid leaving a gap in cover. If you can’t get cover for a certain health complication in Ireland, you might look at retaining the policy abroad if possible.”
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