Double Taxation Relief in Ireland Essay Sample
The following essay sample is written with the sole purpose of highlighting the concept of double taxation in Ireland, double taxation agreement, calculation of relief, Ireland UK double taxation treaty and Ireland US double taxation treaty.
Double taxation can be imposed by one country on assets situated outside (foreign) of the deceased or assets or property of such a person situated within the jurisdiction of the other country can impose such tax. Such tax imposition can take place even in reference to the residence or domicile of the deceased.
Taxation can be imposed on the grounds of nationality, residence, domicile, and location of the property where it is situated.
In Ireland, the liability of the tax falls upon the beneficiary. The double taxation relief helps in ensuring that the country applying for any inheritance tax to global estate gives credit for tax imposition by the other country.
A country with a domicile can give credit for the payment of tax to the country where the property is situated. Ireland has double taxation treaties with UK and US covering Capital Acquisitions Tax (CAT).
Double Taxation Agreement
- If a person works in some other country abroad and pays his taxes there then he shall be entitled to claim relief under the Double Taxation Agreement (DTA).
If any person earns and pays Irish and foreign taxes then he may be entitled to claim relief from this country of residence. Such a country must have a DTA with Ireland. The claim of refund of foreign tax to be made at the tax office in the country where we have paid.
- If a person who is a resident or a domicile in Ireland shall be taxed on the income earned from a foreign land. If a tax has been paid on such foreign income earned from abroad a claim of credit can be made. Such a credit claim is made under DTA and Ireland has several DTAs with other countries.
- A person holding the Irish Public Office as a Director of an Irish company shall pay the Irish tax on the income. Such a person shall also be entitled to claim relief on the tax of the income of directorship. This is being mentioned under DTA terms between Ireland and country if residence.
Calculation of the Relief
The amount which is to be allowed for credit as UK tax cannot be more than the Irish tax which is charged on the income. An “effective rate” is ascertained through a proper calculation.
This rate is determined by calculating Irish tax as a percentage of the aggregate total income of the UK. UK income must include the gross foreign income before any deduction of UK tax credits and withholding tax.
UK tax can be used as a credit against any Irish tax on the same level of income or profits. Any UK tax which is not levied through credit will be allowed to be deducted from income to be included in the Irish tax collection. One shall not receive any credit for payment done to another country as tax if he qualifies for the transborder relief.
Ireland UK Double Taxation Treaty
In Ireland, there is Capital Acquisitions Tax (CAT) which shall include gift tax and inheritance tax while in the UK it has only inheritance tax with no gift tax.
Ireland charges CAT on the grounds of domicile or residence of the deceased person or person receiving the gift (beneficiary). A person who has inherited an estate after payment of all costs shall receive the tax credit. Residuary legatee pays tax in Ireland so that he can claim relief.
Credit given cannot be higher than the Irish tax and a person paying the double tax shall receive the credit. Ireland shall give credit for tax on UK property on the basis of low effective rates.
This treaty could be beneficial for the individuals who are domiciled in Ireland and who own assets on foreign land and is charged within the Irish CAT.
UK levies inheritance tax on the value of the property at the date of death while Ireland imposes CAT on the value of the property at valuation date which results in value differences.
Currencies play an important role as UK tax which is converted into euro on the date of payment at the rate of exchange. The estate value shall be converted at the valuation date.
Credit is given to a person liable to pay UK tax and such a person to claim credit is also liable to pay Irish CAT. If the person (residuary legatee) does not pay any Irish CAT the credit is lost.
Ireland US Double Taxation Treaty
In Ireland US Double Taxation Treaty there is an application of inheritance tax in Ireland and federal tax with no gifts. Such federal tax of US is levied upon the transfer of the estate of a person who is a resident citizen of US. It needs to be paid before any obligation to pay Irish CAT.
The domicile is very important for the application of this treaty. It imposes special rules for determining the status of assets for taxation.
Irish CAT is applied to the resident in Ireland and on the beneficiary of the assets which are located in Ireland. Under this Ireland US Double Taxation Treaty it is stated that Ireland may have tax estate assets only which may be located abroad if the decease is domiciled in Ireland and not a US resident.
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The above-written essay sample is a taxation and finance topic which discusses the double taxation relief in Ireland.
Accountancy Business and Taxation QQI Level 5, Business and Finance QQI Level 5, Business Management QQI Level 5, Bookkeeping: Manual and Computerised QQI Level 6students can read and relate to this sample for writing college essays and assignments based on such similar topics of business and finance.