High-Tax Country Resident Planning To Stay Put: Ireland

If you are resident, ordinarily resident and domiciled in Ireland (which will be the normal situation for a native-born Irish individual) then you are taxable on your world-wide income and capital gains. Capital acquisitions tax is chargeable on lifetime gifts and at death with respect to world-wide assets.

The rules for taxation of offshore (foreign) trusts are complicated, not least because they have been copied to a large extent from the equivalent UK anti-avoidance legislation without much attempt to adjust them to Irish circumstances, but the bottom line is that income and capital gains accruing to trusts (and non-resident companies) are likely to be assessed to the Irish-resident settlors and/or beneficiaries and/or owners of the trusts or companies, whether distributed or not.

One useful exception is that an offshore trust established by a husband and wife who are excluded from benefitting under it, and whose trustees are not Irish-resident, is taxed only on Irish-source income. If the beneficiaries are, for example, children or grand-children, the trust's assets are only going to get taxed in Ireland if remitted there.

Even in the shadow of the anti-avoidance legislation described above, however, there are a surprisingly large number of offshore investments available to Irish residents which offer both superior returns and some tax advantages into the bargain.

As an example, offshore investment bonds are available in various guises, allowing gross roll up and deferral of taxation until maturity, when the penalty will be taxation of the whole gain as income.

Pensions investment can also include an offshore element, although the tax advantages of pensions have been steadily eroded vis-à-vis other tax-efficient investments, which are more flexible. In particular, for high earners, pensions provision over and above that allowed for tax purposes has often been invested in an offshore Funded Unrecognised Retirement Benefit Scheme (FURBS). The foreign (offshore) life assurance sector has been particularly innovative in these types of product.

Inheritance tax can be a major consideration for Irish residents, and offshore trust structures remain one of the best ways of mitigating or completely avoiding the tax. There is plentiful information available on this subject from financial product providers.

For an individual wishing to explore the investment opportunities further afield, www.lowtax.net contains details of the investment and tax regimes for 35 offshore jurisdictions.

NB: The suggestions given above do not constitute investment advice. They are intended only to assist individuals in finding appropriate professional advice, which is essential for anyone planning offshore investment.