Tax Abroad: Understanding Split-Year Treatment and Tax Treaties

Tax laws vary from country to country, so it's important to understand how they apply to you when moving abroad.

In some cases, you may qualify for split-year treatment, which means you'll only be taxed in Ireland for part of the year. Additionally, Ireland has tax treaties with many countries to help avoid double taxation - these agreements can impact how much tax you pay and where. However, unless you meet certain conditions or reside abroad for a full tax year, you may still be liable to pay tax on your earnings in Ireland.

How much tax will I pay abroad?

You’ll have to pay varying levels of tax depending on the country you move to. For example, if you move to Dubai or the Cayman Islands it’s likely that you’ll pay very little income tax. However, you’ll find a relatively similar tax burden to Ireland in most other popular destinations.

You may be able to reclaim some tax if you work abroad. For example, the average Canadian tax refund with Taxback is CA$998.

What happens to my PPS number when I leave Ireland?

In short, nothing. Your PPS number is your unique reference number and is yours for life. You can use the same number if/when you come back to Ireland.

Reclaiming tax when leaving Ireland

If you worked and paid tax since 1 January and you’re now unemployed and/or leaving Ireland, you may be entitled to a tax refund if you have unused tax credits.

If you haven’t paid any tax, you won’t be due a refund.

If you emigrate it’s a good idea to bring as many important documents with you as you can in addition to your passport.

Where can I find a record of my employment in Ireland?

Before you leave Ireland, you should get a Form S1 (certificate of entitlement to healthcare if you don't live in the country where you're insured) and Form U1 (statement of insurance periods to be taken into account when calculating an unemployment benefit) from the Department of Social Protection.

These forms have details of your Irish social insurance record and you’ll need them if you want to claim sickness, maternity, or unemployment benefits in another European country.

This is what the first page of the U1 form looks like:

Processing your application can take a few months as sometimes the department needs to make enquiries with former employers. The more documents you can supply the easier it's to issue the forms!

If you don’t bring your S1 or U1 with you or if you haven’t received them and you need to claim a sickness or unemployment benefit in another European country, the country you’ve moved to can contact Irish authorities to get a record of your insurance contributions.

Split-Year Treatment

‘Split-Year Treatment’ allows you to be treated as resident in Ireland for only part of the year in which you move abroad or come to live in Ireland. This means you’ll be treated as a resident up to the date of departure.

All employment income up to that date is taxed in the normal way, and your employment income from the date of departure is ignored for Irish tax purposes. Generally, full tax credits are allowable on a 'cumulative basis' which means you receive a full year of tax credits even though you’ve been resident here for only part of the year.

Similarly, if you’re coming to live in Ireland or returning after living abroad for a few years and you’ll be resident here for the next year, you can claim Split-Year Treatment in the year you arrive.

This means you’re treated as resident in Ireland from the date you arrive and all your employment income from that date is taxed in the normal way. Split-Year Treatment only applies to employment income.

If you’re leaving Ireland, to qualify for Split-Year Treatment you must be resident in the year of departure and intend to be non-resident in the year following your departure. You don’t have to wait until the tax year following the year you arrive or depart. However, you must satisfy Revenue that you fulfill the intended residence requirements for the following tax year. A letter confirming your employment or an employment contract are preferred forms of proof. If you're unsuccessful, you can reapply at the end of the following tax year.

If you have successfully qualified and fulfilled your intentions, you'll be taxed as resident in the state for the appropriate period. You should be aware that if you qualify for Split Year Treatment and don't fulfil your intention for some reason (e.g. ill health or cancellation of employment), the ruling will stand regardless. This could leave you liable to pay Irish tax on foreign employment income for the following year, if you were resident in the state for the previous tax year.

Tax treaties 

Ireland has tax treaties with more than 70 countries to ensure that if you earn income that is taxed in one country, it won’t be taxed again in another. Under a tax treaty, a tax credit or exemption from tax may be given on some kinds of income, in either the country of residence or the country where you earned the income.

These agreements help prevent double taxation and can significantly affect your overall tax liability. It’s important to check the specific terms of the treaty with the country you’re moving to, as the rules can vary depending on the type of income and your residency status.