Q&A

What are the options for an Irish emigrant who wishes to invest in Ireland? To what taxes are an emigrant's investments abroad subject to on returning to live in Ireland?With a large and increasingly affluent group of Irish people living abroad, the question of efficient saving is of great importance. At the same time, there is an impressive body of international legislation to ensure equitable tax treatment while trying to encourage investment in domestic economies.

While it is impossible to cover all the options in a column of this nature, there are a few pointers which can be given.

Investing from abroad

Traditionally there has not been a lot on offer for people living abroad who wish to invest in Ireland. The first issue is that of residency. Investors abroad are required to make a non-resident declaration. To do so, they must be out of the country for a minimum of six months.

Being expatriates, they are not subject to tax here. That allowed certain small advantages such as the freedom from Deposit Interest Retention Tax (DIRT) on bank and building society deposits in Ireland. However, the attractions were limited and the gains small.

Special savings accounts also provided some scope for Irish investors abroad, but were handicapped by limits on the amount invested.

Because of the restrictions, most of the money invested by people living outside the State has traditionally been in offshore options.

More recently, a range of Irish-based products have been offered by companies in the Irish Financial Service Centre. According to Mr Mark Carter, senior manager (international assignment services) at Price Waterhouse, these are attractive in terms of potential returns and are not subject to any tax or to investment limits.

These are primarily aimed at encouraging people to invest domestically. They offer more flexibility than traditional options. If encashed abroad, they are entirely free of tax in Ireland; if one returns during the period of the investment, the only portion liable for tax here is the growth on the investment since the return to Ireland.

These new products are primarily being offered by Irish companies through their IFSC operations.

Tax position on foreign investments

The tax treatment of emigrants returning home depends on several issues. In the case of the US correspondent above, it would depend on how long they had been out of the State, whether they currently hold a green card or a US passport and whether or not they are repatriating the money accrued under investments abroad.

It is possible to continue to enjoy tax-free income for three years in the case of investments outside the State. As a result, it is important for people returning home to consider what their long-term plans and cash requirements in Ireland might be.

For instance, if they intend buying a house here, there will be a need to repatriate a fair amount. If, on the other hand, they are returning home to test the waters, they might be better advised to leave investments outside the State.

Getting advice

In the case of tax treatment, the plethora of legislation across national boundaries is so complex that it is wise to get specialist financial advice before taking investment decisions.

Ireland has taxation agreements with the US, Britain and most other emigrant destinations. These are designed both to ensure that people moving between countries are not taxed twice and to ensure that such people do not avoid their tax liabilities altogether.

In the case of the US, a new taxation agreement was signed last month, modifying somewhat the provisions of previous accords.

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