I hold shares in a US multinational through an employee share-ownership plan and also in a US-listed Irish technology company. My intention is to expand this to deal in Dow and Nasdaq-listed stocks using a bank account I have set up in the US and to which I will lodge US dollars from Ireland or through an American online trading company. What are the tax implications for an Irish resident trading shares in the Dow and Nasdaq markets in the US from the point of view of dividends and capital gains? What are the tax implications with regard to my existing holdings? Are you aware of any problems I may encounter doing this?
Mr E.F. email
Assuming you are legally domiciled in the Republic, as well as being a resident, there are a couple of points to be noted on the issue of capital gains on stocks bought using US dollars.
If you are buying the US currency to lodge to either a US bank account or an online trading account, that in itself will count as an asset from the point of view of ascertaining capital gains liability. If you subsequently dispose of the currency either by using it to buy shares or reconverting it into pounds or another currency, that represents the disposal of an asset for the purposes of capital gains tax (CGT).
The purchase of the shares themselves will also be treated as the acquisition of an asset and their subsequent disposal is liable to CGT over the individual exemption limits. In order to calculate the liability, the Revenue Commissioners will convert both the cost of purchase and the proceeds of sale on the basis of the relevant exchange rates on the dates in question. There might also be tax implications in share dealings through a non-resident company and you would be advised to get specialist advice in relation to this issue.
On the question of dividends, my understanding is that these would be liable to taxation in the Republic, assuming you are both resident and domiciled here in the legal sense. In such a situation, worldwide earnings are subject to Irish tax. If you are resident, but not domiciled or ordinarily resident in the Republic, you will be liable to taxation on all foreign income which enters the state.
Dividends are taxed at the marginal, or upper, rate of income tax to which the taxpayer is liable.
In relation to holding shares in a US-quoted company under an approved profit-sharing scheme, they are treated in the same way as Irish shares in a similar scheme. They are not liable to income tax if held for three years or more, but they are liable for CGT. In assessing the liability the Revenue will generally take the market value of the shares on the date they were apportioned to the employee.
You also mention shares bought previously in a US-listed Irish technology company. If these were bought in dollars, the situation is as outlined above. If bought in pounds, you would only need to convert the disposal price into pounds, using the exchange rate for the day in question, to assess the capital gain. As the sums you are talking about investing are reasonably large, it might be well worth your while investing a little time and money in professional advice from someone expert in the area of investments abroad for Irish residents.
I am drawing down a British pension although I am now resident and working in Ireland. Should the British pension be taxed here, in Britain or both?
Mr E.K. Dublin
The tax provisions covering British pensions vary depending on who in Britain is paying the pension and that is information you have not given. If you are talking about a British state or local authority pension, these are taxable only in Britain, regardless of residency, provided that the person receiving the pension is a citizen of the United Kingdom (i.e. including Northern Ireland). This would most commonly happen where people in Northern Ireland or people in Britain of Irish extraction hold dual citizenship, although, of course, a number of British citizens have chosen to retire here, living on the British state pensions. If, however, the person concerned is an Irish citizen, but not a citizen of the Britain, the pension becomes taxable in the Republic, assuming the recipient is resident in the Republic.
In situations where the pension concerned is other than a state or local authority pension such as with private pensions or occupational pensions the money is taxed in the country of residence. In any case, the money can only be taxed once; where that might be depends on your circumstances.
Residency itself is a precise legal concept for the purposes of taxation and you would need to check where you are considered to be resident under the law.
Send your queries to Q&A, Business This Week, 10-15 D'Olier St, Dublin 2, or email to dcoyle@irish-times.ie.
