Err, no tax anyone? Try Dublin. Lower tax? Try Denmark

The following is an extract from an article that appeared in Ireland's The Sunday Business Post on 19th August. The article, headed Fast Pace Of IT Sector Means Good Salaries covers the frenetic pace of IT developments in Ireland, and the accompanying "rocketing salary levels". More importantly, the article mentions over 1,000 IT contractors who have come across from Britain – some of whom could possibly work and pay no tax, if they qualify for a remittance scheme:

ZERO TAX THE ULTIMATE PERK

IT contractors who have come from Britain to work in Ireland may be eligible for the ultimate job perk: zero income tax.

With independent IT contractor workers earning up to £500 a day, the system – a remittance scheme – works for people 'not ordinarily resident' in Ireland (workers who the Revenue Commissioners are satisfied do not intend to stay permanently in Ireland, 'permanently' being defined as more than three years).

If this residency test is passed, the person can avail of a special remittance, whereby they only pay tax on money they bring into the country and not on income they earn.

The assumption is that this will primarily apply to project managers and consultants of multinational companies who are coming to work for a period here but who do not intend to stay within the Irish tax net permanently.

However, with the introduction in Britain earlier this year of legislation to restrict the tax freedom of single-person companies operating as IT contract workers, many British-based contractors who have come to Ireland – estimated at over 1,000 – are finding themselves in an interesting position.

If British contractors are away from Britain for one full tax year – April to April – they may avoid paying tax there, leaving them in the position of having no tax liability whatsoever.

"With a bit of tax planning it is possible to do it," says Gary Healy, general manager with Giant, an accountancy, tax and financial planning firm.

However, lest hordes of Irish IT contractors feel they can emigrate and come back into the country on a 'temporary' basis within a few months, the remittance is strictly controlled by the Revenue.

"It can work for Irish nationals," says Healy, "but the onus is on the national to convincingly show the Revenue that the intention in not to stay in the country permanently. It's difficult and we generally don't advise Irish nationals to try it. This is because Irish nationals who have been away for a couple of years and return are almost automatically assumed by the Revenue to be returning to live permanently in Ireland."

If Ireland does not appeal, then how about Denmark? The Embassy is updating their website so you need to call for access to the "Working & Residence" information and try and get hold of a booklet called "Coming to Denmark." The latter booklet details a Danish incentive scheme:

There is a special rule for foreign "experts" coming to Denmark. Provided it is for a limited period and your salary is over 50,000 DKR (circa £4,000) per month, tax rates are reduced to around 25% tax.

Don't forget to register on the PCG Gone Abroad Page, once you get there!

Editor's Note

Readers interested in working in either destination should fully investigate the details of both schemes to ensure that the rules apply to their personal circumstances. UKTECH is unable to offer further advice.

--

Mark Roderick