To start with all forms of labour income are taxable in Ireland. When you work in Ireland your employer will deduct your income taxes (PAYE: Pay As You Earn) and your Universal Social Charge (USC). Some forms of income are excempt from income tax. We listed them below just to be complete.
USC are charges that every working person in Ireland contributes to and which support the social benefits structure of the country. The percentage of USC someone pays is related to the height of the annual income, where higher incomes contribute more than lower incomes. USC also has excemptions, these we will not discuss in this article, but documentation on this is plentiful on Irish government sites.
How does it work?
First of all: every month you work make sure you receive your monthly payroll statement, collect and keep these.
- The income tax in Ireland is set at 20% of your gross annual income.
- In a family – double income – situation a cumulative income taxation is applied.
- Income taxes on wages are automatically paid for you by your employer (PAYE).
- Extra income from external sources are to be reported individually.
- Excemptions from income tax: income below certain threshold; certain earnings from writers/composers; certain earnings from agricultural land leasing; certain income from financial products. For more details on these excemptions, visit your local revenue agency.
Tax relieves exist too and are indicated annually as well, find up-to-date relief definitions here. Tax relief is meant to support lower income situations and is applied automatically via PAYE.
There are arguments for a income tax refund:
- You become unemployed over the course of a year
- Your single income is below € 33.800
- Your single income is below € 37.800 and you take care of a child
- Your combined income is below € 42.800
Note: These are the indications set for 2017 and these may change anually. For up-to-date definitions visit here.
How much is the income tax?
The gross-nett difference in your monthly paycheck is little under 10%. Eg. if your gross income is set at € 1750/month, you will receive around € 1580,00 on your bank account. In the 10% are deducted your contributions for PAYE and the USC. If you want to calculate an indication of your nett income, visit here.
How to apply for a refund?
Tax refunds are possible in Ireland and are based on the amount of taxes you paid related to your total income over a fiscal year. Two possible (main) reasons for tax refund in case of expats: eg. a premature termination of your employment during a fiscal year or during a fiscal year you have gotten a child. In both cases your calculated PAYE level becomes to high.
If you feel you are entitled to a refund, you can apply for a refund at the local tax revenue agency. You need to send two filled out documents to the local tax revenue agency. Document P45 (part 2 and 3) is issued by your former employer and document P50 you can download here. Ask your HR how to proceed and to be on the safe side: keep copies of all the documents you have.
At any time if you have a questions about this subject, we advise you first to contact your HR and gather information on the sites of the Irish government. You should get answers to all your questions. If this fails, get out your income statements and visit your local revenue agency.