Non-domicile regime is tax avoidance with roots in history

Background: Regime began in UK in 1799 and still applies in Ireland

William Pitt the Younger: introducted of Britain’s first income tax but created the non-domicile regime to allow those with foreign property to shelter it from wartime taxes. Photograph: Edward Gooch/Getty Images

William Pitt the Younger: introducted of Britain’s first income tax but created the non-domicile regime to allow those with foreign property to shelter it from wartime taxes. Photograph: Edward Gooch/Getty Images


Fiona Reddan

Ireland’s non-domicile regime stretches back to 1799 when it was introduced by UK prime minister William Pitt the Younger. It was not changed with the advent of independence.

While Pitt may be better known to Irish readers as bringing about the Act of Union of 1800, and of his efforts to emancipate Catholics, he also led Britain in the great wars against Napoleon.

Raising taxes to fund these war efforts was a key concern of his, which led to the introduction of Britain’s first income tax. The non-domicile regime went hand in hand with this tax as a way of allowing those with foreign property to shelter this from wartime taxes.

Today it allows people resident in the UK – but domiciled in another country – to only pay UK tax on their UK incomes. Ostensibly, to claim non-domiciled status, a person needs to have a father or grandfather who was resident in another country when you were born.

However, this is not always the case. HSBC chief executive Stuart Gulliver for example, is understood to be a UK non-dom even though though he was born and raised in Britain, has worked in the UK for past 12 years and sends his children to school in the UK. He considers Hong Kong, where he previously worked, to be his home.

In 2014, a £90,000 charge was introduced for non-doms who have lived in the UK for 17 of the past 20 years.

Like the UK regime, to live in Ireland on a non-domicile basis, a person needs to satisfy a domicile test, which is typically based on where the law considers a person’s home to be. A person with a non-Irish parent would qualify, although you are also allowed to elect a “domicile of choice”. This can be done on the grounds of someone having business interests or bank accounts in a particular location.

The main benefit of being non-domiciled in Ireland is that an individual will only have to pay Irish tax on income and gains made in Ireland. Foreign income will be liable to tax elsewhere unless it’s remitted to Ireland.

The exemption only applies to investment income however. Following the scandal at Turkish construction group Gama, the rule was amended in 2006 to disallow employment income.

One issue which could arise if the UK regime was abolished and non-doms moved to Ireland is managing the potential exposure to Capital Acquisitions Tax (CAT), which applies to gifts and inheritances in Ireland. Typically CAT doesn’t apply to someone who is not domiciled – unless they were tax resident here in each of the five tax years preceding the year in which the gift or inheritance was received.


A separate regime applies to wealthy Irish who are domiciled here, and who live either in Ireland or abroad, but who may not pay Irish tax on all their worldwide income. Again, its use is limited.

For those with worldwide income of more than € 1 million and Irish assets worth more than € 5 million, but who pay Irish income tax of less than € 200,000, a domicile levy may apply. Introduced in 2009 by former finance minister Brian Lenihan, just 14 people paid the €200,000 levy in 2012, down from 25 in 2010.

Many of Ireland’s wealthiest citizens are non-resident for tax purposes; adopting a home instead in a low tax jurisdiction such as Monaco or Malta, and spending no more than 183 days in any one year, or 280 days over two years, in Ireland.

An incentive regime was also introduced in 2008 for venture fund managers, but its use is limited. “I’ve never seen it used in practice,” says Tim O’Rahilly, a partner with PricewaterhouseCoopers.

And there are other ways of avoiding tax. The artist’s exemption allows income to be earned tax free by writers, composers, visual artists and sculptors from the sale of their works. The exemption allows for €50,000 to be earned tax free every year, and it is also open to people who are non-resident in Ireland, but resident in another EEA state. Previously no limit applied and foreigners who have availed of the exemption include Scottish Trainspotting author Irvine Welsh and French artist Aurélien Froment.