Will I have to pay tax on my savings when leaving the US?
Ask the Experts: I have built up a nice nest egg, but will I be charged when I move home?
While the US does have an “exit tax”, this applies only to US citizens giving up their US nationality, or lawful permanent residents.
I have been living and working in the US for eight years, and am planning a permanent move home to Ireland in late summer. I have amassed a nice nest egg of savings over here, which is currently in the savings account of my US bank. Will I have to pay tax on this on my departure? I am here on a working visa, and am not a green card holder or US citizen. What is the most efficient way of transferring these funds back to my Irish bank account, to avoid paying high exchange rate fees?
Answer: Barry Flanagan, director at Taxback.com
There are two aspects to this, as we need to consider the tax implications of this move from both a US and an Irish perspective.
US perspective On the understanding that you are an Irish citizen, it is unlikely that you would be subject to additional US taxes on departure.
While the US does have an “exit tax”, this applies only to US citizens giving up their US nationality, and also lawful permanent residents (i.e. green card holders), of which you have stated you were neither. So it appears unlikely this will apply to you.
Irish perspective Again, there are two aspect to consider - the income amassed for the period prior to the year of return (when you were neither resident nor ordinarily resident in Ireland), and the income you earn in the year of return.
For the period when you were living in the US, you would be regarded as a non-resident, Irish domiciled individual, and as such, taxable on your Irish source of income only. Returning to Ireland in this summer, with the intention to live here for the following years, will mean that if you have more than 183 days in Ireland in 2018, you would be considered Irish resident and domiciled, and would therefore be taxable on your worldwide income.
For any individual moving to Ireland for the first time, or for Irish citizens returning to live in Ireland (after a period of being non ordinarily resident), the position will be as follows:
Funds accumulated from income earned prior to the beginning of the tax year in the year that you become resident in Ireland will not be liable to income tax. However, income other than employment income arising between the beginning of the tax year and the date of your arrival may be taxable if brought into Ireland, unless an exemption or relief applies under the relevant double taxation agreement.
The tax relief available for the year of return to Ireland in respect of foreign employment income earned earlier that year is called “split-year relief”. You can apply for split-year relief to the Irish Revenue by a notification (a simple letter will do). That way you can exclude the foreign employment income earned prior to your return to Ireland, but still benefit from a full year’s worth of Irish tax credits and bands.
In respect of how best to transfer these funds, using a global payments company is usually faster, cheaper and easier than going though the banks yourself. TransferMate is one such company, which is part of the Taxback.com group. You make a simple, local bank transfer to TransferMate in the US and they transfer the Euro equivalent into your Irish bank account.