Split year residence

Split year residence is provided for in section 822 of the Taxes Consolidation Act 1997 (TCA 1997).

Split year residence provides for income tax relief in respect of employment income earned outside the State by qualifying individuals who arrive in or depart the State during a year of assessment. Under split year residence, qualifying individuals are deemed to be resident for that year of assessment only for the part of the year after arrival or prior to their departure from the State. The employment income which arises in this period of deemed residence is chargeable to Irish income tax. The remaining part of the year (the periods spent outside Ireland) are treated as a period of non-residence with respect to the charging of employment income to tax and as such, an Irish tax charge will not arise on employment income unless duties are performed in the State in this period. Split year residence applies to employment income only and not to any other income, for example, directorship income.

Subsection (1) provides that for the purposes of a charge to tax on any income, profits or gains from an employment, where during a year of assessment (the “relevant year), an individual who arrives in or leaves the State and satisfies an authorised officer during that year that:

• in the case of individuals arriving in the State, he or she is in the State with the intention, and in such circumstances, that he or she will be resident in the State in the year after arrival, having not been resident in the State in the year prior to arrival, or
• in the case of individuals departing the State, other than for a temporary purpose, he or she has left the State with the intention, and in such circumstances, that the individual will not be resident in the State in the year following departure,

subsection (2) shall apply in relation to the individual.

Subsection (2) provides that individuals who meet the conditions outlined in subsection (1) shall be deemed to be resident in the State for the relevant year only from the date of arrival in the State (arrival cases) or up to and including the date of leaving the State (departure cases).

Subsection (3) provides that where an individual is, by virtue of this section, resident in the State for part of a year of assessment, the Acts shall apply as if:

• income arising during part of the year (or where the remittance basis applies, amounts received in the State during that part) were income arising or received for a year of assessment in which the individual is resident in the State, and
• income arising or received in the other part of the year are treated as arising or received in a year of assessment in which the individual is not resident in the State.

The requirement to satisfy an authorised officer that these conditions will be satisfied must be done by the individual during the actual year of arrival or departure (the “in-year” requirement). If the in-year requirement is not satisfied, then split year residence is not available and the full annual employment income of the individual (Irish and foreign-sourced) is chargeable to Irish income tax, subject to relief from double taxation under the terms of a double taxation agreement (DTA), if available.

Finance Act 2024 amendment

Section 23 of Finance Act 2024 amended section 822 TCA 1997 to permit an employee to avail of split year residence in cases where the employee did not comply with the in-year authorisation requirement during the year of arrival or departure, but otherwise satisfies the residence conditions for the treatment. Therefore, this amendment will enable an employee to avail of the treatment for the year of arrival or departure by claiming it in their income tax return for that year.

With respect to arrival cases, paragraph (a) of subsection (2A) provides that an individual who satisfies the conditions in paragraph (a) of subsection (1A) will be deemed to be resident in the State for the year of arrival only from the date of his or her arrival in the State. In summary, to avail of split year residence for the year of arrival, the individual must be:

• resident for the “current year” (the year after arrival),
• resident for the year of arrival (the “previous year”), and
• not resident for the year of assessment preceding the year of arrival.

With respect to departure cases, paragraph (b) of subsection (2A) provides that an individual who satisfies the conditions in paragraph (b) of subsection (1A) will be deemed to be resident in the State for the year of departure only up to and including the date of his or her departure from the State. In summary, to avail of split year residence for the year of departure, the individual must be:

• not resident for the “current year” (the year after departure),
• resident for the year of departure (the “previous year”), and
• the individual must have left the State in that year otherwise than for a temporary purpose.

Subsection (4) provides that subsection (1A) shall apply in respect of the year of assessment 2026 and each subsequent year of assessment. While the amendment states that it will apply from 2026, the treatment will first apply to employees who arrive in or depart from the State in 2025. The Finance Act 2024 amendment is constructed on the basis that an employee who is completing their tax return for the year of arrival or departure in the following year will be in a position to self-assess their residence position for the years outlined in subsection (1A) to determine if they qualify for split year residence for the year of arrival or departure.

The legislation remains unchanged for employees who wish to claim the benefit of split year residence during their year of arrival or departure. This would arise, for example, where an employee would seek to enable his employer to have his employment income paid without deduction of PAYE after leaving the country (PAYE Exclusion Order cases). Such employees will still be required to comply with the in-year authorisation process.

Relevant Date: Finance Act 2024