Tax query: cross-border workers

Mary resides in Donegal and her only source of income is from her employment in Derry. Mary is concerned about the potential impact of the recently increased income levy in Ireland on her net take home pay.

Tax position
As Mary resides in Donegal, she is tax resident in Ireland and is therefore required to file an income tax return to the Irish Revenue Commissioners in respect of her worldwide income and gains.
On the basis that Mary's employment income from her job in Derry is her only source of income, Mary should be exempt from the income levy in Ireland because of an exemption in the legislation for persons with "full eligibility for health services under Part IV of the Health Act 1970". This legislation mainly refers to holders of full means tested medical cards. However, it also covers persons entitled to a medical card by virtue of being liable to pay social insurance contributions in another EU country. Therefore, cross border workers (e.g. those living in the border counties and working in the North) would also be exempt from the levies as they are liable to pay National Insurance in the UK and are therefore entitled to an Irish medical card.
Although Mary should still file an income tax return in Ireland it is likely that she will have no further tax to pay in Ireland on her employment income. This is because Mary is entitled to 'transborder relief' or 'double taxation relief' in respect of the UK tax she should have already paid.

Tax query: married couple with two incomes

Patrick and his wife, Marie reside and are employed in Ireland. Patrick earns €70,000pa and Marie earns €120,000pa. Patrick wants to know what rate of income levy will apply to their pay in light of the recent changes and how much they will actually pay?

Tax position
The income levy is charged separately on each spouse. Each spouse therefore has their own thresholds.
Patrick will pay the income levy at the 1% rate on all payments made on or after 1 January 2009 to 30 April 2009. He will pay the income levy rate of 2% on all payments made on or after 1 May 2009. Assuming his salary is paid monthly on the last day of the month, Patrick will pay €1,166 income levy in 2009.

For the period 1 January 2009 to 30 April 2009 Marie will pay 1% on income up to €100,100 per year and 2% on the balance. With effect from 1 May 2009 Marie will pay 2% on income up to €75,036 per year and 4% on the balance of her income. Again assuming Marie is paid monthly on the last day of the month she will pay €2,666 income levy in 2009.

In addition, they will also be hit by the increased health levy which prior to 1 May 2009 was applied at rates of 2% and 2.5%. The health levy has now been doubled to 4% and 5% respectively.

For further information and advice, please contact Clodagh Hegarty or Claire Scott at Carlin McLaughlin & Co., The Business Centre, Lisfannon, Buncrana, Co. Donegal. Tel: +353 74 9364200. Any queries you wish us to address in future weeks, please send them to info@carlinmclaughlin.ie.