Residency, Citizenship, and Domicile

Dear Reader,

We think we want to apply for Irish citizenship.

Our son, Jack, born here in Ireland four years ago, is already a dual citizen, with both U.S. and Irish passports. We've been full-time residents of Ireland for five years now and so are eligible to become nationals as well. It has been our plan to do so since we took up residence.

But we're debating.

On the one hand, we'd gain EU passports and the right to live and work anywhere in the Union. And we'd have second passports that we could pull out whenever they made the logistics easier--when traveling to a country where Americans are required to obtain a visa, for example.

On the other hand is the question of domicile.

Although we're considering becoming Irish citizens, we'd maintain the U.S. as our place of domicile. This is critical, for, should we be perceived by the Irish tax authorities as domiciled in Ireland, we would be liable for tax in Ireland on our worldwide income. Of course, we'd still be likewise liable to the IRS. Not an enviable position.

Right now, my husband and I, like all Americans, including all Americans abroad, are liable for tax on our worldwide income in the U.S. (though we're able to take advantage of the foreign-earned-income exemption on the first $80,000 of income apiece). We pay taxes in Ireland on a remittance basis--that is, on income we either earn in this country or that we bring into the country from any outside source. We've been able to structure things so that we remit to Ireland only that income we need for our annual living expenses. The rest is paid and kept outside the Emerald Isle and thus is not an Irish tax concern.

My husband (who began his career as an accountant) has figured that, living in Ireland, we've reduced our overall effective rate of tax from the 40% we were paying when resident in the States (local, state, and federal combined) to 19%.

I'm not keen to do anything that will interfere with that.

For the past year, as our five-year anniversary being resident in Ireland approached, we've consulted a series of experts on this subject. Would Irish passports and citizenship, in our situation, translate, in the minds of the tax powers that be, to Irish domicile?

We have no definite answer, though the attorneys, accountants, and tax specialists we've spoken with lean in the direction of a no. But they can't guarantee it.

Domicile has to do with heritage. And is generally decided according to where you were born (and, in Ireland, where your father was born). But it can be open to an interpretation of where you seem to have the strongest ties.

Furthermore, in Ireland, the laws related to residency, citizenship, and domicile have lately been in flux.

When we moved here, you could obtain a residency visa (and a work permit) if you were the "high-level" employee of a U.S. company with an Irish subsidiary being transferred "temporarily" (up to five years) from the U.S. office to Ireland. And residency was guaranteed to any woman who gave birth to a child in this country.

Both those allowances have been done away with. And now there is talk of change to the domicile-related legislation as well, as it relates to tax obligation. It could be, we've been told, that citizenship and residency, even without domicile, could trigger the Irish tax responsibility.

Nevertheless, we're pursuing the idea. We have obtained the application forms from our attorney and are gathering the required documents and materials. I'll keep you posted as to our progress.

Wish us luck,

Publisher, International Living

P.S. We've been told that it can take up to 18 months for these citizenship applications to be processed. My husband and I must have our applications approved and our passports issued before we can make application on behalf of our minor daughter (born in the States).

Editor's note: With a second passport, you can travel with greater safety, reduce your taxes, and even discover your own offshore paradise. Most Americans don't realize it...but not only are they legally allowed to obtain a second foreign passport...many are instantly eligible for one right now... And with an EU passport, you can live and work without visas and permits in all EU countries.

After investigating many programs, we've identified what we believe to be the most authoritative source on second passports and dual nationality: The Complete Guide to Offshore Residency, Dual Citizenship, and Second Passports. Read more here.