Consumer Corner: Is retiring abroad a dream or reality?

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Flying home from that summer holiday with thoughts of how you could easily live in that sunny destination full-time?

Retiring abroad may seem like an unattainable task but with a bit of ground work it may not be the pipe dream you think it is. That said there is a lot to consider before making the move.

A recent survey from Royal London Ireland found that a third of Irish people would retire at the age of 60 if they could afford to. That’s a nice dream to aim towards if you can manage it.

Marian Ryan, consumer tax manager with Taxback.com points out that many Irish people are tempted to retire abroad because living costs are much lower in certain countries than they are here.

“This temptation could be all the greater given the cost-of-living and housing crises being experienced in this country. The lure of retiring to countries where your money can go further can be particularly strong for the many Irish people who are largely dependent on the State pension, which is currently €266 a week, or who only have a small private pension."

However, she points out that even if living costs are lower in the country you are considering moving to, it’s very important to do your research and check that you will be happy and safe there should you go ahead with the move.

Glenn Gaughran, head of business development with ITC said that first is that it's good to know that you can still claim and get paid the Irish State contributory pension if you retire overseas as long as you qualify for it.

“You need to have social insurance contributions paid over a number of years and a certain yearly average to qualify for the contributory State pension. The non-contributory State pension which is means-tested is not normally paid if you live outside the Republic of Ireland.”

He said you must know exactly how you will access your State contributory pension and any other pension you might have when you move abroad.

“The State contributory pension can be paid into your bank account in Ireland or an account you have in the country you choose to live in though it will depend on the country. You can’t get your State pension paid into a foreign account in a number of non-EU countries. Even if you must have your State pension paid into your Irish bank account, it should be relatively easy to access it from abroad, though it will usually cost you more to withdraw money out of your Irish account from outside the eurozone than from within the eurozone.”

Ms Ryan said that you must also understand the responsibilities that come with owning an overseas property, particularly around tax and any charges, such as service or community charges.

“If these taxes and charges are not paid, penalties can apply and if those penalties are big enough, you could lose your property. Know too that you may have to pay tax to receive local services in the country where your property is located. If you rent out your property, the amount paid for these services can be deducted as an expense when calculating your rental income."

If you spend less than six months a year abroad, you can continue to be tax resident in Ireland. Otherwise, you will typically need to apply for tax residency in the country you are moving to.

Assuming you continue to be tax resident in Ireland while abroad, if you are aged 65 or over, you must pay income tax in the normal way. There are income tax exemptions for people aged 65 and over who earn no more than €18,000 for a single individual or €36,000 for a married couple so long as your income is not above these thresholds, no income tax will usually be due. This exemption only applies to income tax, it does not apply to Pay Related Social Insurance (PRSI) or the Universal Social Charge (USC).

However, you may also be exempt from PRSI if you are over 66 years.

“You may find that you will be taxed much less on your income if you qualify for tax residency in the country you have moved to. Note however that it may not be as easy to secure this tax residency as you think,” said Ms Ryan.

You may be considering selling your Irish home and buying a small apartment to have as a base when you come back to Ireland to visit. If considering renting out that Irish apartment while you are abroad, be sure you understand and meet your obligations around the tax on rental income and that any other taxes due on the property (such as local property tax) are paid.

Ms Ryan said to be aware too of the Capital Gains Tax (CGT) implications should you decide to sell this apartment in the future.

"If the apartment is not your principal private residence, you will not be exempt from tax on any profits made from the sale."