US Visa/Taxation for Pro Athlete - Interesting query about residency and travelling

nastyshox

I have an interesting query about how my situation will affect me next year in terms of taxation and visas, and what the various options available to me are and more importantly what is the best one to choose! I have signed a contract with a professional team in the US. Any help with any of the paragraphs would be much appreciated!! I am running out of time to make my decision and if anyone has any experience on any of these issues or could offer any advice I would genuinely really appreciate it and thank you very much in advance.

This is how 2013 should go for me. I will travel to the US at the end of January until March for training. This trip will be for less than 90 days. After that I will be based in Europe for the following 6-7 months (this will either be in Italy or Spain). Once the season is over I will be returning to Ireland for the winter for 2 - 3 months.

Initially I thought I had two simple options. (A) I could take a US working visa (P1 for athletes) from the team, and pay all my taxes in the US or (B), I could travel to the US for pre-season training without a visa (on the Visa waiver programme) because it was for less than 90 days and pay my taxes in Ireland.

Following on from this, I thought I was not going to be consideredresident in Ireland for tax purposes in 2013 because I will not be in the country for 183 days, and I thought paying the US taxes was my only option. However since then I have read that "A person is resident for Irish tax purposes if they spend - (A) 183 days in Ireland or (B) 280 days over two years - ie. current and preceding tax year, minimum 30 days in each year. So seeing as I spent approximately 330 days in Ireland in 2012, and I will spend around 100 days in Ireland in 2013, I will in fact still be considered resident in Ireland for tax purposes next year.

I was then advised to base my decision on where I might actually get benefit from taxes paid, that in Ireland I will get a return from my PRSI contributions but that would not be the case for Social Security and Medicare contributions in the US. The table at the bottom of this page is interesting (http://www.longaccounts.ie/general/residence-and-domicile-rules/). I will beconsidered resident, ordinarily resident and Irish domiciled for 2013. While the two year residency rule will not apply to me in 2014, I will still be considered Irish domiciled and ordinarily resident (for 3 years after I becomenon-resident), so it seems I would still be liable for tax in Ireland (except for worldwide income in 2013, and in 2014 worldwide income except a trade orprofession no part of which is carried out in Ireland. On this note, because I would be doing all my professional duties outside of Ireland would my income be exempt from tax this year, or would I be caught for training here in Ireland?).

So it looked to me like the Irish taxes option was proving to be the best way to go. I tried to do some calculations myself to see what the tax bill at the end of the year for both options would be. I have a full medical card so my USC contributions would be somewhat reduced. I am also required to pay into a pension amounting to 12% of my salary (I have another query about this which is mentioned in the next paragraph). Also, I was in the Revenue Tax Office who explained to me about tax relief for professional sportspersons (some information here) so that could bevery worthwhile. I know I might only be able to avail of it for one year because you must be resident for the year you claim it back but it makes the Irish tax setup more appealing than the US. However, likewise I tried to do some calculations myself to see how much tax I would end up paying if I went down the US route.

I am required under the contract to pay into a pension at the minimum rate of 12% of my salary. This I have a few questions about. The team are taking out many insurance policies for me as required in the contract (more on that below) with an insurance broker for professional athletes in Germany. This insurance broker also offers a pension plan for professional athletes which could assist me in setting this up in away to meet the requirements. It is actually a pension set up in conjunction with Zurich in Luxembourg and in the details it says “Taxation: Tax neutral for non resident insured people in Luxembourg (taxed in the country of residence ofthe beneficiary)”. However, I know that pension contributions to approved personal pensions and Personal Retirement Savings Accounts (PRSA) are granted tax relief, however I am not sure do these have to be set up in Ireland or can they be anywhere in the European Union? I will inquire about what are my options here in Ireland if one in Luxembourg is not covered, or pros and cons of each. I was looking here for an answer but couldn't work it out. Possibly I would have better access to and benefits from one set-up in Ireland as a personal pension or Personal Retirement Savings Account?

Also in the contract are many insurance policies which I must have for 2013. All I have to pay for is health insurance with the VHI which will cost me around €500 euro a year and am I right in saying that I receive tax relief on this at source? However the team are going to take out all the required insurance cover and pay for it. I have read that "Employees where medical insurance premiums are paid on their (or their dependents) behalf will not have been allowed Tax Relief at Source" and can claim relief due on the amount paid by the employer? Would this be treated like benefit in kind? Could I claim tax relief on this in Ireland even though it would have been taken out with the German insurance broker?

Also in the Revenue tax office, I was told I would not be entitled to the single person personal tax credit which I had included as €1,650 in my calculations. Is this correct, or did she make a mistake? I thought that"A Personal Tax Credit is due to every individual who is resident in the State" which I will be for 2013? Also, how would my income be treated if I was paid into an Irish account by the team? Would it be considered "foreign income" and subject to self assessment as opposed to PAYE? If so, while I know I would not be entitled to a PAYE tax credit, would I then need an accountant to manage my tax affairs? And also what knock on effect would this have. It seems I would automatically be considered to be in "class S" for PRSI contributions because of self assessment is this correct? And as a result my social welfare benefits would differ compared to if I was in "class A" for PRSI. Also, because of the nature of the income I don't believe that my employer would be deducting PRSI on my behalf and paying it to the Revenue Commissioners on my behalf, so would I be required to do this myself or get an accountant to do it for me?

Now I know there exists a double taxation agreement between Ireland and the US so I won't end up paying tax twice right? If the team send me money directly into an Irish bank account, will they tax it anyway because it is sourced from an American company. And if so, will I then have to claim this tax back off the US tax office? I was told by the Irish tax office, that if I have paid taxes on my income in the US and that I am paying my taxes in Ireland, then the Irish tax office cannot refund me this and I will have to claim it back off the US tax office? This is one area I am very unsure of and would appreciate any clarification. Will it even be subject to tax in the US if it is just sent straight to Ireland and my bank account there? Would I be considered a non-resident alien in the US? If so, this is the explanation of how non-resident aliens are taxed by theIRS and it seems "For a non-resident alien, only income that is generated from U.S. sources, excluding certain investments such as stocks, is subject to taxation" (my income from the US team would be considered to befrom a US source and subject to taxation right?). So it's not as simple as just sending the money home and paying tax here is it?

Now, I mentioned in the very beginning that because the trip to the US at the start of 2013 will be for less than 90 days that I would not necessarily need a P1 Working Visa and could travel there on the visa waiver programme.This is how I travelled to the US to train with the team last month, however next year while I will still be training over there, the difference this time is that I am getting paid so I am not sure if I will even be allowed into the country without a working visa. And I've been told if I don't declare that I am being paid while I am over there that I could be deported back toIreland and not allowed back into the US. So maybe taking out a P1 athlete visa is the only way to go about it? However I have also been told that if I dot his, it is compulsory to pay your taxes in America and there is no other option. Again, I am not too sure regarding the rules and regulations surrounding this so any help would be great.

The final complication I have is that I will be based in Europe for most of the year for training and will travel from there to and from events. This could be for 6-7 months, and it looks to be either Spain or Italy. I have also been advised to see if there is a double taxation agreement between the US and Italy/Spain to see what the outcome would be here, and I have come across this page of United States Income Tax Treaties and both Italy and Spain are on the list but I am not sure what exactly the treaty consists of. I know Ireland seems to have double taxation agreements with Italy and Spain too if that makes any difference.

As I mentioned in the beginning, if anyone can even offer me the slightest bit of help with anything I have mentioned in this post I would be very appreciateive. Thanks very much in advance!!