Case Study: Navigating Tax Residency Challenges with Daysium

Accurate record-keeping can reduce your risk of a lengthy and costly tax investigation. Cases where investigation and even an appeal have been carried out and ruled in favour of the individual are prime examples of how robust evidence trials matter.

We wanted to examine the impact Daysium’s innovative way of gathering evidence could have on reducing the risk of an investigation. Luckily, one of our Founding Partners, Stephanie Wickham, an award-winning international and expatriate tax specialist who founded Expat Taxes in Ireland, directed us towards two intriguing court appeal cases from Ireland. A closer look at the cases showed how our platform could lower risk—not only in terms of strengthening compliance but also resulting in a strong trail of evidence to hasten the actual enquiry process.

Introducing the Two Cases

The cases in question were adjudicated in Irish courts in 2019 and 2020.

Case A – 177TACD2020

In this case, a numismatist was required to demonstrate his non-tax residency in Ireland between 2002 and 2006. He bore the responsibility of proving to the courts that he did not:

• Stay in Ireland for 183 days or more during any single year.
• Spend a total of 280 days or more in Ireland over two consecutive years.

Central to the case was the need to substantiate his physical presence outside Ireland and the nature of his income.

The appellant contended that he did not spend sufficient time in Ireland during those years to be considered a tax resident. Despite being domiciled in Ireland, he argued that his time spent outside the country exempted him from tax liability.

Case B – 08TACD2020

On the other hand, Case B presents the story of a UK citizen who resided in Northern Ireland but commuted to work in Ireland.

These work commutes occurred from August 20, 2012, to May 10, 2013. Subsequently, from May 11, 2013, to November 5, the appellant lived in Ireland before returning to the United Kingdom.

He asserted his tax residency in Ireland for 2012 through an elective declaration. Additionally, he argued for tax residency in 2013, citing his presence in Ireland for over 183 days that year. He also claimed split residence for 2012 and 2013.

Identifying the Challenges

The cases of Case A and Case B unveiled three fundamental challenges individuals encounter in asserting tax residency:

Evidencing Location

The main issue for Case A was for the appellant to show his whereabouts. For the authorities, it’s not enough to claim that “I was here”; you have to find evidence to prove that.

In Case A, the appellant’s connection to various countries complicated matters. He had several addresses attached to his name, proving residence wasn’t straightforward. During the proceedings, the appellant relied on showcasing his location through receipts from car rentals, restaurant bills, and credit card transactions.

Matching Transactions with Location

Additionally, as the cases show, a transaction alone may not be enough evidence of your location. In Case A, the appellant’s documents resulted in a fragmented and inconsistent trail of proof. The Appeal Commissioner, Mark O’Mahony, determined at the start of the opening analysis how the documents didn’t prove anything but a purchase.

For example, regarding a car rental receipt from an Irish airport, O’Mahony notes that “at best, they showed that the appellant had occasionally rented a car”, which, he continued, “could as easily be done by a tax resident as by a non-resident.”

Similarly, a credit card statement of a purchase placing you in another country is not substantial proof. Credit card transactions might not always go through at the time of purchase and could be used to make online purchases.

Finding Historical Evidence

Finally, both cases showcase an issue of searching for historical evidence. The cases involved prior years, with the court appeals taking place years later. In Case A, the proof required dates back almost a decade.

Searching for evidence dating that far back proved a challenge. The appellant for Case A admitted that his day counting records might not be accurate, and during the appeal process, witnesses sometimes offered contradictory evidence.

Introducing Daysium: Revolutionising Tax Compliance

Although both cases were ultimately ruled in favour of the appellant, the process to reach a favourable outcome has the potential to be faster. The risk of the enquiry and the costs associated with it could have been avoided with Daysium.

With its innovative features and robust capabilities, Daysium revolutionises this kind of tax compliance in three key ways:

Strengthening Record-Keeping: Daysium automates evidence collection, generating a comprehensive digital trail of activities and locations. Your location data is logged automatically, clearly showing your day count. Record-keeping is centralised, with digital records accessible and secured with the best encryption techniques.

Displaying Location with Other Evidence: By integrating location data with supplementary evidence like geo-tagged photographs and receipts, Daysium fortifies the authenticity and reliability of your claims. The platform’s seamless integration of disparate data sources creates a compelling narrative that it was indeed you who was, where you now say you were. 

Informing of Current Situation: Real-time calculation of day counts enables you to proactively manage your day count status, ensuring compliance with relevant tax rules and regulations. By providing accurate, up-to-date insights into your status, Daysium empowers you to make informed decisions and mitigate compliance risks effectively.

As an expatriate tax specialist, one of our founding partners Stephanie Wickham agrees with how Daysium can help in today’s tax landscape. She notes,

“Tax authorities are increasingly using more sophisticated data analysis in their audit interventions and risk management. So for clients that frequently cross borders a platform such as Daysium is invaluable in ensuring that a solid evidence book can be presented in the event of a Revenue enquiry/intervention.”

Unleashing the Potential Benefits of Daysium

In both these cases, the adoption of Daysium would have offered three critical advantages to the appellants.

• Enhanced Compliance: Daysium’s robust record-keeping capabilities enable you to navigate residency requirements precisely and confidently, ensuring adherence to relevant tax regulations.
• Reduced risk of enquiries: As compliance becomes more accessible to navigate, the risk of a time-consuming enquiry lessens. Maintaining day count becomes more accessible, and you can better identify any potential issues with your residency data together with your tax advisory team.
• Efficient Investigations: If you come face-to-face with an inquiry, Daysium’s comprehensive data repository expedites the resolution process, saving time and resources for you and the tax authorities. The platform’s seamless integration of disparate data sources facilitates faster, more efficient investigations, enhancing regulatory compliance and enforcement efforts.

In conclusion, Daysium stands at the forefront of tax compliance innovation, offering a transformative solution to the challenges of keeping a robust set of records. With Daysium, navigating complex tax regulations becomes not just a requirement but a strategic advantage in safeguarding your financial interests and ensuring regulatory compliance. You can trust your records to be robust, and if the authorities reach out, you and your team can confidently say, “There’s nothing to see here, everything is in order”.