INCOME TAX

tax

[br] Charge to tax

Individuals and non-corporate persons

[space size=10]Income tax is charged on income of individuals, unincorporated bodies (s 1044), trustees (s 1046) and personal representatives (s 799).[space size=10]

Income of partnerships and European Economic Interest Groupings is charged on the individual partners (s 1008) or grouping members (s 1014).[space size=10]

Tax year
Income tax is charged on income arising in a tax year. The tax year coincides with the calendar year, for example, the tax year 2017 runs from 1 January 2017 to 31 December 2017.[space size=10]

Residence
Resident individuals
If you are resident and domiciled in the Republic of Ireland (ROI), you are liable to Irish income tax on your total income from all sources, i.e., your worldwide income.[space size=10]

You are regarded as ROI resident if your ROI presence amounts to:[space size=10]

(a) 183 days or more in a tax year, or[space size=10]

(b) an aggregate of 280 days in the current and preceding tax year.[space size=10]

Presence of not more than 30 days in a tax year is ignored for the purposes of the 280-day test (s 819). You are present for a day if you are present at any time during the day.[space size=10]

You are regarded as ordinarily resident in the ROI for a tax year if you were resident in each of the three immediately preceding tax years. You cease to be ordinarily resident when you have become non-resident for the three immediately preceding tax years (s 820).[space size=10]

Non-domiciled individuals
If you are resident but non-ROI-domiciled (for example, a foreign national living in Ireland), you are only taxed on foreign income to the extent that it is remitted to Ireland (s 71). This “remittance basis” extends to UK source income (since 1 January 2008).[space size=10]

Non-Irish-resident individuals
If you are non-Irish-resident, you are taxed on Irish source income, i.e., income arising in the ROI.[space size=10]

If you are non-Irish-resident but ordinarily resident in the ROI, you are liable to Irish tax on foreign investment income in excess of €3,810 in the tax year. You are not liable in respect of income from an employment or trade carried on abroad (s 821).[space size=10]

If you are a resident of a country that has a tax treaty with the ROI, you may be exempt, or due a credit, in relation to tax on Irish source income if that income is also taxed in the treaty country (see Double Taxation).[space size=10]

If you are an Irish citizen and Irish domiciled, but resident abroad, you may be liable to the domicile levy (€200,000 per annum) if:[space size=10]

(a) your world-wide income exceeds €1m,[space size=10]

(b) your Irish located property is worth more than €5m, and[space size=10]

Income tax rates
Individuals and married couples
A married person can opt to be assessed for tax purposes via:[space size=10]

(a) joint assessment on the husband (s 1017) or wife (s 1019), separate assessment (s 1023), or[space size=10]

(b) single assessment (s 1016).[space size=10]

A individual who is separated or divorced and not remarried, may by agreement with the ex-partner, opt for joint or separate assessment (s 1026).[space size=10]

The current tax rates are the standard rate (20%) and the higher rate (40%).[space size=10]

The 2017 standard rate bands are: €33,800 in the case of an individual, €37,800 in the case of a one parent family and €42,800 in the case of a married couple (s 15(2)). In the case of a dual income married couple, the €42,800 rate band may be increased by the lower of:[space size=10]

(a) €24,800, and[space size=10]

(b) the income of the second spouse.[space size=10]

The maximum standard rate band a dual income married couple may have is €67,600. However, the maximum part of the standard rate band that may be transferred between the partners of a dual income married couple in a tax year is €42,800.[space size=10]

Unincorporated bodies and trustees
Income of an unincorporated body or trustee (including a personal representative of a deceased person’s estate) is taxed at the standard rate (s 15(1), 799-802).[space size=10]

Undistributed income of an accumulatory trust is subject to a 20% surcharge (s 805).[space size=10]

Exemptions
Exemption limits
An individual aged 65 or over with total income below €18,000 is exempt. In the case of a married couple, one of whom is aged 65 or over, the threshold is €36,000.[space size=10]

If the claimant has dependent children, the exemption limit is increased by €575 for each of the first and second child, and €830 for the third child and each subsequent child.[space size=10]

Other exemptions
The other main exemptions from income tax are:[space size=10]

(a) Personal injury settlements (s 189), payments from the Haemophilia HIV Trust (s 190), Hepatitis C compensation (s 191), and payments in respect of thalidomide victims (s 192).[space size=10]

(b) Income of artists, writers and composers, subject to an overall annual limit of €50,000 (s 195).[space size=10]

(d) Income of recognised charities (s 207, 208).[space size=10]

(e) Income of amateur sports bodies (s 235).[space size=10]

(f) Rent from let farm land (s 664). A claimant must be aged 55 or over, or unable through physical or mental incapacity to carry on farming. Exemption is given for the lower of:[space size=10]

(i) the farm rental income surplus, or[space size=10]

(ii) €40,000 where the lease is for more than 14 years, €30,000 where the lease is for 10 to 14 years, €22,500 where the lease is for seven to 10 years, or €18,000 in any other case.[space size=10]

(g) Rent-a-room relief (s 216A). Income from lodgers is exempt provided your gross income from such letting does not exceed €14,000 in the tax year.[space size=10]

(h) Home childcare earnings of up to €15,000 in the tax year (s 216C).[space size=10]

(i) Earnings of special assignees (s 825C). 30% of income above €75,000 in the case of employees assigned from a tax treaty country to work in their employer’s Irish operation.[space size=10]

(j) Start Your Own Business relief (s 472AA). Where a person previously long-term unemployed sets up a business, the first €40,000 of profits in a tax year are exempt. Expires 31.12.2018.[space size=10]

Schedules
Income is charged under four Schedules: Schedule C, Schedule D, Schedule E and Schedule F (s 12).[space size=10]

Schedule D
Schedule D is the heading under which business income is charged to tax. It has five Cases (s 18).[space size=10]

Cases I and II
Case I charges the profits of a trade (s 2) and Case II charges the profits of a profession (s 3). Employment grants are not regarded as trading income (s 223-226).[space size=10]

Legitimate business expenses are deductible, including:[space size=10]

(a) expenditure on trademarks (s 86), and know how (s 768),[space size=10]

(b) pre-trading expenditure (s 82), and pre-commencement staff training costs (s 769),[space size=10]

(d) a double deduction for wages paid to a previously unemployed person (s 88A).[space size=10]

Not deductible: private expenditure, capital expenditure (s 81), and entertainment expenditure (s 840).[space size=10]

Taxable profits are based on the profits of the accounts year ended in the tax year (s 65), with special rules for commencement (s 66) and cessation (s 67) years and short-lived businesses (s 68).[space size=10]

Land-dealing and farming
Profits from dealing in land are charged under Case I as trading profits (s 640, 641). Capital profits realised by a landholder are charged under Case IV (s 643).[space size=10]

Cases III, IV, V
Case III charges untaxed interest and income from foreign property.[space size=10]

Case IV charges miscellaneous income not falling under any other heading.[space size=10]

Case V charges rental income. Legitimate property-related expenses, including interest (restricted as to 75% as regards residential property, but not for tenants whose rent is paid by a housing authority) are deductible (s 97). Premiums and disguised premiums are partly taxed as rental income (s 98-100), and are deductible rental (s 103) or business (s 102) expenses of the payer.[space size=10]

Profits under Case III-V for tax purposes are the actual profits arising in the tax year (s 70, 74, 75).[space size=10]

Schedule E
Schedule E is the heading under which employment income is charged (s 112). The PAYE system obliges an employer to deduct tax from employee pay (s 985, 986).[space size=10]

An employee is not entitled to any deductions in computing employment income, unless the expenditure is incurred wholly, necessarily and exclusively in the performance of the duties of the employment (s 114).[space size=10]

A termination payment is subject to tax (s 123), but the first €10,160 plus €765 for each year of service may qualify for exemption (s 201).[space size=10]

Benefit in kind (BIK)
An employee is taxed on expense allowances (s 117), benefit in kind (s 118), share options (s 128) and preferential loans (s 122) obtained from the employer. A loan is regarded as preferential if the interest rate is less than 4% in the case of a mortgage loan, or 13.5% in the case of any other loan.[space size=10]

BIK treatment does not apply to:[space size=10]

(a) an annual or monthly bus or train pass (s 118(5A)),[space size=10]

(b) a bicycle and associated safety equipment (costing up to €1,000) for travel to work,[space size=10]

(d) shares worth up to €12,700 received through an approved profit sharing scheme (s 510) – is increased to €38,100 for shares held in an employee share ownership trust for a minimum of 10 years.[space size=10]

Company cars
The employee is taxed on “notional pay” based on the cash equivalent of the benefit of use of a company car (s 121). This is calculated at 30% of the original market value (OMV) of the car, up to 24,000km. For business mileage that exceeds 24,000km, see rates below:[space size=10]

(a) For mileage between 24,000km – 32,000km the rate is 24%[space size=10]

(b) For mileage between 32,000km – 40,000km the rate is 18%[space size=10]

(d) For mileage between 48,000km and upwards the rate is 6%[space size=10]

A new set of rates, due to come into effect by ministerial order, are calculated as a percentage of the car’s OMV, inclusive of duty and VAT, depending on your annual business travel and the car’s CO2 emissions category:[space size=10]

Category A: 0g/km up to and including 120g/km,[space size=10]

Category B: More than 120g/km up to and including 140g/km,[space size=10]

Category C: More than 140g/km up to and including 155g/km,[space size=10]

Category D: More than 155g/km up to and including 170g/km,[space size=10]

Category E: More than 170g/km up to and including 190g/km,[space size=10]

Category F: More than 190g/km up to and including 225g/km,[space size=10]

Category G: More than 225g/km.[space size=10]

Where the annual business travel is:[space size=10]

(a) 0 to 24,000 km, the BIK is:[space size=10]

(i) 40% for category F, G,[space size=10]

(ii) 35% for categories D, E, and[space size=10]

(iii) 30% for categories A, B, C,[space size=10]

(b) 24,001 to 32,000 km, the BIK is:[space size=10]

(i) 32% for category F, G,[space size=10]

(ii) 28% for categories D, E, and[space size=10]

(iii) 24% for categories A, B, C,[space size=10]

(i) 24% for category F, G,[space size=10]

(ii) 21% for categories D, E, and[space size=10]

(iii) 18% for categories A, B, C,[space size=10]

(d) 40,001 to 48,000 km, the BIK is:[space size=10]

(i) 16% for category F, G,[space size=10]

(ii) 14% for categories D, E, and[space size=10]

(iii) 12% for categories A, B, C,[space size=10]

(e) 48,001 or more km, the BIK is:[space size=10]

(i) 8% for category F, G,[space size=10]

(ii) 7% for categories D, E, and[space size=10]

(iii) 6% for categories A, B, C.[space size=10]

The BIK figure will be able to be further reduced by the amount required to be made good, and actually made good, directly to the employer in respect of the car’s running costs.[space size=10]

Civil service travel and subsistence rates
Compensation paid to an employee for the use of his private car, is not taxed provided it complies with the following civil service travel rates.[space size=10]

Where the annual business travel is:[space size=10]

(a) Up to 6,437 km, the rate per km is:[space size=10]

(i) 39.12c where the engine size is up to 1200cc,[space size=10]

(ii) 46.25c where the engine size is 1201 to 1500cc,[space size=10]

(iii) 59.07c where the engine size is 1501 to 2000cc,[space size=10]

(iv) 70.89c where the engine size is over 2000cc.[space size=10]

(b) over 6,438 km, the rate per km is:[space size=10]

(i) 21.22c where the engine size is up to 1200cc,[space size=10]

(ii) 23.62c where the engine size is 1201 to 1500cc,[space size=10]

(iii) 28.46c where the engine size is 1501 to 2000cc,[space size=10]

(iv) 34.15c where the engine size is over 2000cc.[space size=40]

A lunch or overnight allowance paid to an employee is not taxed provided it complies with the following civil service subsistence rates:[space size=10]

(a) €14.01 in respect of an absence of 5 to 10 hours,[space size=10]

(b) €33.61 in respect of an absence of 10 hours or more,[space size=10]

(c) €125.00 (normal rate) in respect of an overnight stay by any employee €112.50 (reduced rate for extended stays), and €62.50 (detention rate),[space size=10]

As of 1 July 2015 class of allowances for Civil Service subsistence rates has been discontinued, meaning all employees, regardless of grade, are subject to the same rates.[space size=10]

Schedule F
Schedule F is the heading under which dividend income is charged to tax (s 20).[space size=10]

Reliefs
Personal reliefs and tax credits
The personal reliefs and tax credits you can use to reduce your income tax liability are:[space size=10]

As a deduction when computing taxable income[space size=10]

No limit: Gifts to the Minister for Finance (s 483).[space size=10]

€150,000: Employment and Investment Incentive Scheme (EIIS) (s 490).[space size=10]

€50,000: Film investment (ends 2014) (s 481).[space size=10]

€35,000: This is the maximum deduction available to employees working in Algeria, Bahrain, Brazil, Chile, China, Columbia, Congo, Egypt, Ghana, India, Indonesia, Japan, Kenya, Kuwait, Malaysia, Mexico, Nigeria, Oman, Pakistan, Qatar, Russia, Saudi Arabia, Senegal, Singapore, South Korea, South Africa, Tanzania, Thailand, United Arab Emirates, Vietnam. (s 823A). It is proportionate to the number of qualifying days spent working in those countries.[space size=10]

€75,000: Carer for incapacitated person (s 467).[space size=10]

€31,750: Expenditure on heritage buildings/gardens (s 482).[space size=10]

€6,350: Seafarer allowance (s 472B).[space size=10]

€3,810 with €1,270 increase for each child: Previously long-term unemployed person (s 472A). In the second tax year of employment, it is €2,540 with €850 increase for each child, and in the third tax year, €1,270 with €425 increase for each child.[space size=10]

As a tax credit against tax liability[space size=10]

No limit: Medical expenses (s 469).[space size=10]

€3,600: Widowed parent in the first year after bereavement; €3,150 (second year); €2,700 (third year); €2,250 (fourth year); €1,800 (fifth year).[space size=10]

€3,300: Incapacitated child (per child) (s 465).[space size=10]

€3,300: Married couple, or civil partners, basic personal tax credit (s 461).[space size=10]

€2,700: Health insurance premiums (s 470B), where the insured is aged 85+ on contract date or renewal date; €2,400 (aged 80 – 84); €2,025 (aged 75 – 79); €1,400 (aged 70 – 74); €975 (aged 65 – 69); €600 (aged 60 – 64);[space size=10]

€1,650: Basic personal tax credit (s 461).[space size=10]

€1,650: Single person child carer credit (s 462). Goes to the child’s primary carer.[space size=10]

€1,650: Blind person (s 468).[space size=10]

€1,650: Employee tax credit (s 472).[space size=10]

€3,300: Widowed person, or surviving civil partner (bereavement year) (s 461).[space size=10]

€3,000: College fees (Full-time course) (s 473A) (excess over).[space size=10]

€1,500: College fees (Part-time course) (s 473A) (excess over).[space size=10]

€1,270: Fisher tax credit (s 472BA).[space size=10]

€1,100: Home carer (s 466A).[space size=10]

€950: Earned income tax credit (s 472AB).[space size=10]

€640: Rent paid by individual aged 55 or over.[space size=10]

€640: Rent paid by married couple/widowed person, or civil partners aged under 55.[space size=10]

€540: Widowed person, or surviving civil partner (other years) (s 461A).[space size=10]

€490: Married couple, or civil partners one of whom is aged 65 or more (s 464).[space size=10]

€320: Rent paid by married couple/widowed, or civil partners, person aged 55 or over.[space size=10]

€254: Training course fees (s 476) (max).[space size=10]

€245: Individual aged 65 or more (s 464).[space size=10]

€70: Dependent relative (per relative) (s 466)[space size=10]

€40: Rent paid by individual aged under 55.[space size=10]

Other reliefs
The other main reliefs from income tax are:[space size=10]

(a) Home loan interest (s 244) Loans taken out after 31 December 2012 do not qualify unless approved before that date and drawn down in 2013.[space size=10]

Loans taken out between 2004 and 2008 continue to obtain relief, loans taken out between 2009 and 2012 are also relieved at 30%, but relief is abolished from 1 January 2018. During 2013 to 2017 inclusive, the interest ceiling for married couples and widowed individuals is €6,000, and for single persons it is €3,000, and the maximum rate at which relief will be given is 15% for first-time buyers and 10% for non-first time buyers.[space size=10]

(b) Bridging loan interest (s 245) and interest on money borrowed to invest in a company (s 248) or partnership (s 253) – but not a rental company.[space size=10]

(d) Pension contributions. The contribution limits, whether through an employer scheme (s 776) or Personal Retirement Savings Account (PRSA), or a self-employed retirement annuity scheme (s 787), are:[space size=10]

(i) aged under 30: 15% of earnings,[space size=10]

(ii) aged 30-39: 20% of earnings,[space size=10]

(iii) aged 40-49: 25% of earnings,[space size=10]

(iv) aged 50-54: 30% of earnings,[space size=10]

(v) aged 55-59: 35% of earnings, and[space size=10]

(vi) aged 60 or more: 40% of earnings.[space size=10]

This 40% limit also applies to a sportsman or sportswoman.[space size=10]

The overall annual earnings limit for pension contributions is €115,000 (s 787B).[space size=10]

Unless you have a personal fund threshold (PFT), the standard fund threshold is €2,000,000 and the maximum tax-free lump sum on retirement is €200,000.[space size=10]

(e) Covenants. To be tax effective, a covenant must be payable to:[space size=10]

(i) a human rights body, or to a recognised college to carry out research, and exceed, or be capable of exceeding three years, or[space size=10]

(ii) an individual who is aged 65 or over, or permanently physically or mentally handicapped, and exceed, or be capable of exceeding six years.[space size=10]

The maximum income that be tax-effectively covenanted is 5%, but this limit does not apply to income covenanted to an individual who is permanently physically or mentally handicapped (s 792).[space size=10]

(f) Stock relief (farmers). This is given at 25% of the increase in stock value (s 666), 100% in the case of a young trained farmer (s 667), and 100% to the extent that proceeds of compulsory livestock disposals are reinvested in replacement livestock (s 668).[space size=10]

(g) Home renovation incentive. Provides an income tax credit of 13.5% of qualifying home improvement expenditure. It is paid over the two years following the year in which the work was carried out. The minimum qualifying expenditure is €5,000; the maximum is €30,000. Expires 31.12.2018 (s 477B).[space size=10]

(h) Help to buy scheme. Provides for an income tax rebate for “first time purchasers” (s 477C). To qualify, the property must be purchased or built as a principal private residence. The mortgage must be at least 70% of the purchase price, or for self-builds, 70% of the valuation approved by the mortgage provider.[space size=10]

From 19.07.2016-31.12.2016 the maximum relief is the lower of; €20,000 (purchase value between €400,000 and €600,000), income tax paid by the claimant for the 4 years immediately preceding the year of claim, or 5% of the house price (or self-build valuation).[space size=10]

From 01.01.2017-31.12.2019 , the same conditions apply but the valuation is between €400,000 and €500,000, with no relief granted on any property over €500,000.[space size=10]

Note: Cash buys do not qualify for the relief and you can not avail of the relief if you have previously bought, built or inherited a property, either individually or jointly with another party.[space size=40]

Capital allowances
In computing tax due on your business profits, you do not get any allowance for depreciation of business assets. Instead, you get a capital allowance over several chargeable periods until the cost of the asset has been fully allowed.[space size=10]

Capital allowances are computed exclusive of grants (s 317) and VAT (s 319).[space size=10]

Machinery or plant
Expenditure on machinery or plant used in your business is given an annual wear and tear allowance of 12.5% (s 284). A similar allowance is given for expenditure on software (s 291).[space size=10]

If you dispose of an item of machinery or plant on which capital allowances were claimed, and the disposal results in an underclaim (or overclaim) of allowances, you may be due a balancing allowance (or subject to a balancing charge) (s 288).[space size=10]

Cars
A car (new or secondhand) costing over €24,000 is given an annual 12.5% wear and tear allowance as if the car’s purchase price were €24,000 (s 373).[space size=10]

The capital allowances and leasing deductions of cars bought or leased since 1 July 2008 are based on the level of carbon emissions (see Benefit in Kind, above). Cars with emissions above 190g/km get no allowance (s 380K).[space size=10]

A taxi or short-term hire car is given an unrestricted write off of the purchase price at 40% per annum on a reducing balance basis (s 286).[space size=10]

Restrictions
If you carry on a trade of leasing machinery or plant, you may only set off the related capital allowances against income from that trade. This is relaxed if not less than 90% of your activity consists of leasing (s 403).[space size=10]

Industrial buildings
If you purchase an industrial building for your business, you may be due:[space size=10]

(a) an industrial building annual allowance (also known as a writing down allowance) (s 272),[space size=10]

(b) an industrial building accelerated writing down allowance (also known as “free depreciation”) (s 273), or[space size=10]

If the disposal of an industrial building on which capital allowances were claimed results in an underclaim (or overclaim), a balancing allowance (or charge) may arise (s 274).[space size=10]

Industrial buildings annual allowance may be claimed at the following rates:[space size=10]

(a) 15%, in respect of expenditure on:[space size=10]

(i) palliative care units (hospices),[space size=10]

(ii) private convalescent facilities,[space size=10]

(iii) private hospitals,[space size=10]

(iv) registered nursing homes,[space size=10]

(v) sports injury clinics,[space size=10]

(vi) airport-buildings specified expenditure.[space size=10]

(b) 10%, in respect of expenditure on:[space size=10]

(i) buildings for intensive livestock production,[space size=10]

(ii) market gardening structures.[space size=10]

(i) airport buildings, structures, runways, aprons,[space size=10]

(ii) camp/caravan site buildings and structures,[space size=10]

(iii) factories, mills, dock undertakings,[space size=10]

(iv) mineral analysis laboratories,[space size=10]

(v) hotels.[space size=10]

Unused accelerated allowances carried forward beyond the tax life of the building will be lost. However, if the tax life of the building ends before 31 December 2014, only capital allowances unused as at 31 December 2014 will be lost.[space size=10]

High Earners’ Restriction
Where your income exceeds €125,000, the maximum reliefs and exemptions you can claim is the higher of:[space size=10]

(a) €80,000, and[space size=10]

(b) 20% of your total income.[space size=10]

An EIIS investment (s 490) is not subject to this restriction.[space size=10]

Farm buildings, structures, milk quotas
If you are a farmer, expenditure on farm buildings may qualify for a farm building allowance of 15% in each of the first six years and 10% in the seventh year (s 658).[space size=10]

Expenditure on the purchase of a milk quota may be written off over a seven year period (s 669B).[space size=10]

Losses
A trading or professional loss can be offset against income from all sources (s 381). An unused trading or professional loss is automatically carried forward against such income for the next and later tax years (s 382).[space size=10]

A trading or professional loss can be increased by current capital allowances (s 392).[space size=10]

A loss in the final year of trade (a terminal loss) may be offset against the income of the three immediately preceding tax years (s 385-389).[space size=10]

A Case IV loss may be set against Case IV income and any unused balance may be carried forward against Case IV income of later tax years (s 384).[space size=10]

An Case V (rental) loss may be set against Case V income and any unused balance may be carried forward for offset against rental income of the next and later tax years (s 385).[space size=10]

Double taxation
Double taxation is the imposition of comparable taxes in two or more states on the same taxpayer in respect of the same subject matter and for identical purposes.[space size=10]

There are three basic methods of relieving double taxation on income:[space size=10]

(a) the tax paid in the foreign country may be deducted (as if it were a business expense) when calculating the income that is liable to Irish tax,[space size=10]

(b) the tax paid in the foreign country may be credited against the Irish tax payable on the same income, or[space size=10]

The Irish government has negotiated double tax treaties (s 826) with: Albania, Australia, Austria, Belgium, Bosnia and Herzegovina, Botswana, Bulgaria, Canada, Chile, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Ethiopia, Finland, France, Georgia, Germany, Greece, Hong Kong, Hungary, Iceland, India, Israel, Italy, Japan, South Korea, Latvia, Lithuania, Luxembourg, Macedonia, Malaysia, Malta, Mexico, Morocco, Kuwait, Netherlands, New Zealand, Norway, Pakistan, Poland, Portugal, Qatar, Romania, Russia, Serbia, Singapore, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland, Thailand, Turkey, United Arab Emirates, UK, Ukraine, USA, Uzbekistan, Vietnam, Zambia.[space size=10]

For full details, see http://www.revenue.ie/en/practitioner/law/tax-treaties.html.[space size=10]

Self assessment
Pay and file
If you are self-employed, or a company owner-director, you must (s 950):[space size=10]

(a) pay preliminary tax (s 952) on or before the preliminary tax date, i.e., 31 October in the tax year (s 958(2)), and[space size=10]

(b) file an income tax return on or before the return filing date, i.e., 31 October following the tax year to which the return relates (s 951).[space size=10]

Therefore, you must:[space size=10]

(a) pay the preliminary tax for the tax year 2016, and[space size=10]

(b) file the tax return for the tax year 2015,[space size=10]

on or before the pay and file date, i.e. 31 October 2016.[space size=10]

Computational error
If you file your return and pay your tax before the return filing date, but a computational error results in an underpayment of tax of not more than 5% of the tax liability, the shortfall may be paid by the following 31 December provided it does not exceed the greater of:[space size=10]

(a) €3,175, or 5% of the tax payable for the year, whichever is lower, and[space size=10]

(b) €635.

Insufficient preliminary tax
Interest applies from the preliminary tax date if the preliminary tax payment amounts to less than:[space size=10]

(a) 90% of the ultimate liability for the period,[space size=10]

(b) 100% of the liability for the preceding period, or[space size=10]

(c) where tax is paid through direct debit instalments, 105% of the liability for the pre-preceding period.[space size=10]

Revenue powers
Administration
The Revenue Commissioners are responsible for the administration of income tax, corporation tax and capital gains tax (s 849). Inspectors of taxes appointed by the Revenue are responsible for the local administration of the tax (s 852).[space size=10]

Anti-avoidance
An Irish resident individual who has power to enjoy income arising to a non-resident (e.g., an offshore company) may be assessed to tax on the income of that company (s 806).[space size=10]

Revenue may assess underpaid tax if in their opinion a tax avoidance transaction is wholly artificial (s 811).[space size=10]

Revenue may also potentially impose a 20% surcharge if they are successful in challenging a tax avoidance scheme. You may avoid such surcharge and interest by filing a protective notice (s 811A).[space size=10]

Information
A taxpayer must file a third party return of payments made to:[space size=10]

(a) a property management agent (s 888),[space size=10]

(b) a business person who pays fees to a self-employed service provider (s 889),[space size=10]

(d) a bank that pays interest without deduction of tax (s 891),[space size=10]

(e) a nominee shareholder (s 892),[space size=10]

(f) a UCITS intermediary (s 893).[space size=10]

An auditor who becomes aware that a relevant offence has been committed must report the offence to the Revenue if you do not rectify the offence within six months (s 1079).[space size=10]

Audit
A taxpayer must keep records that will enable him to make a true tax return. This means – a cash receipts book, a cheque payments book, a sales book, a purchases book, a register of assets and liabilities, and a record of asset acquisitions and disposals (s 886). Records may be stored electronically (s 887).[space size=10]

A Revenue inspector may inspect PAYE records (s 903), relevant contracts tax records (s 904), and general business records (s 905).[space size=10]

He may be accompanied by a member of An Garda Síochána (s 906).[space size=10]

He may require a financial institution to provide copies of bank statements (s 908).[space size=10]

He may require you to submit a statement of affairs (s 909).[space size=10]

He may check a third party return of information or payments made (s 899).[space size=10]

Revenue may take criminal proceedings against a taxpayer who deliberately and defiantly refuse to comply with tax laws by failing to pay tax or file returns (s 1078).[space size=10]

Collection
Tax
The Collector-General (s 851) may enforce collection of unpaid tax by:[space size=10]

(a) issuing a certificate to the appropriate sheriff or county registrar (s 962),[space size=10]

(b) suing for the tax as a civil debt in the District Court or Circuit (s 963) or High Court (s 966),[space size=10]

(d) issuing an attachment notice to one of your debtors (s 1002),[space size=10]

(e) requiring payment of arrears before issuing a tax clearance certificate (s 1094, 1095).[space size=10]

Revenue may offset repayments between taxes (s 1006A) and appropriate tax payments as they see fit (s 1006B).[space size=10]

A court seizure order in respect of a Revenue debt takes priority over other debts (s 971). Unpaid relevant contracts tax and PAYE estimates (s 1000), and corporation tax (s 974), are preferential debts in company liquidation.[space size=10]

Tax may also be paid by donating a heritage item to a State-owned or State-funded gallery, library or museum (s 1003).[space size=10]

Interest
Interest on late tax (s 1080) accrues at the following rates for each day the tax remains unpaid:[space size=10]

(a) 0.0219% in respect of the period 1 July 2009 to the date of payment,[space size=10]

(b) 0.0273% in respect of the period 1 April 2005 – 30 June 2009,[space size=10]

(d) 0.041% in respect of the period 1 August 1978 – 31 March 1998.[space size=10]

Surcharge
A 5% surcharge, which may not exceed €12,695, applies where a return is filed late, but within two months of the return filing date.[space size=10]

A 10% surcharge, which may not exceed €63,485, applies where a return is filed more than two months after the return filing date (s 1084).[space size=10]

Withholding taxes
Dividend withholding tax
An ROI-resident company must deduct dividend withholding tax (DWT) at the standard rate from dividend payments and other profit distributions (s 172B).[space size=10]

DWT need not be deducted from distributions made to:[space size=10]

(a) an Irish resident company, a pension scheme, an employee share ownership trust, a collective investment undertaking, or a charity (s 172C),[space size=10]

(b) a person resident in a tax treaty country, an EU resident, or a quoted company (s 172D),[space size=10]

DWT may be credited against the recipient’s tax liability for the tax year in which the dividend is received (s 172J).[space size=10]

Annual payments
An annual payment (for example, a covenanted payment) is a payment that is pure income profit in the hands of the recipient. Where an annual payment is made:[space size=10]

(a) out of taxed income, the payer is chargeable to tax on the payment and is entitled to deduct tax at the standard rate (s 237),[space size=10]

(b) out of income not charged to tax, the recipient is chargeable and the payer must deduct tax at the standard rate from the payment (s 238).[space size=10]

Deposit interest retention tax
Financial institutions must deduct deposit interest retention tax (DIRT) at 41% from interest payable on deposits. This is so, even though the higher rate is now 39%.The rate of DIRT will be decreased by 2% each year for the next 4 years until it reaches 33% in 2020.[space size=10]

DIRT deducted from general deposit account interest satisfies income tax liability but must be included in the recipient’s return of income (s 261).[space size=10]

DIRT does not apply to accounts held by pension funds (s 265) and charities (s 266), provided they have completed the appropriate declaration.[space size=10]

A person aged 65 or over, with income below €18,000 (individual) or €36,000 (married couple) may obtain a refund of DIRT (s 267).[space size=10]

Professional services withholding tax
An accountable person (a government department or State-funded body) must deduct professional services withholding tax (PSWT) at the standard rate from payments made for professional services (s 520) of:[space size=10]

(a) doctors, dentists, pharmacists, opticians and veterinary surgeons,[space size=10]

(b) architects, engineers, and quantity surveyors,[space size=10]

(d) solicitors, barristers and other legal agents,[space size=10]

(e) geologists.

Relevant contracts tax
A main contractor must deduct relevant contracts withholding tax (RCT) at 35% from payments made to unauthorised subcontractor who has been engaged to carry out a relevant contract, i.e., construction operations, forestry operations, or meat processing operations on behalf of the main contractor (s 530, 531).[space size=10]

RCT also applies to activities carried out on the Continental Shelf.[space size=10]

Penalties
A person who fails to file a return or provide information on request, is liable to a penalty of €950 (s 1052). Where a return is filed negligently, the penalty is €125 plus the difference between the correct liability and the tax paid (s 1053). Where a return is filed fraudulently, the penalty is €125 plus twice the difference between the correct liability and the tax paid (s 1054).[space size=10]

Revenue may not seek a civil penalty wishes unless a court has determined that the penalty is due. Revenue may enforce collection of a penalty confirmed by a court, as if it were tax. Revenue may not recover penalties from the estate of a deceased person unless that person agreed, or a court confirms that the penalties are due. Revenue practice in relation to tax-geared penalties is given effect in the legislation.[space size=10]

Appeals
A taxpayer aggrieved by an assessment to income tax or corporation tax may appeal within 30 days of the notice of assessment. The appeal may be settled before the appeal hearing by agreement between the inspector and the appellant or by withdrawal of the appeal (s 933).[space size=10]

The Appeal Commissioners must hear the evidence and order that the assessment be reduced, stand good, or be increased (s 934). They may summon and examine witnesses (s 939), and they may determine liability in cases of default (s 940).[space size=10]

The taxpayer may request that the appeal decision be reheard by a Circuit Court judge (s 942). If dissatisfied on a point of law, he may request the Appeal Commissioners to state a case for the opinion of the High Court (s 943).

TAX INFORMATION 2017

April 26, 2017

INCOME TAX

[br] Charge to tax

COMMENTS