Brendan Burgess explains: The taxation of Credit Union dividends

Brendan Burgess

There are three types of share account and one type of deposit account

Regular Share Accounts| No Dirt deducted | taxable at your top rate

Special Share Accounts|Dirt deducted| No further tax liability

Special Term Share Account|Dirt deducted|no further tax liability;min term 3 years

Deposit Accounts|Dirt deducted| no further tax liability
If you are paying tax at the top rate i.e. 41%, then you should opt for the Special Share Account as DIRT is only 25%

If you are not paying any tax or if you are paying tax at the lower rate, then you should opt for the Regular Share Account

Not all Credit Unions offer every type of account.
Some CU’s require you to have a Regular Share Account before you can avail of either of the other Special accounts.

What are "Special Term Share Accounts" ?
These are offered by only a few Credit Unions. You must leave your money on deposit for at least three years. In my opinion, this is not a good idea in the current environment where it is important to have instant access to your money.Clondalkin Credit Union describes them well:


Brendan Burgess

[SIZE=+0]Special Share Accounts, Special Term Share Accounts and Deposit Accounts from which DIRT has been deducted

In theory, you should do a tax return and declare this income. In practice, if you are a PAYE employee, the Revenue does not expect you do a tax return just to pay the additional PRSI and Levies due. If you are doing a tax return for some other purpose, then you must include your Credit Union income.

The whole area of prsi and levies is very complicated and it's very difficult to get clear guidance.

Income Levy

The income levy does not apply to interest which is subject to DIRT

PRSI - the situation is unclear
An employee who has no trading or professional income is not liable to pay PRSI on deposit interest received. However, a proprietary director would be liable to pay PRSI on any deposit interest received.

Health Levy
Deposit interest is not exempted from the Health Levy.

Alternative view: Some believe that
[/SIZE]ALL CU Dividend and Deposit Interest would be subject to Class S PRSI - which means that PRSI is payable, but not Health Levy.[SIZE=+0]

Source: Key post by patrickjd

Brendan Burgess

Reporting of dividend payments by Credit Unions

Your Credit Union must make a return to the Revenue of all dividends paid in excess of €635. So if your Credit Union is paying a dividend of 1%, you will need €63,500 in the share account to receive this level of dividend.

It does not matter if they don't report your dividends - you are still liable to pay tax on them.

Reporting of New Accounts
The Credit Union must report initial payments of dividend and deposit interest to new account holders, irrespective of the size of payment.