Key Post Brendan Burgess explains: The taxation of foreign deposit income

Runner1

Registered User
Messages
33
I live in the UK and have a relatively large sum (around 60k) on deposit in the EBS in Ireland, I claimed the DIRT back in Ireland as a non-resident for 2009 and 2010, should i have declared this to the UK tax authorities even though the form gets stamped by HMRC to say you have been paying tax in the UK? Or as it was only about €1500 in total is it considered as income in Ireland that would be below the thresholds for taxation? i dont want to be hit by any penalties for not paying tax on the additional income.
 

Vega

Registered User
Messages
65
It is correct that interest is taxed in the year received.
But you have to notify Revenue in the year any foreign accounts have been opened, so will still have to make a tax return for 2010.

I emailed Revenue about this a few weeks back and they only just replied to me now. They advised that if I did not receive any foreign deposit interest in 2010 that I do not need to make a tax return for 2010.

Is there a separate notification requirement? I can't see anything on the Revenue site.
 
Messages
4,931
I live in the UK and have a relatively large sum (around 60k) on deposit in the EBS in Ireland, I claimed the DIRT back in Ireland as a non-resident for 2009 and 2010, should i have declared this to the UK tax authorities even though the form gets stamped by HMRC to say you have been paying tax in the UK?

If you are ordinarily resident in the UK you are subject to UK law and the rules of HMRC.

You should declare the deposit income to HMRC if above any UK minimums (there are no similar minimums with the Revenue).
 
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4,931
Does this not also apply to basic rate taxpayers? DIRT rate is 27% and basic income tax rate is 20%

Here's how it works:

1) All deposit interest earned by all taxpayers should be declared to the Revenue.
2) The Revenue apply your higher rate of tax on this income.
3) The Revenue then give you an extra tax credit for the income in lieu of the fact that you have already paid DIRT on the income.

BUT

3.1) The credit is only given if you have other declared income to cover the credit.
3.1.1) Otherwise, you pay full tax at the higher rate even if you have already paid DIRT.
3.2) The credit is only given against normal income tax and the income levy. It is not given against the health levy for prior years, obviously not applicable for the 2011 tax year.
3.2.1) Hence, you need to need to pay DIRT and some tax on top of the DIRT to the Revenue.
 

Jiblet-run

Registered User
Messages
61
I've just been speaking to the Revenue today and here is my experience.

Initially I spoke to several people from different branches before finally ringing the correct number which is 1890 333 425 - note this is for PAYE people only.

Got through to a very helpful person.
I explained my situation that I have money on deposit outside of Ireland - but within the EU and wanted to know to go about paying the DIRT owed to the Revenue.

Quite simply she said that all I needed to do was to write a letter to your local revenue office - give your details, give all the financial information as required and include a DIRT cert from the bank (if possible).
If the bank does not exempt you from DIRT - then make a note of this and you will be refunded if necessary.
The Revenue may respond to your letter requesting you to fill in form but the initial step would be this letter.
She did make mention of earning interest over a certain amount - somewhere between 2000 and 3000 euros. In this case you may have to complete a different form. However as it was unlikely that I would get this much interest - this didn't concern me and I didn't pursue further questioning on this.
In terms of when to make a return - generally the year you receive the interest - is the year you make the return. Of course if you get your interest on the 31.12.20XX - then it would be into the next year. The deadline of 31st October does not apply here.
I must stress that from my understanding this only applies to PAYE worker earning interest below a level as mentioned.

Of course all of this contradicts what has been said in this thread and many others. To me I am surprised at the ease of this process. So I would be interested in what other folk think of this. Has anyone done it in this fashion before?
 
C

crazypole

Guest
Here's how it works:

1) All deposit interest earned by all taxpayers should be declared to the Revenue.
2) The Revenue apply your higher rate of tax on this income.
3) The Revenue then give you an extra tax credit for the income in lieu of the fact that you have already paid DIRT on the income.

BUT

3.1) The credit is only given if you have other declared income to cover the credit.
3.1.1) Otherwise, you pay full tax at the higher rate even if you have already paid DIRT.
3.2) The credit is only given against normal income tax and the income levy. It is not given against the health levy for prior years, obviously not applicable for the 2011 tax year.
3.2.1) Hence, you need to need to pay DIRT and some tax on top of the DIRT to the Revenue.

Does it mean that if I'm on 41% tax (earning above 32800 in 2011), I'm still eligible to pay 14% tax on interest accrued in 2011 (27% of DIRT deducted at source, 14% left to pay)?
 
C

crazypole

Guest
To clarify - do we have to declare interest earned in Ireland based banks (DIRTed at 27%) or only in foreign institutions ?
 
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4,931
Does it mean that if I'm on 41% tax (earning above 32800 in 2011), I'm still eligible to pay 14% tax on interest accrued in 2011 (27% of DIRT deducted at source, 14% left to pay)?

No unless you received over 32,800 EUR in deposit interest, which I assume you did not.

Your DIRT credit will be given against your other income in 2011. Hence, you will not pay extra tax.
 
Messages
4,931
To clarify - do we have to declare interest earned in Ireland based banks (DIRTed at 27%) or only in foreign institutions ?

You need to declare interest earned in all banks. ROI banks, NI banks, offshore banks, EU banks. All banks.
 
C

crazypole

Guest
Thank you for the info CiaranT.

Talked to a few people around - not a single one fills tax return form just to declare interest income from Irish banks.

I have did a tax return for 2009 as I've been self employed back then, however I haven't declared interest earned in BoI. I'm assuming that now I owe 41% minus 2009 DIRT rate (failed to declare it on time so it taxed at higher rate). Is it correct?
 
Messages
4,931
Thank you for the info CiaranT.

Talked to a few people around - not a single one fills tax return form just to declare interest income from Irish banks.

I have did a tax return for 2009 as I've been self employed back then, however I haven't declared interest earned in BoI. I'm assuming that now I owe 41% minus 2009 DIRT rate (failed to declare it on time so it taxed at higher rate). Is it correct?

DIRT is your only liability if you have other income that allows for a DIRT credit to be created.

Example:
PAYE Income: 50,000 EUR
Deposit Interest: 1,000 EUR
Step 1) DIRT paid: 270 EUR to the bank automatically.
Step 2) Declare 1,000 EUR deposit interest.
Step 3) Revenue charge you 27% tax on your deposit interest AND at the same time grant you a tax credit for 270 EUR. The tax credit was only issue because you had PAYE/other income to cover this tax credit.
Hence, you do not pay anything further that you original DIRT payment to the bank because of other income that allowed for the creation of a DIRT tax credit.

Hence, when you were self employed did you have other income? This income can be used to create a tax credit.
 
C

crazypole

Guest
Yes, I had enough other income to apply tax credit to (PAYE for 5 months, self-employed rest of the year). My tax return was submitted by accountancy firm. However, I haven't notified them about deposit interest and it hasn't been declared (they never mentioned that and I simply had no idea). Does it change tax situation ?
 

KOR101

Registered User
Messages
7
Just to be clear!

I will be paid interest of about €6k by a bank in an EU country in July 2012. So, I must complete a Form 12 tax return for the year 2012, and submit it by end October 2013, paying 27% tax.
 

Gervan

Registered User
Messages
1,076
When you open an offshore account, you have to inform Revenue with your tax return for that year.
 

KOR101

Registered User
Messages
7
Just to be clear!

I will be paid interest of about €6k by a bank in an EU country in July 2012. So, I must complete a Form 12 tax return for the year 2012, and submit it by end October 2013, paying 27% tax.

Still trying to figure this out.

So, no preliminary tax for 2012. (i.e. right now) Payment is in October 2013?
 

vf949

Registered User
Messages
22
I'm far from an expert but my view at the moment for the coming couple of months is to leave your money in a current account at 0% interest if you are putting it in a foreign bank account.

This way our government will have less right to get their paws on it to convert it into a PIIGS EURO or PUNTS should this scenario happen.

I guess this is perfectly legal because you are not dodging DIRT at all as you are not earning any interest?
 
Messages
4,931
Huh? It is not illegal to earn interest on an offshore account.

The rate of interest will have no implication with regard to the currency the deposit would be converted into if the EUR breaks up.
 

vf949

Registered User
Messages
22
Huh? It is not illegal to earn interest on an offshore account.

The rate of interest will have no implication with regard to the currency the deposit would be converted into if the EUR breaks up.

I never said it was illegal to earn interest. I just said that if you are earning interest you have to tell the government about the account and pay DIRT tax on the interest. If you are not earning any interest then I was thinking you might not have to tell the government at all about the account?

I'm then thinking that if a two tier euro comes in and Ireland are in the worse one the Irish Government will insist that all accounts in other eurozone countries that are registered with them will have to be changed into the new euro. If an account is not registered with them for DIRT tax then maybe it would be left in the same currency as the Germans.

This is all hypothetical of course and I am completely guessing just as everyone else is. This is unchartered territory for us all!
 

Vega

Registered User
Messages
65
I've just been speaking to the Revenue today and here is my experience.

Initially I spoke to several people from different branches before finally ringing the correct number which is 1890 333 425 - note this is for PAYE people only.

Got through to a very helpful person.
I explained my situation that I have money on deposit outside of Ireland - but within the EU and wanted to know to go about paying the DIRT owed to the Revenue.

Quite simply she said that all I needed to do was to write a letter to your local revenue office - give your details, give all the financial information as required and include a DIRT cert from the bank (if possible).
If the bank does not exempt you from DIRT - then make a note of this and you will be refunded if necessary.
The Revenue may respond to your letter requesting you to fill in form but the initial step would be this letter.
She did make mention of earning interest over a certain amount - somewhere between 2000 and 3000 euros. In this case you may have to complete a different form. However as it was unlikely that I would get this much interest - this didn't concern me and I didn't pursue further questioning on this.
In terms of when to make a return - generally the year you receive the interest - is the year you make the return. Of course if you get your interest on the 31.12.20XX - then it would be into the next year. The deadline of 31st October does not apply here.
I must stress that from my understanding this only applies to PAYE worker earning interest below a level as mentioned.

Of course all of this contradicts what has been said in this thread and many others. To me I am surprised at the ease of this process. So I would be interested in what other folk think of this. Has anyone done it in this fashion before?

Is this true? Has anyone done it? I also have one foreign account earning well less than €2000 and I’m trying to complete the Form 12. Firstly, there is no option for foreign deposit interest on the Form 12 (there’s one on Form 11 but where do you enter it on Form 12?).

Also it seems like a total waste of time (for myself and Revenue) completing all of the rest of the form and all of my other Irish accounts where DIRT has already been deducted automatically. I may have a couple of old accounts that I can’t remember earning negligible interest somewhere, will I be penalised for not including them? I lost my post office book years ago, there was probably a tenner in there, I’ve opened accounts with nearly every credit institution in the state at some point. Is there an easier way to see your total amount of DIRT paid? Revenue must have this information already surely?
 

Jiblet-run

Registered User
Messages
61
I sent a letter as described around 10 days ago to the Revenue. Haven't heard anything yet from the Revenue. Might give them a call tomorrow.

My advice would be to ring them on the number below and see what they say. Hopefully they will agree with my post.

I might point it really depends on who you speak to in the Revenue on this matter. The first person (who gave me the information below) was very helpful and said filling the forms were not necessary.
However I rang around 2 weeks ago (just before sending the letter) and got a guy who was completely clueless on the matter.
But in the end when I explained the situation for the 3rd time - he just agreed with me and said send in the letter.
Perhaps as it was approaching 4pm - he wanted to get out of the office.
 
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