Foreign P60

[user name]

Trying to enter Swiss P60 details foreign on Ros. If I go into foreign income, then foreign employments and enter pay and tax i end up with a big enough tax bill am i missing something else.

 

[bazermc]

Is Ros giving you a credit for the Swiss tax paid, at the end of the computation

 

[user name]

When it shows up on Form 11 it is not showing the full amount for Income or the full amount for tax paid. I think i might have it in the wrong section.

 

[Gervan]

In Double Taxation Treaty calculations, the income and tax get restated to show the tax as at Irish tax rates.

 

[user name]

48500 gross and 13500 tax paid showing up as 40700 and 5600 tax paid leaving a tax bill here of over 3500 to be paid, seems high.

 

[Gervan]

I wonder if you're being charged USC by the ROS calculation, when you shouldn't be. Can you work out whether USC is being charged on your Swiss earnings?

 

[mandelbrot]

I wonder if you're being charged USC by the ROS calculation, when you shouldn't be. Can you work out whether USC is being charged on your Swiss earnings?

Why shouldn't USC be charged on the Swiss employment income - if it's case III income isn't it liable to the charge?

 

[Gervan]

I thought the double taxation treaty would apply, and USC being an income tax would not apply to the Swiss employment income. I'd better check this up.

 

[mandelbrot]

The wording of the relevant Article in the Swiss DTT is:
"Subject to the provisions of the law of Ireland regarding the allowance as a credit against Irish tax of tax payable in a territory outside Ireland (which shall not affect the general principle hereof):
Swiss tax payable under the laws of Switzerland and in accordance with this Convention, whether directly or by deduction, on profits, income or chargeable gains from sources within Switzerland (excluding in the case of a dividend tax payable in respect of the profits out of which the dividend is paid) shall be allowed as a credit against any Irish tax computed by reference to the same profits, income or chargeable gains by reference to which the Swiss tax is computed..."

The Case III income is correctly chargeable for USC since it is part of Total Income. There is no provision to confer a credit against USC for the foreign tax paid, and if you think about it, would you take the credit against income tax first, and then against USC, or vice versa, or would the credit be available against both, in the absence of a provision to state otherwise... I'd suspect the Revenue interpretation of the DTT would be that USC is by definition not income tax, nor would it fall within the definition (per Article 2 of the DTT) of "identical or substantially similar taxes which are subsequently imposed in addition to, or in place of, the existing taxes".

Schedule 24 to TCA 97 states "the Irish taxes means income tax, income levy, universal social charge and corporation tax". It then goes on to say that "Subject to this Schedule, where under the arrangements credit is to be allowed against any of the Irish taxes chargeable in respect of any income, the amount of the Irish taxes so chargeable shall be reduced by the amount of the credit.... Nothing in this paragraph shall authorise the allowance of credit against any Irish tax against which credit is not allowable under the arrangements."

It's an issue I've been looking at recently for an Irish resident relative who is being subjected to the 10% rate of USC on foreign employment income (when he's already paying Income tax at a very high rate in the foreign country), so I'll revert back, probably in a couple of months after some correspondence with Revenue, with something a bit more concrete. Wouldn't be holding out too much hope though, short of someone going to ECJ...

 

[Joe_90]

Hi guys couple of things come to mind. If they are resident in Ireland and chance trans border relief is available.

Also found this in the USC FAQ point 1.21 USC & DTA
http://www.revenue.ie/en/tax/usc/universal-social-charge-faqs.pdf

Not my area but it may be that ROS is not computing the DTA Relief properly!

 

[smeharg]

It's not as straightforward as calculating the Irish tax then taking off the foreign tax paid.

1. Calculate the Irish tax based on gross foreign income to ascertain the effective Irish tax rate.
2. In this case the effective Irish rate (14%) is lower than the effective Swiss rate (29%) so the net income received (ie 48,500 less 13,500 = 35,000) is grossed up at the effective Irish rate to arrive at the amount subject to Irish tax, ie 40,700.
3. Calculate Irish tax on 40,700
4. Give credit for unrelieved foreign tax of 40,700 @ 14% = 5,700.

I think you only see steps 3 & 4 in ROS.

 

[mandelbrot]

It's not as straightforward as calculating the Irish tax then taking off the foreign tax paid.

1. Calculate the Irish tax based on gross foreign income to ascertain the effective Irish tax rate.
2. In this case the effective Irish rate (14%) is lower than the effective Swiss rate (29%) so the net income received (ie 48,500 less 13,500 = 35,000) is grossed up at the effective Irish rate to arrive at the amount subject to Irish tax, ie 40,700.
3. Calculate Irish tax on 40,700
4. Give credit for unrelieved foreign tax of 40,700 @ 14% = 5,700.

I think you only see steps 3 & 4 in ROS.

But shouldn't the Irish effective rate calculation include the USC... or shouldn't the same operation be performed for USC as for income tax...

 

[smeharg]

But shouldn't the Irish effective rate calculation include the USC... or shouldn't the same operation be performed for USC as for income tax...

I think so. But we don't know whether it has or not as OP hasn't given enough info to determine how the Irish effective rate or the final liability were calculated.

 

[Joe_90]

Don't think ROS gives any relief for USC, 14% would seem very low if it did on gross of €48,500.

 

[smeharg]

Don't think ROS gives any relief for USC, 14% would seem very low if it did on gross of €48,500.

You're right. I just ran a few test figures and the Irish effective rate calculared by ROS ignores USC.

 

[mandelbrot]

You're right. I just ran a few test figures and the Irish effective rate calculared by ROS ignores USC.

I think you'd actually need a separate effective rate for USC...

 

[smeharg]

I think you'd actually need a separate effective rate for USC...

Why? You just need one effective rate that includes income tax and USC.

 

[WizardDr]

@smeharg jasus no - if you did that our shaggin 'marginal' rate would be in the high forties of fifties - and put a big hole in the sociliasts 'tax the rich' campaign. Whatever Joan Burton stands for, she wont agree to that as the game would be up.

 

[mandelbrot]

@smeharg jasus no - if you did that our shaggin 'marginal' rate would be in the high forties of fifties - and put a big hole in the sociliasts 'tax the rich' campaign. Whatever Joan Burton stands for, she wont agree to that as the game would be up.

We're talking about the "Irish Effective Rate" used in calculating a credit for Double Tax Relief, you seem to be throwing your tuppence in about something completely unrelated!

 

[smeharg]

@smeharg jasus no - if you did that our shaggin 'marginal' rate would be in the high forties of fifties - and put a big hole in the sociliasts 'tax the rich' campaign. Whatever Joan Burton stands for, she wont agree to that as the game would be up.

I think you're confusing "marginal" with "effective". It's hardly a secret that the marginal rate of tax is 52% (55% for self-employed).

As mandelbrot pointed out you need to read the rest of the thread. An individual's effective tax rate (total tax liability over total income) is used to calculate the amount of foreign income chargeable to Irish tax and the credit for foreign tax paid. It would appear that this effective rate should include USC, however ROS is excluding it from the calculation.