Interest only income and DIRT

[zepplin]

If income made from monies on deposit is the only income an individual has, and this income is less than the applicable tax credits, can a refund be claimed of the DIRT deducted or is DIRT never refundable?

individual is under 65

Assume that the individual's only tax credit is the personal Tax credit of €1830.

Assume a ficticious amount of gross interest earned of €1000

 

[Heraldo]

No - individuals under age 65 will not get a refund of DIRT unless an incapaciated person.

 

[Gervan]

or married to someone who is incapacitated or over 65, and the joint income is under the exemption limit

 

[zepplin]

There would seem to be a contradiction.

If the only income is the interest and it is less than the applicable tax credit, why should the individual not obtain a refund?

Does DIRT have a 'special non-refundable status' and if so does anyone know where this is stated? For example, is there an applicable statutory Instrument or revenue rule/directive etc?

 

[mathepac]

See "Exemptions and refunds of DIRT" here - http://www.citizensinformation.ie/c...nd-investments/deposit-interest-retention-tax

I believe this is definitive, unless someone has more up-to-date information.

 

[Graham_07]

The relevant details are here and in S. 267 of the T.C.A. 1997

 

[zepplin]

Only in Ireland can you have no tax liability and yet pay tax!

When the 'Abgeltungssteuer', which operates in a similar fashion to DIRT, was introduced in Germany in 2009, it was made clear that anyone havng a tax liability less than the rate of the Abgeltungssteuer (25%), will receive the tax back even if the income on which the tax was paid came exclusively from deposit interest.

What is the point of having a tax credit if a tax cannot be offset against it?

Does anyone know why DIRT enjoys this non-refundable status?

 

[WaterSprite]

If you had a capital gain, you would not be able to offset this against an income tax credit, nor would you be able to for CAT or VAT (or offset a capital loss against DIRT etc. etc. etc). The different taxes are generally only off-settable against each other. DIRT is clearly different to income tax and is your only liability for deposits (you don't have to pay 41% on interest if you are in the higher income bracket). So it makes sense to me at any rate.

 

[mathepac]

... Does anyone know why DIRT enjoys this non-refundable status?

Presumably because the legislation was enacted for it to operate as it does. I can't see why we should mimic how a similar tax operates in a different jurisdiction.

 

[zepplin]

If you had a capital gain, you would not be able to offset this against an income tax credit, nor would you be able to for CAT or VAT (or offset a capital loss against DIRT etc. etc. etc). The different taxes are generally only off-settable against each other.

This is exactly the type of explanation required.

However, it seems unfair that DIRT cannot be offset against an income tax credit as contrary to taxes such as CAT, it is more likely that DIRT will affect vulnerable people such as those on low income with little or no tax liability.

Consider someone on unemployment assistance. UA does not have to be entered on a tax return. So there is no tax liability. A person on UA is permitted to have savings up to €20000 without affectig the UA payment. Yet that person must pay DIRT.

Whilst in no way begrudging the over 65s for being able to reclaim DIRT, the matter is further aggravated by allowing this vulnerable section of society to reclaim DIRT but excluding any others.

Which leads me to:

Presumably because the legislation was enacted for it to operate as it does.

Yes, it would seem so. A tax for the masses. Like one of those signs often seen 'No refunds given'.

I can't see why we should mimic how a similar tax operates in a different jurisdiction.

And I cannot see why we should not.

Germany, having a progressive tax system, recognised that similar to here with DIRT, the higher taxpayer would be at an advantage once the Abgeltungssteuer came into effect as it was a flat 25% and not as before up to a rate of 45% depending on earnings.

However, they did not penalise the lower earner or expect him to subsidise the higher earner. 25% is the maximum due - less is possible including a refund if no tax liability occurs. As the masses were affected, interest earned on deposits was counted as income and not a separate capital tax. It would have been political suicide otherwise. But here, no one bats an eyelid.

As an aside, it would do Ireland no harm on many fronts in looking to how our European partners do things. But then again we know it all, don't we? Thats why we are so far ahead here - not.