Pension contribution using foreign income

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bricktruck

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I have worked as an employee for most of 2018 in the US, and have earned a good sum of money while there.

I have now returned home, but I never broke my tax residency. In other words, I am tax resident in Ireland in 2018. Therefore, I have a pretty hefty Irish tax bill on all worldwide income.

Since returning home, I have been working as a sole trader (contractor). I have set up a PRSA, and will be making a contribution equal to 15% (this is the contribution limit for under 30’s) of my earnings from my sole trader business. This should be completely tax free.

However, I am wondering if I can also contribute 15% of my foreign income to the PRSA and claim tax relief on it?

I understand rental income doesn’t count for tax relief, but am struggling to find any information on foreign employment income.

It may be worth noting that I have not been contributing to a pension in the US.

Thanks.
 
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Yes, I will be paying Irish Income Tax on all of my US income when I submit my Form 11 next year. However, my total tax bill will be discounted by the amount of US tax I’ve already paid.

For example, let’s say my Irish tax bill is €20k, but I’ve already paid €15k US tax. I will only have to pay €5k Irish tax.
 
I don't see a problem here provided it is classified as a foreign trade or foreign salary. As you mention rental income doesn't qualify for PRSA deductions so provided it isn't that, or other investment income, you should be okay. I'd suggest download the ROS offline shell and enter your foreign income different ways to see it you are allowed the PRSA deduction.

Just a not of caution - are you 100% sure that you don't have a U.S. tax liability on any of the income? If this is U.S. taxable income you are probably looking to the tax treaty to obtain a tax deduction for it and then good luck ...
 
Thanks for the response!

I downloaded the tool (didn’t even know it existed, so thanks for that), and played around with it.

There’s a “Calculation of Maximum Pension Relief Available” page, that I played around with. If I add my foreign trade income under “Other Income”, it does include it in my pension contribution allowance, which is great!

So I have had US taxes withheld from my US income already. In other words, I have already paid the US tax. You are correct in that I am looking at the tax treaty to get the Irish tax deduction on it. Have I overlooked something here?

Thanks again.
 
If you are tax resident in Ireland for 2018 (based on 183 days residence or 280 over 2017 and 2018) then you will pay tax in Ireland on your gross earnings and get a credit for the tax paid in the U.S.

You will probably need to file some form of tax return in the U.S. to get an official tax calculation of your tax liability on your U.S. income. Tax withheld does not equal your tax liability, even though it may be the same. You will only get credit for your final U.S. tax liability in Ireland and any tax refund due from the U.S, if applicable, is not available for credit. The way this is typically demonstrated is having a copy of an official tax assessment from the U.S.

The Revenue may ask for proof of your U.S. tax liability particularity if the figures are significant or your pension contribution generates a refund.
 
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