Deposit Income Retention Tax

A

alaskaonline

Registered User
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Hi,
I came across this by coincidence and was wondering if anyone here can clarify this tax to me? I just read up on it on the revenue site and also checked AAM for info but got even more confused.

I have a saving account with the CU. The money on it are bibs and bobs from my salary for the past three years whenever I had something left at the end of the month. The Revenue site states the following:

Deposit Interest Retention Tax Deposit interest retention tax (D.I.R.T.), at the rate of 25% (from the 8th April 2009) is deducted at source by deposit takers (e.g. banks, building societies, Credit Unions, Post Office Savings Bank, etc.) from interest paid or credited on deposits of Irish residents
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A) I am confused about the word "deposit" :eek:
B) Does the quote mean, that any interests the CU applies to my savings is taxed at source straight away i.e. by the CU? As stated above, I am very confused with all the online info and I am waiting for an email from the CU to confirm. When I opened the saving account, the CU never mentioned to me that tax has to be paid for the interest paid to me each year - so I am even more confused. Does the Deposit Income Retention Tax only apply to Life Assurance accounts, Developers with large deposits or something?

Any info and clarifications are very much appreciated. I am a bit panicky at the moment because I just heard of this tax now :(
 
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Unlike the main stream banks the CU do not automatically deduct DIRT from interest. However you may elect to have them deduct DIRT.

If you do not get them to deduct DIRT then you are liable to tax on the interest/divident at your mariginal rate 20% or 41%. However if you do get them to deduct DIRT then the DIRT deducted satisfies your tax liability regardless of your marginal rate. In other words for a higher rate taxpayer it pays to have the CU deduct DIRT. For a standard rate taxpayer DIRT or not, the same liability will be due. For a non-taxpayer it is best not to have the CU deduct DIRT.

The DIRT is only on the interest/dividend earned not on the original deposits.
 
deposit = savings regardless of where the money came from and what it's used for - is that correct?

where is the incentive to save if the 20€ interest i get every year is being taxed? and what does the revenue mean with

Deposit Interest Retention Tax Deposit interest retention tax (D.I.R.T.), at the rate of 25% (from the 8th April 2009) is deducted at source by deposit takers (e.g. banks, building societies, Credit Unions, Post Office Savings Bank, etc.) from interest paid or credited on deposits of Irish residents
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?

they clearly state the CU in there. sorry for all the questions, just want to make sure i understand it all correctly :(
 
DIRT is simple. If you open a bank/credit union account, be it a current account, saving account or any other kind of account, 25% of any interest you recceive will be taken by the Govt. Source of funds is irrelevant.

You may be entitled to get an exemption from DIRT, eg many pensioners are DIRT exempt
 
25% of any interest you recceive will be taken by the Govt. Source of funds is irrelevant.
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Mpsox - what do you mean by that? the government takes it off before it shows on my statement? or the CU takes it off before it shows on the statement?

And if its a "no" to both of the scenarios - what does the Revenue then mean with
is deducted at source by deposit takers (e.g. banks, building societies, Credit Unions, Post Office Savings Bank, etc.)
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?
How comes CU never mentioned this when I opened the account in the 1st place? Just by chance I came across this subject and I am worried now cause I haven't filled out any Revenue forms for it to date...
 
The CU takes the DIRT and pays it over to Revenue.

The figure on your CU statement is the figure net-of-DIRT - ie. it is 75% of what the actual interest is.

You have already paid the tax on the interest - you shouldn't have to pay any more PAYE on the interest although some PRSI may have to be paid.
 
The interest that you earn on your savings is income and therefore it is taxable. Rather than everyone in the country having to file returns to report this income, in most cases the financial institution will operate DIRT and pay this over to the Revenue Commissioners on behalf of their customers. As previosuly explained, this settles the income tax liability on this income in full. If you are a PAYE tax payer there is no need to report this income on a tax return unless it exceeds €3,174. If you are a self assessed tax payer then you should have been reporting the interest income on a tax return all along (as PRSI/levies may apply).
 
thank you all for your responses and information on this matter.
to clarify I am a PAYE tax payer by the way and the interest paid to me is about 20€ each year. thanks again.
 
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