# Brendan Burgess explains: The taxation of Credit Union dividends



## Brendan Burgess (6 Dec 2010)

There are three  types of share account and one type of deposit account



Regular Share Accounts| No Dirt deducted | taxable at your top rate

Special Share Accounts|Dirt deducted| No further tax liability 

Special Term Share Account|Dirt deducted|no further tax liability;min term 3 years


Deposit Accounts|Dirt deducted| no further tax liabilityIf you are paying tax at the top rate i.e. 41%, then you should opt for the Special Share Account as DIRT is only 25%

If you are not paying any tax or if you are paying tax at the lower rate, then you should opt for the Regular Share Account

  Not all Credit Unions offer every type of account. 
 Some CU’s require you to have a Regular Share Account before you can avail of either of the other Special accounts.

What are  "Special Term Share Accounts" ?
These are offered by only a few Credit Unions. You must leave your money on deposit for at least three years. In my  opinion, this is not a good idea in the current environment where it is  important to have instant access to your money.:


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## Brendan Burgess (6 Dec 2010)

*Draft - The taxation of Credit Union dividends*

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## Brendan Burgess (6 Dec 2010)

*Draft - The taxation of Credit Union dividends*

[SIZE=+0]If you receive dividends on a *Regular Share Account*, no DIRT has been deducted, so *you must do a tax return*.
*

 *[/SIZE][FONT=&quot]Income Tax,  Income Levy, PRSI and Health Levy are payable on Regular Share Account Dividend.[/FONT] 
 		  		  		 		  		  		  		  		 			 			 				 [SIZE=+0] [/SIZE]


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## Brendan Burgess (6 Dec 2010)

[SIZE=+0]*Special Share Accounts, Special Term Share Accounts and Deposit Accounts from which DIRT has been deducted

In theory, you should do a tax return and declare this income. In practice, if you are a PAYE employee, the Revenue does not expect you do a tax return just to pay the additional PRSI and Levies due. If you are doing a tax return for some other purpose, then you must include your Credit Union income. 
**
The whole area of prsi and levies is very complicated and it's very difficult to get clear guidance.  * *
Income Levy*
The income levy does not apply to interest which is subject to DIRT 


*PRSI - the situation is unclear*
An employee who has no trading or professional income is not liable to   pay PRSI on deposit interest received. However, a proprietary director   would be liable to pay PRSI on any deposit interest received.

*Health Levy*
Deposit interest is *not* exempted from the Health Levy. 

*Alternative view: Some believe that *[/SIZE]ALL CU Dividend and Deposit Interest would be subject to Class S PRSI - which means that PRSI is payable, but not Health Levy.[SIZE=+0]
*
Source: Key post by patrickjd*[/SIZE]


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## Brendan Burgess (6 Dec 2010)

*Reporting of dividend payments by Credit Unions

*Your Credit Union must make a return to the Revenue of all dividends paid in excess of €635.  So if your Credit Union is paying a dividend of 1%, you will need €63,500 in the share account to receive this level of dividend.

It does not matter if they don't report your dividends - you are still liable to pay tax on them. 


*Reporting of New Accounts* 
 The Credit Union must report initial payments of  dividend and deposit interest to new account holders, irrespective of  the size of payment.


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## Brendan Burgess (7 Dec 2010)

Many thanks to Crugers for his corrections to the original post.

Brendan


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