# Tax on State Savings Products - PRSI Clarified



## Lightning (16 Jun 2014)

In recent months, there has been a lot of questions as to the PRSI implications for the annual payments and bonus payments with State Savings products, especially with regard to the legacy State Savings products. 

The NTMA have clarified the position via the below clear table.


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## The Ghoul (16 Jun 2014)

Good find Ciaran, thanks for posting. That does clarify things. I think it is as we predicted i.e PRSI on the NSB annual payment but not on the bonus.

However I'm still confused as to how this relates to the definition of a chargeable person and the obligation to make a from 11 tax return. Let's say you earn >3174 in interest from State Savings bonds and certs - do you have to file a Form 11 return. If you do, presumably you'd then get charged zero tax and PRSI on your State Savings interest. 

But if in addition to the State Savings interest you also had, say, 1000 euro in interest from a deposit account, would you then have to pay PRSI on the 1000?


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## dub_nerd (16 Jun 2014)

Thanks for posting, Ciaran T. Good to have this finally explicitly cleared up, even though it's as expected.


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## dub_nerd (16 Jun 2014)

The Ghoul said:


> Good find Ciaran, thanks for posting. That does clarify things. I think it is as we predicted i.e PRSI on the NSB annual payment but not on the bonus.
> 
> However I'm still confused as to how this relates to the definition of a chargeable person and the obligation to make a from 11 tax return. Let's say you earn >3174 in interest from State Savings bonds and certs - do you have to file a Form 11 return. If you do, presumably you'd then get charged zero tax and PRSI on your State Savings interest.
> 
> But if in addition to the State Savings interest you also had, say, 1000 euro in interest from a deposit account, would you then have to pay PRSI on the 1000?


 
My understanding -- and what I've been practicing -- is that you do not need to declare the non-taxable part of income from State Savings; no need to make a return on foot of this income, or mention it anywhere even if you _do_ make a return.

Any income liable to DIRT (i.e. in the case of State Savings, the annual interest from previous issues of National Solidarity Bonds -- which presumably doesn't feature in Issue 4 because of this added complexity) is declared on your tax return in the same place as all other "Deposit Interest on which DIRT has been withheld".

If you are a  chargeable person under the definition (i.e. > 3174 unearned income in total from all sources: deposit interest, rental income, etc.), you will be charged PRSI on all such income. If you are not a chargeable person and have only PAYE income in addition to your deposits, you don't have to make any return.


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## The Ghoul (17 Jun 2014)

Thanks for that, dub_nerd. It makes a difference to me as I am below the 3174 euro chargeable person threshold if I only have to count the yearly interest from my NSBs (issues 1-3) and from my PTSB deposit accounts.

One of my 3 year savings bonds has just matured - if I had to include the interest from that and/or my PB wins I'd definitely be above 3174.


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## Pinesky (17 Jun 2014)

Am I correct in saying that if a person has no other income other than deposit income of €3175 , then they would pay DIRT at 41% and the minimum PRSI contribution of €500 , giving an effective tax rate of 56.75%.
Surely this was not intended by the legislators, and is just a lazy and mean spirited interpretation by Revenue.


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## dub_nerd (17 Jun 2014)

Pinesky, the PRSI rate on unearned income is a flat 4%, so on €3175 is €127. It doesn't have any particular PRSI class (as far as I know) and does not entitle the payer to any of the normal PRSI benefits (pension entitlement etc.). So really, it just means the rate of tax on deposits for a chargeable person is 45%.

If you were a single person paying tax on PAYE income, you'd have to be earning a quarter of a million euro before you had an aggregate tax (including USC and PRSI) rate of 45% -- the same rate that you pay on every euro of deposit income if you are chargeable. It's _exactly_ as intended by the legislators, and gives an idea of how much the government wants you to spend your savings.


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## Pinesky (17 Jun 2014)

Dub_Nerd
Thanks for your reply but I was under the assumption that if you only had investment income in excess of €3174 you would be classified as self employed and liable to a minimum PRSI payment of €500.


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## dub_nerd (18 Jun 2014)

Pinesky said:


> Dub_Nerd
> Thanks for your reply but I was under the assumption that if you only had investment income in excess of €3174 you would be classified as self employed and liable to a minimum PRSI payment of €500.


 
Ok, now I'm confused. What you're saying may be borne out by this link. On the other hand, I was in that position last year, and Revenue did not class me as self employed (that's as far as I know -- how would I know if they _did_?). If it's possible, I'd be more than happy to declare myself self-employed: my PRSI liability from deposits is more than €500 anyway, and at the moment as far as I know I get no class S (or any other class) of contributions for the money. Voluntary contributions based on my last year of PAYE employment are way too expensive to consider.


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## Kimmagegirl (18 Jun 2014)

If you have a 3 year product with interest paid on the 3rd year do you declare €x of interest on the 3rd year or do you average out the notional interest over the 3 years?


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## dub_nerd (18 Jun 2014)

Kimmagegirl said:


> If you have a 3 year product with interest paid on the 3rd year do you declare €x of interest on the 3rd year or do you average out the notional interest over the 3 years?


 
You don't declare interest on tax free State Savings products at all. The sole exception is the taxable annual portion of the solidarity bond, highlighted in red in Ciaran T's picture in the first post.


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## R. Moore (18 May 2016)

Hi folks,

Filling out SUSI grant application online for first time, I declared about €8,000 in investment income for last year (2015). Now this ALL came from the maturity of State Savings Bonds, some of which I inherited from my late father. This turned out to be something of a “perfect storm” insofar as there were no bonds maturing in 2014 or none this year. All came together in 2015.

I have received a letter from SUSI looking for

(1) Statements detailing the interest/dividends received from your financial institution or company covering the period 1.1.2015-31.12.2015 and

(2) P21 PAYE Balancing Statement or an acknowledgement from Revenue that you were Self-Assessed for 2015. This document is known as “Revenue’s Indicative calculation on which you based your self assessment”. If the income was earned outside the state, please provide the equivalent documentation”

WRT #1, I can provide copies of the letters you get with maturing state products, no problem there. I am taxed under PAYE (retired, small pension) but WRT #2, do I need to trot into Revenue and become Self-Assessed for the 2015 year only?

Therefore I am wondering if I was correct to actually disclose investment return from State savings products at all? Given that these are supposedly free from Income Tax, UCS, CGT and PRSI. I did it to be honest, to be honest!

Thanks, RM


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## dub_nerd (26 May 2016)

R. Moore, you don't have to declare tax free income from State Savings to Revenue at all, so there is no question of you needing to be self-assessed for 2015. By the same token, you can request a P21 from Revenue ([broken link removed]) but it won't show your undeclared State Savings income since there is simply no need for Revenue accounting of it.

I don't know if/how the income affects your SUSI grant, but you can presumably explain to them that it cannot appear on any Revenue statement. Also, this is probably a silly question, but just checking: is the €8k the full value of your State Savings on maturity, or just the interest portion of it? Obviously the original investment amount does not count as income, any more than money withdrawn from a deposit account would be.


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