DIRT or Income Tax??

This may have been answered here before but I can't find the info I was looking for.

Basically my wife and I are thinking of moving a big chunk of our savings abroad, just to current/regular savings accounts for the time being. We already have accounts opened in Spain and Italy (we are not "Irish nationals").

Would we be paying DIRT or income tax on the interests?

If income tax, how would it work as we are jointly assesed? One of us is taxed at the lower rate, the other at the higher. If we put these savings one chunk in one country under one name, the other chunk in the other country under the other's name, would we pay income tax at the higher rate?

Also could we ask to be taxed in these two countries or would it have to happen in Ireland? I ask because e.g. DIRT is lower in Spain.

Look here and you'll find the answer:
http://www.revenue.ie/en/tax/it/foreign-income-assets.html

I'm still so grateful to McGrath and rayn for this link!

Grazie Padrino!

Foreign deposit interest taxed as dirt or income tax

Based on that revenue document, it seems to be saying that tax payable on foreign deposit interest is liable to income tax rather than DIRT. The distinction is important as DIRT is non refundable unless over 65 yrs/permanent disability, but tax credits & other allowances can be used to reduce any income tax due.
Can anybody confirm my reading of this is correct?

quovadis99 said:

Based on that revenue document, it seems to be saying that tax payable on foreign deposit interest is liable to income tax rather than DIRT.

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It's slightly complicated.

EU deposit interest is taxed at DIRT rates if you have enough other income to cover the creation of a DIRT tax credit, otherwise you pay tax at income tax rates.

Hence, for most people DIRT rates apply. For a small number of people, who have little or no other income sources, income tax rates apply.

Make sense?

It does!!! On a small account I had in Australia I paid tax on interest as income tax but on german interests I've submitted income tax return form asking to pay DIRT... If I get disagreement on my request I'll let you know. Thank you!

Godfather said:

It does!!! On a small account I had in Australia I paid tax on interest as income tax but on german interests I've submitted income tax return form asking to pay DIRT... If I get disagreement on my request I'll let you know. Thank you!

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I was talking about the difference between deposit interest been taxed at income tax rates versus deposit interest tax rates.

With regard to your point ... you may not be liable to pay income tax on the Australian bank account for much longer.

[broken link removed]

DIRT and Deposit Interest

As announced in the Budget, the rate of DIRT has been increased by 3% with effect from 1 January 2012.

Separately, the bill introduced provisions which tax deposit interest earned from financial institutions in other EU countries at 30% if the income is returned on time as part of the annual return process, and at 41% if it is not returned on time. This provision takes effect for interest received on or after 8 February 2012.

For deposit interest earned from financial institutions in non-EU countries, such interest will now be taxed at 30% where the recipient is a standard rate taxpayer and makes a timely tax return of the income, and at a rate of 41% if a timely return is not made. Higher-rate taxpayers will continue to be taxed at 41% on such income, regardless of whether a timely tax return has been made or not. This provision takes effect for interest received on or after 8 February 2012.

Finally, a number of technical amendments have been made to the reporting requirements applying to credit unions in respect of DIRT, and in relation to the exemption that applies for deposits made on behalf of a PRSA.

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Obviously, the finance act has not passed the above into law yet.

Thank you for the update CiaranT!

CiaranT said:

It's slightly complicated.

EU deposit interest is taxed at DIRT rates if you have enough other income to cover the creation of a DIRT tax credit, otherwise you pay tax at income tax rates.

Hence, for most people DIRT rates apply. For a small number of people, who have little or no other income sources, income tax rates apply.

Make sense?

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Sorry for resurrecting an old thread, but I am interested in the above statement. Does it apply only to foreign deposits or to domestic ones too. Basically, if you have no income other than deposit interest, and are neither in employment nor registered as unemployed:

1) Are you liable for DIRT in the same way as everyone else or are you liable for income tax instead of, or in addition to, DIRT?

2) Are you liable for PRSI on deposit interest like a self-employed person, or not liable, like a PAYE worker? (I realise this ends up being the same from 2014 onward, due to 2013 budget announcements)

3) If you are liable for PRSI (and in any event, in 2014), what class of PRSI contributor are you? Does this PRSI count toward any benefits such as State Contributory Pension, or would you have to pay additional voluntary contributions in addition to the PRSI liability on deposit interest.

I've searched high and low on the revenue.ie site for the answer to 1). Even though I've found the details of how the calculation is done -- it seems the standard rate cutoff is extended by the amount of interest earned, and then 20% of it as added as a credit, negating the tax liability -- it's not clear what happens when you don't have a tax liability to use up that credit. Surely you couldn't end up paying both DIRT and income tax? If you only pay income tax, then up to the standard rate cutoff income tax is now actually cheaper than DIRT ... so do you get a refund? All very confusing!