Can anyone here confirm for certain that Irish tax residents are not subject to Irish income tax on American Roth IRA distributions? It’s not easy to find dispositive information online.
Roth IRAs are not explicitly mentioned in the Double Taxation Treaty between Ireland and the USA, presumably because it was signed into law in July of 1997 and Roth IRAs were only established in August of 1997. (Similar, but more recent, double tax treaties, such as that between the UK and the USA, do mention Roth IRAs.)
According to Revenue’s website, “Foreign occupational and social security pensions that would not be taxable if the recipient lived in the country that granted the pension” are exempt from tax:
https://www.revenue.ie/en/jobs-and-pensions/pension/private/exempt-pensions.aspx
And Revenue’s Tax and Duty Manual supplies this additional detail:
https://www.revenue.ie/en/tax-profe...ains-tax-corporation-tax/part-07/07-01-09.pdf
Roth IRAs are not taxable in the US, since they are funded with post-tax earned income, and the U.S. (unlike, say, some countries in the Middle East that do not levy income tax on individual salaries) has an income tax system that is similar to Ireland’s, so it would seem that they should fall under the exemption. But there could conceivably be some question whether they count as occupational pensions, because although only a person with taxable income from (self-)employment can contribute to a Roth IRA, unlike Roth 401(k)s—which must be set up by employers—Roth IRAs can be set up independently by employees (akin to the way PRSAs can in Ireland).
I submitted the following query to Revenue…
…and received this one-line response: “Based on the information outlined by you the U.S. Roth IRAs fall under the exemption.” I wouldn’t want to make a potentially expensive and irreversible tax-planning decision on the basis of that response alone though, especially given the weasel words “based on the information outlined by you.”
In an article, “The Taxation of Foreign Pensions in Ireland,” published on LIA’s website, Lisa Cantillon corroborates Revenue’s response, writing that, "In practice, [the section 200 TCA 1997] exemption has been seen to operate in Ireland on pension payments from Australia, Switzerland and US Roth IRAs, where payments have been received by Irish residents”:
https://www.lia.ie/resources/news/the-taxation-of-foreign-pensions-in-ireland
Can anyone cite a specific precedent in which Section 200 of the Taxes Consolidation Act (TCA) 1997 has been successfully used to claim an income tax exemption for Roth IRA distributions?
Roth IRAs are not explicitly mentioned in the Double Taxation Treaty between Ireland and the USA, presumably because it was signed into law in July of 1997 and Roth IRAs were only established in August of 1997. (Similar, but more recent, double tax treaties, such as that between the UK and the USA, do mention Roth IRAs.)
According to Revenue’s website, “Foreign occupational and social security pensions that would not be taxable if the recipient lived in the country that granted the pension” are exempt from tax:
https://www.revenue.ie/en/jobs-and-pensions/pension/private/exempt-pensions.aspx
And Revenue’s Tax and Duty Manual supplies this additional detail:
Section 200 of the Taxes Consolidation Act (TCA) 1997 provides for a tax exemption for certain foreign occupational and social security pensions. Where these pensions are disregarded for income tax purposes in the hands of a resident of the country of source, they are also disregarded for income tax purposes in this State, provided the country of source has a similar income tax system to Ireland.
https://www.revenue.ie/en/tax-profe...ains-tax-corporation-tax/part-07/07-01-09.pdf
Roth IRAs are not taxable in the US, since they are funded with post-tax earned income, and the U.S. (unlike, say, some countries in the Middle East that do not levy income tax on individual salaries) has an income tax system that is similar to Ireland’s, so it would seem that they should fall under the exemption. But there could conceivably be some question whether they count as occupational pensions, because although only a person with taxable income from (self-)employment can contribute to a Roth IRA, unlike Roth 401(k)s—which must be set up by employers—Roth IRAs can be set up independently by employees (akin to the way PRSAs can in Ireland).
I submitted the following query to Revenue…
According to the Tax and Duty Manual Part 07-01-09, "Section 200 of the Taxes Consolidation Act (TCA) 1997 provides for a tax exemption for certain foreign occupational and social security pensions." The manual states: "Where these pensions are disregarded for income tax purposes in the hands of a resident of the country of source, they are also disregarded for income tax purposes in this State, provided the country of source has a similar income tax system to Ireland." Could you please inform me as to whether U.S. Roth IRAs (individual retirement arrangements)—which are funded with post-tax earned income during employment, and the distributions from which are thus not subject to income tax in the U.S., since the money contributed has been taxed already—fall under this exemption?
…and received this one-line response: “Based on the information outlined by you the U.S. Roth IRAs fall under the exemption.” I wouldn’t want to make a potentially expensive and irreversible tax-planning decision on the basis of that response alone though, especially given the weasel words “based on the information outlined by you.”
In an article, “The Taxation of Foreign Pensions in Ireland,” published on LIA’s website, Lisa Cantillon corroborates Revenue’s response, writing that, "In practice, [the section 200 TCA 1997] exemption has been seen to operate in Ireland on pension payments from Australia, Switzerland and US Roth IRAs, where payments have been received by Irish residents”:
https://www.lia.ie/resources/news/the-taxation-of-foreign-pensions-in-ireland
Can anyone cite a specific precedent in which Section 200 of the Taxes Consolidation Act (TCA) 1997 has been successfully used to claim an income tax exemption for Roth IRA distributions?