Tax on Interactive Brokers uninvested cash interest

Interactive Brokers (IBKR) pays interest on uninvested cash in your brokerage account. Since the account is with their Irish subsidiary, they deduct 20% Irish Withholding Tax from the interest payment at source. They provide this FAQ about the withholding tax, in which they say that it is withheld due to "section 246 of the Irish Taxes Consolidation Act 1997". I would like to be sure that I report this interest income correctly.

My current guess is that the interest, before the 20% withholding tax, should be reported in Panel G "Irish Other Income" on line 408 "Gross amount of Other Income received where Irish Standard Rate Tax was deducted at source". I imagine that the interest income will then be taxed at my marginal income tax rate (rather than at the DIRT rate), and that I will receive a credit for the 20% tax already withheld.

Does this sound correct? It feels concerning that this would cause it to be taxed differently from normal deposit interest, even though that is effectively what it is. Perhaps the difference is that IBKR is not a bank (highlighted by the fact that the bank deposit guarantee scheme does not apply, only the Irish investor compensation scheme).

I would agree with your understanding.

From other sources I've read there seems to be disagreement whether it's DIRT or Income Tax, but imo evidence is pointing to Income Tax treatment.

It’s income tax……IBKR is not a bank……to the extent that they deposit your funds at an IBKR partner bank and receive interest payments and then pass some of this on to you as payment……they are in effect paying you a ‘rental fee’ for your money.

Does the same apply with Trade Republic? They issued me with a CITI IBAN, which I use to transfer money in. Does that mean that the 2% I get for cash in the account is "interest" and subject to DIRT, or "income" and subject to income tax?
FWIW, there's no withholding tax with Trade Republic.

Hello, strangely even though I'm tax resident in Ireland I was set up with an Interactive Brokers Hungary account. When it comes to the tax treatment of interest earned on cash balances they have said that the assets are held outside of Hungary and non Hungarian customers are not subject to local taxes or withholding tax.

Does the Irish tax treatment of the interest earned come down to whether IB Hungary is determined to be a bank? I would note that the assets of retail investors in IB Hungary are covered by the Hungarian Investor Protection Fund up to €100k but it isn't a bank.

It obviously seems penal to treat all interest earned under Irish income tax.

If you are tax resident in Ireland, you are assessed for income tax on your worldwide income including DIRT tax on all interest earned

Thanks for your reply. So the interest earned is treated as income and is subject to my marginal rate of income tax (I'm a PAYE worker) and it's also subject to DIRT tax?

Lightbulb said:

Thanks for your reply. So the interest earned is treated as income and is subject to my marginal rate of income tax (I'm a PAYE worker) and it's also subject to DIRT tax?

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Deposit interest is definitely not doubly taxed via DIRT and income tax! Deposit interest is normally subject to DIRT at 33%. It may be that if you earn significant deposit interest in a year (~ €5k+?) it may be assessable instead for income tax (and maybe for PRSI/USC too?)?

Thanks again, no it would be definitely under €5k, prob about €2k-3k in a year. DIRT would be preferable to my marginal rate of income tax do I'll maybe check with Revenue how that is declared. Bit of a pain but still better than Irish Bank saving rates.

Lightbulb said:

Thanks again, no it would be definitely under €5k, prob about €2k-3k in a year. DIRT would be preferable to my marginal rate of income tax do I'll maybe check with Revenue how that is declared. Bit of a pain but still better than Irish Bank saving rates.

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You declare deposit interest via your tax return. myAccount "form 12" return for most PAYE individuals, ROS "form 11" return for self-assessed individuals.

Thanks all for the guidance, much appreciated

Re: DIRT vs income tax on IBKR cash interest. For 2023 they sent me a form R185 Certificate of Income Tax Deducted which showed that they deducted income tax at the standard rate on my cash interest payment.

If it is treated as an income can it be offset vs expenses(losses) if you are a sole trader and mainly engaged in trading stocks/derivatives? Ie trading is your main preoccupation.

Sorry to resurrect an old thread, but can't find anywhere where this has been definitively answered (I've searched over and over, but would appreciate a link if I've missed it).

Given that IBKR seem to treat interest on cash balances as something they need to deduct Income tax / WHT from, does this in itself mean I need to treat the interest i earn at IBKR as income on my tax return, or do I report it as DIRT (and reduce the amount by the 20% they deducted)?

It'll be over 5k this year, so a substantial difference if I've to treat it as income! thank for any advice.