Taxation of coupon interest

B

BigM

Registered User
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Hello all
I'm thinking of investing in a bond issue and am wondering how the annual Coupon interest will be taxed?
Do the Issuer (in Ireland) withhold any portion or do they just pay the full amount and I have to declare my Sch D Case III and pay tax on it at the marginal rate?
Thanks
BigM
 
BigM said:
Hello all
I'm thinking of investing in a bond issue and am wondering how the annual Coupon interest will be taxed?
Do the Issuer (in Ireland) withhold any portion or do they just pay the full amount and I have to declare my Sch D Case III and pay tax on it at the marginal rate?
Thanks
BigM
Click to expand...

The coupon interest will be taxed, as you mentioned, as case III at your marginal rate. The issuer will be obliged to withhold standard rate income tax at 20% for which a credit will be available to recover the WHT. You will need to declare income as it accrues to you on a normal form 11 and make a annual tax return

You may also have a PRSI liability of 3% if the income exceeds €3,174. Basically, when that threshold is reached and your a PAYE contributor under class A, you become a self employed cont under class S.

Here is an extract from tax summary clarifing same:

"There is no liability to PRSI where reckonable income is below €3,174".

Good luck
 
That's very interesting bazer. Does the same rule apply to interest from deposit accounts? If an employee earns more than €3174 in interest from savings, is PRSI due on it?
 
MugsGame said:
That's very interesting bazer. Does the same rule apply to interest from deposit accounts? If an employee earns more than €3174 in interest from savings, is PRSI due on it?
Click to expand...

Yes, the employee will become an self employed contributor in repsect of his non employee income when it exceeds €3,174 in tax year (it use to be £2,500)
 
bazermc said:
The coupon interest will be taxed, as you mentioned, as case III at your marginal rate. The issuer will be obliged to withhold standard rate income tax at 20% for which a credit will be available to recover the WHT. You will need to declare income as it accrues to you on a normal form 11 and make a annual tax return

You may also have a PRSI liability of 3% if the income exceeds €3,174. Basically, when that threshold is reached and your a PAYE contributor under class A, you become a self employed cont under class S.

Here is an extract from tax summary clarifing same:

"There is no liability to PRSI where reckonable income is below €3,174".

Good luck
Click to expand...
That's interesting - the coupon should be around 30% (on circa 100k) which means I'll have to pay 42% + 3%. Seems like a huge tax take - I thought we were supposed to be a low-tax economy:)!!
 
BigM said:
That's interesting - the coupon should be around 30% (on circa 100k) which means I'll have to pay 42% + 3%. Seems like a huge tax take - I thought we were supposed to be a low-tax economy:)!!
Click to expand...


I am afraid we are a low tax econony but only for corporates who only pay 12.5% if trading or 25% if passive hence the recent ECJ decision in the Cadburys case against the English Revenue authorities [broken link removed] but remember income tax is still high
 
That must have been a relief to an awful lot of companies!
Although the UK could always go down the US route and offer lower taxes on repatriated monies to get some of their cash back.

Thanks for the tax info chaps.
 
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