Charge to tax

Individuals and non-corporate persons

Income tax is charged on income of individuals, unincorporated bodies (s 1044), trustees (s 1046) and personal representatives (s 799).

Income of partnerships and European Economic Interest Groupings is charged on the individual partners (s 1008) or grouping members (s 1014).

Tax year

Income tax is charged on income arising in a tax year. The tax year coincides with the calendar year, for example, the tax year 2012 runs from 1 January 2012 to 31 December 2012.

Residence

Resident individuals

If you are resident and domiciled in the Republic of Ireland, you are liable to Irish income tax on your total income from all sources, i.e., your worldwide income.

You are regarded as resident in the Republic of Ireland if you spend:

(a) 183 days or more in the Republic of Ireland in a tax year, or

(b) an aggregate of 280 days in the current and preceding tax year.

Presence in the Republic of Ireland of not more than 30 days in a tax year is ignored for the purposes of the two year test (s 819). You are treated as present in the Republic of Ireland for a day if you are present at any time during the day.

Non-domiciled individuals

If you are resident but not domiciled in the Republic of Ireland (for example, a foreign national living in Ireland), you are only taxed on foreign income to the extent that it is remitted to Ireland (s 71). This “remittance basis” also applies in the case of an individual who is resident but not ordinarily resident in the Republic of Ireland. The remittance basis extends to UK source income (since 1 January 2008).

If you are non-Irish domiciled, and employed in the Republic of Ireland (ROI) but paid from abroad by your foreign employer, you can opt to be taxed on the greater of:

(a) the amount you remit into the ROI,

(b) €100,000 plus half of your salary in excess of €100,000.

Non-Irish-resident individuals

If you are non-Irish-resident, you are taxed on your Irish source income, i.e., income arising in the Republic of Ireland. If you are non-Irish-resident but ordinarily resident in the Republic of Ireland, you are liable to Irish tax on foreign investment income in excess of €3,810 in the tax year. You are not liable in respect of income from an employment or trade carried on abroad (s 821).

You are regarded as ordinarily resident in the Republic of Ireland for a tax year if you were resident in the Republic of Ireland in each of the three immediately preceding tax years. You cease to be ordinarily resident when you have become non-resident for the three immediately preceding tax years (s 820).

If you are a resident of a country that has a tax treaty with Ireland, you may be exempt, or due a credit, in relation to tax on Irish source income if that income is also taxed in the treaty country (see Double Taxation).

If you are an Irish citizen and Irish domiciled, but resident abroad, you may be caught for the domicile levy (€200,000 per annum) if:

(a) your world-wide income exceeds €1m,

(b) your Irish located property is worth more than €5m, and

(c) your Irish income tax liability was lower than €200,000.

Income tax rates

Individuals and married couples

If you are married, you can opt to be assessed for tax purposes via:

(a) joint assessment on the husband (s 1017) or wife (s 1018), separate assessment (s 1023), or

(b) single assessment (s 1016).

If you are separated or divorced and have not remarried, you may still, by agreement with your ex-partner, opt for joint or separate assessment (s 1026).

The current tax rates are the standard rate (20%) and the higher rate (41%).

The 2012 standard rate bands are: €32,800 in the case of an individual, €36,800 in the case of a one parent family and €41,800 in the case of a married couple (s 15(2)). In the case of a dual income married couple, the €41,800 rate band may be increased by the lower of:

(a) €23,800, and

(b) the income of the second spouse.

Therefore the maximum standard rate band you can have as a dual income married couple in the tax year 2012 is €65,600. However, the maximum part of the standard rate band that may be transferred between the partners of a dual income married couple in a tax year is €41,800.

Unincorporated bodies and trustees

If you are an unincorporated body or trustee, your income is taxed at the standard rate (s 15(1)). Similarly, if you are a personal representative (i.e., a trustee) of a deceased person’s estate, income earned during the period of administration of an estate is taxed at the standard rate (s 799-802).

Undistributed income of an accumulatory trust is subject to a 20% surcharge (s 805).

Exemptions

Exemption limits

You are exempt from income tax if you are aged 65 or over and your total income is below the appropriate exemption limit, i.e., €18,000 in the case of an individual, and €36,000 in the case of a married couple, one of whom is aged 65 or over.

If you have one or more dependent children, the exemption limit is increased as follows: €575 for each of first and second child, and €830 for the third child and each subsequent child.

Other exemptions

The other main exemptions from income tax are:

(a) Personal injury settlements (s 189), payments from the Haemophilia HIV Trust (s 190), Hepatitis C compensation (s 191), and payments in respect of thalidomide victims (s 192).

(b) Income of artists, writers and composers, subject to the limitation of reliefs for high earners – see below (s 195).

(c) Interest on savings certificates (s 42) and instalment savings schemes (s 197).

(d) Income of recognised charities (s 207, s 208).

(e) Income from patent royalties, provided the development work was done in the EU (s 234).

(f) Income of amateur sports bodies (s 235).

(g) Rent from let farm land (s 664). To claim, you must be aged 55 or over, or unable through physical or mental incapacity to carry on your farming trade. Exemption is given for the lower of:

(i) the farm rental income surplus, or

(ii) €20,000 where the lease is for more than 10 years, €15,000 where the lease is for seven to 10 years, or €12,000 in any other case.

(h) Rent-a-room relief (s 216A). Income from letting rooms in your private residence is exempt provided your gross income from such letting does not exceed €10,000 in the tax year.

(i) Home childcare earnings of up to €15,000 in the tax year (s 216C).

(j) Earnings of special assignees (s 825C). 30% of income between €75,000 and €500,000 in the case of employees assigned from a tax treaty country to work in their employer’s Irish operation.

Schedules

Income is charged under four Schedules: Schedule C, Schedule D, Schedule E and Schedule F (s 12).

Schedule D

Schedule D is the heading under which business income is charged to tax. It has five Cases (s 18).

Cases I and II

Case I charges the profits of a trade (s 2) and Case II charges the profits of a profession (s 3). Employment grants are not regarded as trading income (s 223-226).

In computing your trading or professional profits, you may deduct legitimate business expenses, including:

(a) expenditure on trademarks (s 86), and know how (s 768),

(b) pre-trading expenditure (s 82), and pre-commencement staff training costs (s 769),

(c) the cost of establishing an approved savings-related share option scheme for employees (s 519B).

You may be entitled to a double deduction for wages paid to a previously unemployed person (s 88A).

You may not deduct private expenditure, capital expenditure (s 81) or entertainment expenditure (s 840).

Trading and professional profits for tax purposes are generally based on the profits of the accounts year ended in the tax year (s 61), with special rules for commencement (s 66) and cessation (s 67) years and short-lived businesses (s 68).

Land-dealing and farming

Profits you make from dealing in land are charged under Case I as trading profits (s 640, s 641). Capital profits realised by a landholder are charged under Case IV (s 643).

Cases III, IV, V

Case III charges untaxed interest and income from foreign property.

Case IV charges miscellaneous income not falling under any other heading.

Case V charges rental income. In computing your net rental income, you may deduct legitimate property-related expenses, including interest in relation to residential property, but restricted as to 75% of such interest (s 97). Premiums and disguised premiums are partly taxed as rental income (s 98-100), and may be regarded as deductible rental (s 102) or business (s 103) expenses of the payer.

Profits under Case III-V for tax purposes are the actual profits arising in the tax year (s 70, 74, 75).

Schedule E

Schedule E is the heading under which employment income is charged to tax (s 119). The PAYE system obliges an employer to deduct tax at source from the wages and salaries of his employees (s 985, 986).

As an employee, you are not entitled to any deductions in computing your employment income, unless the expenditure is incurred wholly, necessarily and exclusively in the performance of the duties of the employment (s 114).

A termination payment is subject to tax (s 123), but the first €10,160 plus €765 for each year of service may qualify for exemption. Furthermore, if you are made redundant, you can receive as part of your redundancy package up to €5,000 of retraining costs tax-free (s 201).

A payment under an agreed pay restructuring agreement (s 202) may also qualify for exemption, depending on the size of the percentage pay cut, as follows:

(a) Where the pay cut is 20% or more, €10,160 plus €765 for each year of service,

(b) Where the pay cut is 15%-20%, €7,620, plus €635 for each year of service, and

(c) Where the pay cut is 10%-15%, €7,620, plus €255 for each year of service.

Benefit in kind

As an employee, you are also taxed on any expense allowances (s 117), benefit in kind (s 118), or preferential loans (s 122) you obtain from your employer. A loan is regarded as preferential if the interest rate is less than 5% in the case of a mortgage loan, or 15% in the case of any other loan.

Benefit in kind treatment does not apply to an annual or monthly bus or train pass (s 118(5A)), or to subsidised crèche facilities (s 120A) provided by your employer.

You are not caught for BIK if your employer provides you with a bicycle and associated safety equipment (costing up to €1,000) for travel to work.

Unless received under a Revenue-approved share option scheme, share options received from your employer are subject to income tax at the time the option is exercised (s 128). Gains arising on share options exercised under a Revenue-approved scheme are liable to capital gains tax (25%) instead of income tax.

In the case of an approved savings-related share option scheme, you are also exempt from tax on the interest on the savings (s 519C).

You may receive up to €12,700 worth of shares tax-free through an approved profit sharing scheme (s 510). This is increased to €38,100 for shares held in an employee share ownership trust for a minimum of 10 years (or a lesser period if Revenue so determine). You may also obtain a tax deduction of up to €6,350 for shares bought through an employee share purchase scheme (s 479).

Company cars

You are taxed on “notional pay” based on the cash equivalent of the benefit of use of a company car (s 121). This is calculated as a percentage of the car’s original market value (OMV), inclusive of duty and VAT, depending on your annual business travel and the car’s CO2 emissions category:

Category A: 0g/km up to and including 120g/km,

Category B: More than 120g/km up to and including 140g/km,

Category C: More than 140g/km up to and including 155g/km,

Category D: More than 155g/km up to and including 170g/km,

Category E: More than 170g/km up to and including 190g/km,

Category F: More than 190g/km up to and including 225g/km,

Category G: More than 225g/km.

Where the annual business travel is:

(a) 0 to 24,000 km, the BIK is:

(i) 40% for category F, G,

(ii) 35% for categories D, E, and

(iii) 30% for categories A, B, C,

(b) 24,000 to 32,000 km, the BIK is:

(i) 32% for category F, G,

(ii) 28% for categories D, E, and

(iii) 24% for categories A, B, C,

(c) 32,000, to 40,000 km, the BIK is:

(i) 24% for category F, G,

(ii) 21% for categories D, E, and

(iii) 18% for categories A, B, C,

(d) 40,000 to 48,000 km, the BIK is:

(i) 16% for category F, G,

(ii) 14% for categories D, E, and

(iii) 12% for categories A, B, C,

(e) 48,000 or more km, the BIK is:

(i) 8% for category F, G,

(ii) 7% for categories D, E, and

(iii) 6% for categories A, B, C.

The BIK figure can be further reduced by the amount required to be made good, and actually made good, by you directly to your employer in respect of the car’s running costs.

Civil service travel and subsistence rates

As an alternative to benefit in kind, you may opt to be paid agreed civil service kilometric rates for using your private car for company business. The amount payable depends on the engine capacity (cc) of your car, and the number of kilometres travelled in the year on official business.

Where the annual business travel is:

(a) Up to 6,437 km, the rate per km is:

(i) 39.12c where the engine size is up to 1200cc,

(ii) 46.25c where the engine size is 1201 to 1500cc,

(iii) 59.07c where the engine size is 1501 to 2000cc,

(iv) 70.89c where the engine size is over 2000cc.

(b) over 6,438 km, the rate per km is:

(i) 21.22c where the engine size is up to 1200cc,

(ii) 23.62c where the engine size is 1201 to 1500cc,

(iii) 28.46c where the engine size is 1501 to 2000cc,

(iv) 34.15c where the engine size is over 2000cc.

You may also be paid subsistence at agreed civil service rates, without invoking a benefit in kind charge. Since 5 March 2009, the agreed rates are:

(a) €13.71 in respect of an absence of 5 to 10 hours,

(b) €33.61 in respect of an absence of 10 hours or more,

(c) €107.69 (normal rate) in respect of an overnight stay by an employee on salary equivalent to executive officer or higher executive officer) and €92.11 (reduced rate for extended stays), and €53.87 (detention rate),

(d) €108.99 (normal rate) in respect of an overnight stay by an employee on salary equivalent to assistant principal and higher grades) and €100.48 (reduced rate for extended stays), €54.48 (detention rate).

Schedule F

Schedule F is the heading under which dividend income is charged to tax (s 20).

Reliefs

Personal reliefs and tax credits

The personal reliefs and tax credits you can use to reduce your income tax liability are:

As a deduction when computing taxable income

No limit: Gifts to the Minister for Finance (s 483).

€150,000: Enterprise investment scheme (s 490).

€50,000: Film investment (s 481).

€35,000: This is the maximum deduction available to employees working in Brazil, Russia, India, China or South Africa (s 823A). It is proportionate to the number of qualifying days spent working in those countries.

€50,000: Carer for incapacitated person (s 467).

€31,750: Expenditure on heritage buildings/gardens (s 482).

€6,350: Seafarer allowance (s 472B).

€3,810 with €1,270 increase for each child: Previously long-term unemployed person (s 472A). In the second tax year of employment, it is €2,540 with €850 increase for each child, and in the third tax year, €1,270 with €425 increase for each child.

As a tax credit against tax liability

No limit: Medical expenses (s 469).

€3,600: Widowed parent in the first year after bereavement; €3,150 (second year); €2,700 (third year); €2,250 (fourth year); €1,800 (fifth year).

€3,300: Incapacitated child (per child) (s 465).

€3,300: Married couple, basic personal tax credit (s 461).

€2,700: Health insurance premiums (s 470B), where the insured is aged 85+ on contract date or renewal date; €2,400 (aged 80 – 85); €2,025 (aged 75 – 79); €1,400 (aged 70 – 75); €975 (aged 65 – 69); €600 (aged 60 – 65);

€1,650: Individual, basic personal tax credit (s 461).

€1,650: One parent family (s 462).

€1,650: Blind person (s 468).

€1,650: Employee (s 472).

€1,650: Widowed person (bereavement year) (s 461).

€1,280: Rent paid by married couple/widowed person aged 55 or over.

€1,000: College fees (s 473A) (max),

€810: Home carer (s 466A),

€640: Rent paid by individual aged 55 or over.

€640: Rent paid by married couple/widowed person aged under 55.

€540: Widowed person (other years) (s 461A).

€490: Married couple one of whom is aged 65 or more (s 464).

€320: Rent paid by individual aged under 55.

€254: Training course fees (s 476) (max).

€245: Individual aged 65 or more (s 464).

€70: Dependent relative (per relative) (s 466).

Other reliefs

The other main reliefs from income tax are:

(a) Home loan interest (s 244) Loans taken out on or after 1 January 2013 will not qualify for relief. Loans taken out between 2004 and 2008 continue to obtain relief, loans taken out between 2009 and 2012 are also relieved at 30%, but relief is abolished from 1 January 2018. During 2013 to 2017 inclusive, the interest ceiling for married couples and widowed individuals is €6,000, and for single persons it is €3,000, and the maximum rate at which relief will be given is 15% for first-time buyers and 10% for non-first time buyers.

(b) Bridging loan interest (s 245) and interest on money borrowed to invest in a company (s 248) or partnership (s 253) – but not a rental company.

(c) Compensation for change in work practices (disturbance money) (s 480).

(d) Pension contributions. The contribution limits, whether through an employer scheme (s 776) or Personal Retirement Savings Account (PRSA), or a self-employed retirement annuity scheme (s 787), are:

(i) aged under 30: 15% of earnings,

(ii) aged 30-39: 20% of earnings,

(iii) aged 40-49: 25% of earnings,

(iv) aged 50-54: 30% of earnings,

(v) aged 55-59: 35% of earnings, and

(vi) aged 60 or more: 40% of earnings.

This 40% limit also applies if you are a sportsman or sportswoman. If your contributions are paid through a payroll system, income tax, PRSI and universal social charge are charged on your salary net of contributions.

The overall annual earnings limit for pension contributions is €115,000 (s 787B). This figure may be indexed at the discretion of the Minister for Finance.

The maximum fund value you may have is €2,300,000 and the maximum tax-free lump sum that you can withdraw on retirement is €200,000.

(e) Covenants. To be tax effective, a covenant must be payable to:

(i) a human rights body, or to a recognised college to carry out research, and exceed, or be capable of exceeding three years, or

(ii) an individual who is aged 65 or over, or permanently physically or mentally handicapped, and exceed, or be capable of exceeding six years.

The maximum part of your income that you can tax-effectively covenant is 5%, but this limit does not apply to income covenanted to an individual who is permanently physically or mentally handicapped (s 792).

(f) Stock relief (farmers). This is given at 25% of the increase in stock value (s 666), 100% if you are a young trained farmer (s 667), and 100% to the extent that proceeds of compulsory livestock disposals are reinvested in replacement livestock (s 668).

(g) Donations to Revenue-approved bodies. If you are self-employed, you can claim a deduction at your marginal tax rate. If you are an employee, you complete a form for the charity and the charity gets a refund at your marginal tax rate (s 848A). You can make donations in the form of quoted securities.

(h) Donations to approved sports bodies to fund capital projects. If you are self-employed, you can claim a deduction at your marginal tax rate. If you are an employee, you complete a form for the sports body and it gets a refund at your marginal tax rate (s 847A).

Capital allowances

In computing tax due on your business profits, you do not get any allowance for depreciation of business assets. Instead, you get a capital allowance over several chargeable periods until the cost of the asset has been fully allowed.

Capital allowances are computed exclusive of grants (s 317) and VAT (s 319).

Machinery or plant

Expenditure on machinery or plant used in your business is given an annual wear and tear allowance of 12.5% (s 284). A similar allowance is given for expenditure on software (s 291).

If you dispose of an item of machinery or plant on which capital allowances were claimed, and the disposal results in an underclaim (or overclaim) of allowances, you may be due a balancing allowance (or subject to a balancing charge) (s 288).

Cars

A car (new or secondhand) costing over €24,000 is given an annual 12.5% wear and tear allowance as if the car’s purchase price were €24,000 (s 373).

The capital allowances and leasing deductions of cars bought or leased since 1 July 2008 are based on the level of carbon emissions (see Benefit in Kind, above). Cars with emissions above 190g/km get no allowance (s 380K).

A taxi or short-term hire car is given an unrestricted write off of the purchase price at 40% per annum on a reducing balance basis (s 286).

Restrictions

If you carry on a trade of leasing machinery or plant, you may only set off the related capital allowances against income from that trade. This is relaxed if not less than 90% of your activity consists of leasing (s 403). Capital allowances on assets let under a balloon lease may only be set against income from that lease. This is relaxed for certain foreign currency leases and long-term leases (s 404).

Industrial buildings

If you use an industrial building for your business, you may be due:

(a) an industrial building annual allowance (also known as a writing down allowance) (s 272),

(b) an industrial building accelerated writing down allowance (also known as “free depreciation”) (s 273), or

(c) an industrial building (initial) allowance (s 271).

These latter two allowances are now generally restricted to qualifying premises located in renewal incentive areas.

If the disposal of an industrial building on which capital allowances were claimed results in an underclaim (or overclaim), a balancing allowance (or charge) may arise (s 274).

Industrial buildings annual allowance may be claimed at the following rates:

(a) 15%, in respect of expenditure on:

(i) palliative care units (hospices),

(ii) private convalescent facilities,

(iii) private hospitals,

(iv) registered nursing homes,

(v) sports injury clinics.

(b) 10%, in respect of expenditure on:

(i) buildings for intensive livestock production,

(ii) market gardening structures.

(c) 4%, in respect of expenditure on:

(i) airport buildings, structures, runways, aprons,

(ii) camp/caravan site buildings and structures,

(iii) factories, mills, dock undertakings,

(iv) mineral analysis laboratories,

(v) hotels.

Unused accelerated allowances carried forward beyond the tax life of the building will be lost. However, if the tax life of the building ends before 31 December 2014, only capital allowances unused as at 31 December 2014 will be lost.

Restrictions: lessors

The accelerated industrial building annual allowance only applies if you are an owner-occupier; it is not given if you are a landlord who is letting the building (s 273). Both owner-occupiers and lessors can claim the industrial building (initial) allowance.

If you carry on a trade of leasing holiday cottages, any excess capital allowances may not be used to give rise to a tax repayment or to create or increase a loss (s 405).

No industrial building allowance is given in relation to a hotel for which a room ownership scheme exists (s 409).

If you are a lessor of an industrial building, or a passive investor in an industrial building, your ability to set excess capital allowances against your non-rental income is restricted to the lower of:

(a) the excess, or

(b) €31,750.

This restriction does not apply to a tourist building in a resort area, or a hotel (s 409A).

If you are a lessor of a hotel, or passive investor in a hotel, you have no ability to set excess capital allowances against your non-rental income (s 409B). This restriction does not apply to a hotel in an area of Cavan, Leitrim, Mayo, Monaghan, Roscommon or Sligo which is not a resort area, or a Fáilte Ireland recognised holiday cottage.

High Earners’ Restriction

Where your income exceeds €125,000, the maximum reliefs and exemptions you can claim is the higher of:

(a) €80,000, and

(b) 20% of your total income.

Farm buildings, structures, milk quotas

If you are a farmer, expenditure on farm buildings may qualify for a farm building allowance of 15% in each of the first six years and 10% in the seventh year (s 658).

Expenditure on the purchase of a milk quota may be written off over a seven year period (s 669B).

Patent rights

An annual allowance of one-seventeenth of the expenditure is given for capital expenditure on patent rights (s 755).

Losses

If you make a trading or professional loss, you may reduce your income from all sources by the amount of the loss (s 381). Any unused balance may be carried forward against your trading or professional income for the next and later tax years (s 382).

You can use current capital allowances to create or increase a trading or professional loss arising in the tax year’s basis period, i.e., the period the profits of which form the basis of the tax assessment – usually a 12 month period ending in the tax year (s 392).

If you make a loss in the final year of your trade or profession (a terminal loss), you may carry it back for set-off against the income of the three immediately preceding tax years (s 385-389). This may give rise to a repayment of tax for those years.

A Case IV loss may be set against Case IV income and any unused balance may be carried forward against Case IV income of later tax years (s 384).

If you make a Case V (rental) loss, you can carry it forward for set-off against rental income of the next and later tax years (s 385).^#dbl_tax

Double taxation

Double taxation is the imposition of comparable taxes in two or more states on the same taxpayer in respect of the same subject matter and for identical purposes.

There are three basic methods of relieving double taxation on income:

(a) the tax paid in the foreign country may be deducted (as if it were a business expense) when calculating the income that is liable to Irish tax,

(b) the tax paid in the foreign country may be credited against the Irish tax payable on the same income, or

(c) the income arising in the foreign country may be exempted from Irish tax.

The Irish government has negotiated double tax treaties (s 826) with: Albania, Australia, Austria, Belgium, Bosnia and Herzegovina, Bulgaria, Canada, Chile, China, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Georgia, Germany, Greece, Hong Kong, Hungary, Iceland, India, Israel, Italy, Japan, South Korea, Latvia, Lithuania, Luxembourg, Macedonia, Malaysia, Malta, Mexico, Morocco, Kuwait, Netherlands, New Zealand, Norway, Pakistan, Poland, Portugal, Romania, Russia, Serbia, Singapore, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland, Turkey, United Arab Emirates, UK, USA, Vietnam, Zambia.

New treaties are being negotiated with Argentina, Egypt, Moldova, Thailand, Tunisia and Ukraine. Existing treaties with Cyprus, France, Italy and Korea are in the process of re-negotiation.

For full details, see http://www.revenue.ie/en/practitioner/law/tax-treaties.html.

Self assessment

Pay and file

If you are self-employed, or a company owner-director, you must (s 950):

(a) pay preliminary tax (s 952) on or before the preliminary tax date, i.e., 31 October in the tax year (s 958(2)), and

(b) file an income tax return on or before the return filing date, i.e., 31 October following the tax year to which the return relates (s 951).

Therefore, you must:

(a) pay the preliminary tax for the tax year 2012, and

(b) file the tax return for the tax year 2011,

on or before the pay and file date, i.e. 31 October 2012.

Computational error

If you file your return and pay your tax before the return filing date, but a computational error results in an underpayment of tax of not more than 5% of the tax liability, the shortfall may be paid by the following 31 December provided it does not exceed the greater of:

(a) €3,175, or 5% of the tax payable for the year, whichever is lower, and

(b) €635.

Insufficient preliminary tax

You are liable to interest from the preliminary tax date if your preliminary tax payment is insufficient, i.e., if it amounts to less than:

(a) 90% of the ultimate liability for the period,

(b) 100% of the liability for the preceding period, or

(c) if you pay by direct debit, 105% of the liability for the pre-preceding period. ^#rev_powers

Revenue powers

Administration

The Revenue Commissioners are responsible for the administration of income tax, corporation tax and capital gains tax (s 849). Inspectors of taxes appointed by the Revenue are responsible for the local administration of the tax (s 852).

Anti-avoidance

If, as an Irish resident individual, you have power to enjoy income arising to a non-resident, which you have transferred to that non-resident, the income may be treated for tax purposes as your income (s 806).

If Revenue form the opinion that a tax avoidance transaction is wholly artificial, they may assess the tax that in their opinion has been underpaid (s 811).

Revenue may also potentially impose a 20% surcharge if they are successful in challenging a tax avoidance scheme. You may avoid such surcharge and interest by filing a protective notice (s 811A).

Information

If you are one of the following persons, you must file with your self-assessment return a third party return of information or payments made to:

(a) a property management agent (s 888),

(b) a business person who pays fees to a self-employed service provider (s 889),

(c) a commission agent (s 890),

(d) a bank that pays interest without deduction of tax (s 891),

(e) a nominee shareholder (s 892),

(f) a UCITS intermediary (s 893).

If your auditor becomes aware that you have committed a relevant offence, he must report the offence to you. He must then report the offence to the Revenue if you do not rectify the offence within six months of it being reported to you (s 1079).

Audit

You must keep records that will enable you to make a true tax return. This means you must keep a cash receipts book, a cheque payments book, a sales book, a purchases book, a register of assets and liabilities, and a record of asset acquisitions and disposals (s 886). Records may be stored electronically (s 887).

A Revenue inspector may inspect your PAYE records (s 903), relevant contracts tax records (s 904), and he may audit your general business records (s 905).

He may be accompanied by a member of An Garda Síochána (s 907).

He may require a financial institution to provide copies of bank statements (s 908).

He may require you to submit a statement of affairs (s 909).

He may check a third party return of information or payments made (s 899).

Revenue may take criminal proceedings against you if you deliberately and defiantly refuse to comply with tax laws by failing to pay tax or file returns (s 1078).

Collection

Tax

The Collector-General (s 851) is responsible for collection of income tax (s 961), corporation tax (s 974) and capital gains tax (s 976). If you do not pay your tax, he may enforce collection by:

(a) issuing a certificate to the appropriate sheriff or county registrar (s 962),

(b) suing for the tax as a civil debt in the District Court or Circuit (s 963) or High Court (s 966),

(c) taking bankruptcy proceedings against you (s 999),

(d) issuing an attachment notice to one of your debtors (s 1002),

(e) requiring payment of arrears before issuing a tax clearance certificate (s 1094, 1095).

He is entitled to offset repayments between taxes (s 1006A) and to appropriate tax payments as he sees fit (s 1006B).

A court seizure order in respect of a Revenue debt takes priority over other debts (s 971). Unpaid relevant contracts tax and PAYE estimates (s 1000), and corporation tax (s 974), are preferential debts in company liquidation.

You may pay income tax, corporation tax or capital gains tax by donating a heritage item to a State-owned or State-funded gallery, library or museum (s 1003).

Interest

Interest on late income tax or corporation tax (s 1080) or capital gains tax (s 1083) accrues at the following daily rates for each day the tax remains unpaid:

(a) 0.0219% in respect of the period 1 July 2009 to the date of payment,

(b) 0.0273% in respect of the period 1 April 2005 – 30 June 2009,

(c) 0.0322% in respect of the period 1 April 1998 – 31 March 2005,

(d) 0.041% in respect of the period 1 August 1978 – 31 March 1998.

Surcharge

You are liable to a 5% surcharge, which may not exceed €12,695, if your return is filed late, but within two months of the return filing date.

You are liable to a 10% surcharge, which may not exceed €63,485, if your return is filed more than two months after the return filing date (s 1084).

Withholding taxes

Dividend withholding tax

If you are a company resident in the Republic of Ireland, you must deduct dividend withholding tax (DWT) at the standard rate from dividend payments and other profit distributions (s 172B).

The tax need not be deducted from distributions made to:

(a) an Irish resident company, a pension scheme, an employee share ownership trust, a collective investment undertaking, or a charity (s 172C),

(b) a non-resident who is resident in a tax treaty country, an EU resident, or a quoted company (s 172D),

(c) a qualifying intermediary, provided the ultimate beneficiary is non-liable (s 172E).

The withheld tax may be credited against the dividend recipient’s tax liability for the tax year in which the dividend is received (s 172J).

Annual payments

An annual payment (for example, a covenanted payment) is a payment that is pure income profit in the hands of the recipient. If you make an annual payment out of taxed income, you (not the recipient) are chargeable to tax on the payment and you are entitled to retain tax at the standard rate from the amount of the payment (s 237).

If you make an annual payment out of income not charged to tax, the recipient (not you) is chargeable to tax on the payment, and you must retain tax at the standard rate from the amount of the payment (s 238).

Deposit interest retention tax

Financial institutions must deduct deposit interest retention tax (DIRT) at the following percentage rates from interest payable on deposits:

(a) 30% from interest that is payable annually or more frequently, and

(b) 33% from interest payable less frequently than annually (s 256).

DIRT deducted from general deposit account interest satisfies your income tax liability but must be included in your return of income (s 261).

DIRT does not apply to accounts held by pension funds (s 265) and charities (s 266), provided they have completed the appropriate declaration.

If you are aged 65 or over, and your income is below €18,000 (individual) or €36,000 (married couple), you may obtain a refund of DIRT (s 267).

Professional services withholding tax

If you are an accountable person (a government department or State-funded body), you must deduct professional services withholding tax (PSWT) at the standard rate from payments made for professional services (s 520) of:

(a) doctors, dentists, pharmacists, opticians and veterinary surgeons,

(b) architects, engineers, and quantity surveyors,

(c) accountants, auditors, and financial, economic, marketing, or business consultants,

(d) solicitors, barristers and other legal agents,

(e) geologists,

(f) providers of training services on behalf of FÁS.

Relevant contracts tax

If you are a main contractor, you must deduct relevant contracts withholding tax (RCWT) at 35% from payments made by you an unauthorised subcontractor who has been engaged to carry out a relevant contract, i.e., construction operations, forestry operations, or meat processing operations on behalf of the main contractor (s 530, 531). ^#penalties

Penalties

If you fail to file a return or provide information on request, you are liable to a penalty of €950 (s 1052). If you file a return negligently, the penalty is €125 plus the difference between the correct liability and the tax paid (s 1053). If you file a fraudulent return, the penalty is €125 plus twice the difference between the correct liability and the tax paid (s 1054).

Revenue may not seek a civil penalty against your wishes unless a court has determined that the penalty is due. Revenue may enforce collection of a penalty confirmed by a court, as if it were tax. Revenue may not recover penalties from the estate of a deceased person unless that person agreed, or a court confirms that the penalties are due. Revenue practice in relation to tax-geared penalties is given effect in the legislation. ^#appeals

Appeals

If you are aggrieved by an assessment to income tax or corporation tax, you may appeal within 30 days of the notice of assessment. The appeal may be settled before the appeal hearing by agreement between the inspector and the appellant or by withdrawal of the appeal (s 933).

The Appeal Commissioners must hear the evidence and order that the assessment be reduced, stand good, or be increased (s 934). They may summon and examine witnesses (s 939), and they may determine liability in cases of default (s 940).

You may request that the appeal decision be reheard by a Circuit Court judge (s 942). If dissatisfied with the appeal decision on a point of law, you or Revenue may request the Appeal Commissioners to state a case for the opinion of the High Court (s 943).