Withholding taxes

Dividend withholding tax

An ROI-resident company must deduct dividend withholding tax (DWT) at the standard rate from dividend payments and other profit distributions (s 172B).

DWT need not be deducted from distributions made to:

  • An Irish resident company, a pension scheme, an employee share ownership trust, a collective investment undertaking, or a charity (s 172C).
  • A person resident in a tax treaty country, an EU resident, or a quoted company (s 172D).
  • A qualifying intermediary, provided the ultimate beneficiary is non-liable (s 172E).

DWT may be credited against the 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. Where an annual payment is made:

  • out of taxed income, the payer is chargeable to tax on the payment and is entitled to deduct tax at the standard rate (s 237),
  • out of income not charged to tax, the recipient is chargeable and the payer must deduct tax at the standard rate from the payment (s 238).

Deposit interest retention tax

Financial institutions must deduct deposit interest retention tax (DIRT) at 41% from interest payable on deposits. This is so, even though the higher rate is now 39%.The rate of DIRT will decrease by 2% each year for the next 4 years until it reaches 33% in 2020.

DIRT deducted from general deposit account interest satisfies income tax liability but must be included in the recipient’s 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.

A person aged 65 or over, with income below €18,000 (individual) or €36,000 (married couple) may obtain a refund of DIRT (s 267).

Professional services withholding tax

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

  • doctors, dentists, pharmacists, opticians and veterinary surgeons,
  • architects, engineers, and quantity surveyors,
  • accountants, auditors, and financial, economic, marketing, or business consultants,
  • solicitors, barristers and other legal agents,
  • geologists.

Relevant contracts tax

A main contractor must deduct relevant contracts withholding tax (RCT) at 35% from payments made to 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, 530A).

RCT also applies to activities carried out on the Continental Shelf.