Deposit Interest Retention Tax

If you are an Irish resident and you make an investment in a deposit account (with any Irish bank, building society, post office or credit union), the interest that is paid on your investment is taxed at source.

The tax deducted by the bank is referred to as Deposit Interest Retention Tax (DIRT). The current rate is 33%.

The DIRT withheld by the bank satisfies the full requirement to pay income tax. Deposit interest is not liable to USC, although it may be liable to PRSI.

If you or your spouse/civil partner are 65 or if you're permanently incapacitated, you may not be liable for DIRT if you're exempt from income tax.

If you're exempt from DIRT, you should contact your financial institution to ensure your interest is paid without a DIRT deduction.

You must include the gross deposit interest you received in your tax return. A credit for DIRT withheld will then be allowed against your income tax liability.

DIRT is not charged on interest from the accounts of:

• individuals who are not resident in Ireland and who do not pay tax in Ireland. Although, a joint account owned by an Irish resident and a foreign resident is subject to DIRT
• companies that pay Corporation Tax
• Revenue-approved pension schemes
• charities

Interest from accounts in other European Union (EU) Member States and from non-EU countries

If you receive interest from an account in another EU Member State, you must pay the current rate of DIRT on the interest income. You must include the details of this on your annual tax return. The income will be subject to a higher rate of 40% tax if it is not returned on time.

Deposit interest from non-EU countries will be taxed at the current DIRT rate if you are a standard rate taxpayer and have made a timely return. However, a rate of 40% will apply if you are a higher rate taxpayer or if you have not made a return of this income on time.

First-time buyers

If you are a first-time buyer you can apply for a DIRT refund. New schemes have been introduced to help first-time buyers with the cost of buying or building their first home. These schemes are the:

• DIRT First-Time Buyers
• Help To Buy (HTB) incentive

Non-resident account holder

If you are not a resident in Ireland for tax and Ireland has a double taxation agreement with the country you are resident in, you may claim a refund of some or all of the Deposit Interest Retention Tax (DIRT) that you paid. You should complete a Form IC5 to claim a refund.

Dividend income from Irish companies

All companies resident in Ireland must deduct Dividend Withholding Tax (DWT) at 25% from the gross dividend paid (there are some exceptions). The Irish resident company paying the dividend is obliged to pay the DWT to Revenue.

If you are in receipt of dividend income from an Irish resident company, you should file a tax return and declare the gross amount of the dividend received. You are entitled to a credit for the DWT against your total income tax liability.

Foreign dividend income

An Irish resident is, subject to some exceptions, liable to income tax in respect of his/her worldwide income. In some cases, part of that individual's income may also be subject to tax in another country.

If you have had foreign tax taken off dividend income that is also taxable in Ireland, you may be able to claim a Foreign Tax Credit. You can claim Foreign Tax Credit for all or part of the foreign tax you paid depending on whether or not Ireland has a Double Taxation Treaty with the country from which the dividend is received. You can only claim Foreign Tax Credit if a double taxation agreement allows both countries to tax the same item of income. If there is no double taxation agreement in place between Ireland and that country, a unilateral relief can be claimed.

Sometimes dividends received from foreign countries will suffer an Irish tax deduction on encashment. If this applies you will get a full credit against your Irish tax for this deduction. If you do not owe tax you will get a refund of the Irish tax deducted.