Pat Carey (Dublin North West, Fianna Fail)
Link to this: Individually | In context

Question 219: To ask the Minister for Finance if he will clarify where tax at 42% has to be paid on refunds of AVC's and other such pension refunds; and if he will make a statement on the matter. [7389/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
Link to this: Individually | In context

I am advised by the Revenue Commissioners that section 780 of the Taxes Consolidation Act provides for a tax charge on refunds of employee-pension contributions. The rate of tax is the standard rate, which currently is 20%, in force at the time of payment. A refund of employee contributions may only be made if the employee is leaving the employment and has less than two years service. The refund of employee contributions is in lieu of any other benefits from the pension scheme.

Refunds of AVC are not generally allowed by Revenue. In exceptional cases, for example, where an AVC has been made in error, Revenue may allow a refund of the AVCs. Where the employee has received tax relief in respect of the contributions which will be refunded, Revenue will seek to recover any tax relief claimed. The rate applying will depend on the individual's marginal rate of tax and could be either 20% or 42%.