Michael McGrath (Cork South Central, Fianna Fail)
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To ask the Minister for Finance if he will respond to an issue raised with him in correspondence dated 1 August 2012 (details supplied). [45755/12]

Michael Noonan (Limerick City, Fine Gael)
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I am advised by the Revenue Commissioners that maintenance payments made under a legally enforceable separation agreement are taxable in the hands of the recipient, unless the parties have elected to be jointly assessed to tax in accordance with the provisions of section 1026 (for former spouses) or 1031K (for former civil partners) of the Taxes Consolidation Act 1997. In either situation both parties must be resident in the State for the provision to apply. Where such an election is not made, the payer is entitled to a tax deduction against his or her income for the maintenance payments made. In the United Kingdom, maintenance payments made under a separation or divorce agreement have not been deductible against the income of the payer since 1988. Additionally, such payments are not taxable in the hands of the recipient under UK law.

However, such a maintenance payment made to an Irish resident person by a non-resident individual will be taxed as income arising from a foreign possession under Schedule D of Case III by virtue of section 18 of the Taxes Consolidation Act 1997. It will also attract a universal social charge. There are no provisions in the Double Taxation agreement between Ireland and the UK to exempt this type of income from Irish tax in the hands of the recipient resident in Ireland.

The tax treatment in different countries in relation to various sources of income may not always be similar. The Double Taxation conventions are not designed to make the tax treatment the same. Rather they are designed to ensure that Irish tax law is applied in the same way to Irish nationals and nationals of other jurisdictions where they are chargeable to tax in Ireland on similar sources of income. Irish tax law provides that all maintenance payments are taxable in the hands of the beneficiary.

There has been no amendment of the Ireland / UK Double Taxation Agreement in recent years that affects the tax treatment of maintenance payments and I am advised by the Revenue Commissioners that there are no current proposals to make such an amendment. The issue of the lack of relief in the United Kingdom for a payment being made which is then properly taxable in this State in the hands of the recipient is one that could be addressed to the taxing authorities in the other jurisdiction.