Written answers

Tuesday, 16 December 2014

Photo of Billy TimminsBilly Timmins (Wicklow, Independent)
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226. To ask the Minister for Finance the position regarding DIRT being taken from children's savings accounts; if there are institutions that do not charge children DIRT; his views on this matter; the way it impacts on encouraging children to save; and if he will make a statement on the matter. [48238/14]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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I am informed by the Revenue Commissioners that the legislation governing the operation of Deposit Interest Retention Tax (DIRT) is set out in Chapters 4 and 5 of Part 8 of the Taxes Consolidation Act 1997 (the Act).

Under Section 257 of the Act all deposit takers are obliged to deduct Deposit Interest Retention Tax (DIRT) from payments of interest made to an account unless the account qualifies as an exempt account. There is no specific exemption in the case of interest paid on deposit accounts held by children.

Certain exemptions apply from DIRT, the main ones are:

Individuals aged over 65:

Since the enactment of the Finance Act 2007, individuals are exempt from Deposit Interest Retention Tax (DIRT) on their interest income provided they or their spouse or civil partner  are aged 65 or over, and their total income in a year (including the interest) is below the annual exemption limit.

The annual exemption limits, for 2014, are as follows

€18,000 (in the case of a single person) and

€36,000 (in the case of a married couple or civil partnership).

In order to claim the exemption the person must make a declaration, on form DE1, to the financial institution where the account is held. As part of the process, the person makes a declaration on the form DE1 that their income is less than the exemption limit and that they will notify the financial institution if this changes.

In the absence of this declaration, a financial institution must deduct DIRT at the appropriate rate from the interest income. However, in any case where tax was so deducted from interest income of an individual who otherwise qualifies for the exemption, he or she will be entitled to a refund of that tax.

Permanently Incapacitated Individuals:

Since the enactment of the Finance Act, 2007, an exemption from DIRT also applies where an individual, his or her spouse or civil partner:

I. is permanently incapacitated by reason of physical or mental infirmity from maintaining himself or herself and

II. is not liable to pay income tax because of the level of his or her income.

In order to claim the exemption, the individual must make a declaration to the Revenue Commissioners, on form (DE 2) to the effect that they or their spouse or civil partner are permanently incapacitated. Where the person qualifies for the exemption, Revenue will notify the financial institution where the deposit account is held, that they should operate a DIRT free account for the individual.

In the absence of a Revenue notification, a financial institution must deduct DIRT at the appropriate rate from the interest income. However, in any case where tax was so deducted from interest income of an individual who otherwise qualifies for the exemption, he or she will be entitled to a refund of that tax.

Companies, Pension Funds and Charities:

DIRT is not deducted from interest paid on deposits held by companies, pension funds or charities. However, Irish resident companies pay tax on investment income (including deposit interest) at 25%.

Non-Resident Account Holders:

Deposit accounts where all of the interest on the deposit is beneficially owned by a person or persons resident outside the State are exempt from the application of DIRT. However a joint account owned by an Irish resident and a foreign resident would be subject to the retention tax system.

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