Pádraig O'Sullivan (Cork North Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

325.To ask the Minister for Finance if a person who has an American pension but is resident in Ireland must pay tax in both jurisdictions; and if he will make a statement on the matter. [31717/24]

Jack Chambers (Dublin West, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

I am advised by Revenue that under general charging rules in Ireland, the extent to which a taxpayer is liable to tax on his or her US sourced income depends on his or her residence and domicile position for Irish tax purposes. An individual who is resident and domiciled for Irish tax purposes is liable to Irish income tax on their worldwide income. An individual who is resident, but not domiciled, for Irish tax purposes is liable to Irish income tax on Irish sourced income, but a liability to tax will only arise on their foreign sourced income only to the extent that this income is remitted to the State. This is known as the remittance basis of taxation.

Further information regarding the above is available at the following link:

www.revenue.ie/en/jobs-and-pensions/tax-residence/index.aspx

Therefore, the extent to which the payments are chargeable to Irish income tax depends on the residence and domicile position of the taxpayer. The USA tax rules will determine whether the payments will also be taxable in the USA. If the pension payments are chargeable to tax in the US and Ireland under the domestic tax rules of each country, then double tax relief may be available under the terms of the Ireland-US Double Taxation Treaty (DTT).

The Ireland-US DTT provides relief from double taxation, either by providing that a particular source of income is taxable in one country or that where income is taxable in both countries, one country (usually the country where the individual is resident) will give credit for tax deducted in the other country.

With respect to the US private occupational pension, Article 18(1)(a) of the DTT provides that pensions and other similar remuneration derived and beneficially owned by a resident of a Contracting State (in this case, the USA) in consideration of past employment are taxable only in the State of residence (in this case, Ireland) of the beneficiary. However, the US ‘saving clause’ in Article 1(4), may allow the US to tax a pension received by an Irish resident individual who is also a US citizen.

With respect to pensions derived from government service, in summary, Paragraph 2 of Article 19 allows the taxing rights to remain with the USA unless a taxpayer is both tax resident in and a national of Ireland.

I am further advised by Revenue that under domestic tax rules, section 200 of the Taxes Consolidation Act (TCA) 1997 provides for a tax exemption for certain foreign pensions which are paid to Irish resident taxpayers. Where these pensions are disregarded for income tax purposes in the hands of a resident of the country of source (in this case the USA), they are also disregarded for income tax purposes in this State, provided the country of source has a similar income tax system to Ireland. This means that, in general, a US pension (for example an occupational pension) that would not be subject to tax in the USA if it was received by a US resident taxpayer, will therefore not be subject to Irish Income Tax if paid to an Irish resident taxpayer.

There is an exception to this general rule in relation to United States social security pensions, which are excluded from the scope of the section. The specific treatment of United States social security pensions is dealt with under Article 18(1)(b) of the Ireland-US DTT. The DTT provides that United States social security pensions paid to Irish residents are exempt from tax in the United States, on the basis that they are subject to tax in Ireland. Revenue guidance material on section 200 is available in Tax and Duty Manual Part 07-01-09 Certain Foreign Pensions, which is available on Revenue’s website - www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-07/07-01-09.pdf.

In cases, where double taxation arises, the provisions of Article 24 on relief from double taxation will apply.

Without further specifics, the foregoing is a general overview of the position based on the information provided.