Taxes et investissements

In Ireland, employees can avail of certain share options from their company that may be "tax free" or "tax efficient". It is useful to remember that there are few benefits employees can receive that are completely "tax free". The provision of shares is a benefit that could be treated as a cash bonus and therefore subject to income tax. However, changes in legislation in Ireland have allowed employees to benefit from the profitability of their company without incurring significant tax liabilities. There are two main ways an employee can benefit from shares in the company:

• Approved Profit Sharing Schemes
• Stock Options

Rules

Approved Profit Sharing Schemes

Approved Profit Sharing Schemes allow an employer to give an employee shares in the company up to a maximum value of 12,700 euro per year tax-free and are subject to certain conditions set out in legislation and administered by the Revenue Commissioners.

Providing the scheme satisfies the required conditions, an employee will pay no tax on shares up to a maximum value of 12,700 euro per year. The employer must hold the shares for a period of time (called the "retention period") and the employee must not dispose of the shares before three years. If an employee disposes of shares before this time, he or she is liable to pay income tax on whichever is the lower of the following:

• The market value of the shares when they were given to the employee or,
• The value of the shares at the time of sale

Approved Profit Sharing Schemes are subject to a number of conditions that should be checked with the Revenue Commissioners. 

Stock Options

Employee stock options are shares in the company that are offered to an employee at a preferential price. Clearly there is a tax benefit to the employee when the preferential price is less than the market value.

The amount of tax an employee is expected to pay depends on whether the share options are part of an "Approved Share Option Scheme" or an Unapproved Share Option Scheme.

Approved Share Options Scheme rules came into effect in 2001. Under these rules, if an employee purchases shares from a company at preferential price then he or she becomes liable for Capital Gains Tax of 20 cent in the euro if he or she sells the shares. The Capital Gains Tax is charged on the difference between the purchase price and the subsequent sale price of the shares.

Unapproved Share Option Schemes require the employee to pay tax on the difference between the market value of the shares and the purchase price of the shares at the time the employee exercises the right to buy them. If the employee subsequently sells the shares, he or she is also liable for Capital Gains Tax if the shares have increased in value from the time of purchase to the time of sale.

Tax in chargeable on all dividends arising from profit sharing schemes and share option schemes.

It is important to check with the Revenue Commissioners and your employer as to what rules apply to your share options and when you are liable to pay tax, if any.

DIRT

Financial service providers such as banks, building societies and post offices, offer accounts where you can save a sum of money - a deposit - for which they will pay you an annual rate of interest in return, usually as a percentage of the deposit.

The interest you receive is subject to a tax called Deposit Interest Retention Tax (DIRT).

DIRT is charged at the standard rate of income tax, currently 20%. The tax is deducted by the bank or other deposit-taker before the interest is paid to you.

If you request it, you are entitled to be given a statement of the amount of DIRT deducted from your interest.

You do not have to pay any further tax on the interest but it is declared as income if you are making a tax return.

Refunds of DIRT

You can claim a refund of DIRT if your income is below the low exemption limit and you are, or your spouse is:

• aged 65 or over

Or

• permanently incapacitated.

The trustees of a trust fund for a permanently incapacitated person can claim a refund of DIRT.

Apart from these cases, you cannot claim a refund, even if you are otherwise exempt from income tax.

If you qualify for a refund, your financial institution will be able to pay your interest without deducting DIRT.

Charities registered for tax purposes can claim repayment of DIRT or can apply for exemption.

Credit Unions

When you save money with a credit union you do this by buying shares in the credit union. Each year you receive a dividend which will be a percentage of the value of your shares. The way the dividend is taxed depends on the type of credit union account that you have: a regular share account or a special share account. You can check with your credit union if you are not sure which type of account you have.

If you have a regular share account, DIRT is not deducted by the credit union. It is your responsibility to declare the dividend in your annual tax return.

If you have no tax liability on your income, you will not be taxed on your dividend. For this reason a regular share account is a good choice if you are not liable to pay income tax but you don’t meet the requirements above to obtain a refund of DIRT that has been deducted.

If you pay income tax at the 41% rate, then this rate will also apply to the dividend you receive on a regular share account and it may be preferable to open a special share account.

If you have a special share account, your credit union will deduct DIRT from your dividend. The dividend is taxed at 20%.

Credit Union - Special Term Accounts

Special Term Accounts are deposit accounts that have a set term and have limits to the amounts that can be deposited in them. They can be medium term or long term. DIRT is charged at 15%.

Non-resident accounts

If you are not resident in Ireland you can receive Irish deposit interest without the deduction of DIRT. You should notify your bank, building society etc, who will require you to make a written declaration of non-residence. You must notify them if you become resident again.

The interest you receive is still considered as income for tax purposes. If you are not liable for income tax in Ireland then you will not be liable to pay tax on the interest. If you are liable for Irish income tax then you can be taxed on the interest at your marginal, or highest, rate of tax. This could be higher than the usual 20% rate of DIRT.

How to apply

To apply for a refund of DIRT, obtain form 54D online or by calling 1890 306706. Send the completed form to your local Revenue office. You will need to obtain a Certificate of Interest from your bank, building society etc, and include this with your application.

If you are over 65 years of age you must complete form DE1 and return it to your financial institution.

If you are a permanently incapacitated person or a trustee of a special trust for a permanently incapacitated person, you must complete form DE2 and return it to Revenue.