Introduction: Welcome to our comprehensive guide on Deposit Interest Retention Tax (DIRT). In this article, we will provide you with all the essential information about DIRT, including its definition, declaration process, current rates, exemptions, refund eligibility, and more. Our goal is to equip you with the knowledge you need to understand and navigate the world of DIRT effectively. Let's dive in!
What is DIRT? Deposit Interest Retention Tax, commonly known as DIRT, is a tax deducted by Irish financial institutions from deposit interest paid to the accounts of Irish residents. Essentially, any interest payments you receive on your savings are subject to DIRT. It is important to note that DIRT is applicable to various financial institutions, including licensed banks, building societies, trustee savings banks, the Post Office Savings Bank, and credit unions.
Declaration Process: To comply with tax regulations, you need to include any deposit interest you received in your tax return. The process differs depending on whether you are self-assessed or a Pay As You Earn (PAYE) worker.
For self-assessed individuals: If you are self-assessed, you should include any DIRT on your Form 11, specifically in Section F 'Income from fees, covenants, distributions.' We recommend using the Revenue Online Service (ROS) to conveniently submit your Form 11.
For PAYE taxpayers: If you are a PAYE taxpayer and your taxable non-PAYE income (including income subject to DIRT) is less than €5,000, you should include any DIRT on your Form 12 under 'Irish Deposit Interest.' You can submit your Form 12 online through PAYE Services on Revenue.ie. However, if your taxable non-PAYE income is €5,000 or more, you must register for self-assessment and file a Form 11 for that year.
Current DIRT Rate: As of 2021, the tax rate for DIRT stands at 33% of your total interest. It is important to stay informed about the current DIRT rate, as it may vary from year to year. For reference, here are the DIRT rates for previous years:
- 2020: 33%
- 2019: 35%
- 2018: 37%
- 2017: 39%
- 2014-2016: 41%
- 2013: 33%
Interest from EU and Non-EU Accounts: If you receive interest from an account in another European Union (EU) Member State, you must pay the current DIRT rate on the interest income. It is crucial to include the details of this on your annual tax return. Failure to do so may result in a higher rate of 40% tax if the income is not returned on time. Higher-rate taxpayers or those who fail to make timely returns are subject to the 40% DIRT rate.
Exemptions from DIRT: Certain individuals are exempt from paying DIRT under specific conditions. These exemptions apply to those who are:
- 65 years of age or over: To be exempt from DIRT over the age of 65, your total income for the year, including interest, must be below the annual exemption limit.
- Permanently incapacitated: Individuals who are permanently incapacitated due to a physical or mental disability can also receive interest without paying DIRT. A declaration form must be completed to avail of this exemption.
Additionally, trustees of special trusts for permanently incapacitated individuals can apply for an exemption from DIRT. The trust must be set up solely for the benefit of one or more permanently incapacitated persons, with funds coming from subscriptions given by the general public. If you meet these criteria, complete a Form DE2 and send it to your Revenue Office to notify them of your exemption.
DIRT Refunds: At the end of the year, you may be entitled to claim a refund of DIRT from Revenue. Refunds can be claimed in the following circumstances:
- Over 65 years of age: If you are now over 65 years of age, you may be eligible for a DIRT refund.
- Temporary income exemption: If your income temporarily went over the exemption limit, you can claim a refund.
- Permanent incapacitation: In the event of permanent incapacitation, a DIRT refund can be claimed.
- First-time buyers: First-time buyers can also apply for a DIRT refund to assist with the cost of buying or building their first home. The DIRT First-Time Buyers Relief and Help to Buy (HTB) incentive are two schemes available to eligible individuals.
DIRT Refund for Non-Resident Account Holders: Non-resident account holders may claim a refund of the DIRT paid if both of the following conditions apply:
- Not resident in Ireland for tax purposes.
- Ireland has a Double Taxation Agreement with the individual's country of residence.
To claim a refund, complete a Form IC5 and submit it accordingly. However, if Ireland does not have a Double Taxation Agreement with the country of residence, a refund of DIRT may not be possible. In such cases, it is advisable to contact your financial institution to determine if DIRT payment can be avoided by completing a non-resident declaration.
Conclusion: We hope this comprehensive guide has provided you with valuable insights into Deposit Interest Retention Tax (DIRT). Understanding DIRT is essential for Irish residents, as it affects the taxation of their deposit interest. Remember to declare DIRT accurately in your tax return, considering the specific requirements for self-assessed individuals and PAYE taxpayers. Stay informed about the current DIRT rate and be aware of the various exemptions and refund opportunities available. By following these guidelines, you can effectively navigate the world of DIRT and ensure compliance with tax regulations.