I am an Italian citizen, who has been working in Ireland for three years. There is a possibility I will leave the country in mid-April and I heard that European citizens can claim back a certain percentage of the taxes paid. So I rang the tax office in Dublin a number of times but it seems they are not certain as to what the exact procedure is. Can you help?
Ms B.R., email
I can quite easily see why you have been having problems in determining whether or not you are entitled to a refund of taxes paid. To the layman, including myself, it appears that there are a number of apparently contradictory provisions in the tax laws. A lot of it has to do with the issue of residency.
One reading of the situation indicates that foreign nationals arriving in the Republic are entitled to a full year's tax free allowances if they become a resident upon arrival, regardless of when during the tax year that declaration takes place. This means that you would receive the full year's reliefs while only facing income tax on part of that year's income.
However, once you are resident, you are liable to Irish income tax on all income received worldwide which is brought into the jurisdiction and any income earned in the Republic and Britain.
Under this reading of things, once you leave the Republic you will be taxed on your income up to the point of departure but even if, as in your case, this might be in mid-April and only weeks into the new tax year, you will be entitled to a full year's tax free allowance against that income. Self-evidently, in your situation, such a reading of the rules would permit you to claim a tax refund. To do so, you would need to complete something called a Form 12 and send it in to your tax office together with your P45, which outlines your tax situation upon termination of employment.
The complicating factor is that of ordinary residence.
Basically, if one is resident in the Republic for three consecutive tax years, one is deemed to be ordinarily resident here, even if you move abroad. This situation ceases if you remain abroad for three consecutive tax years. This may or may not matter as you say you are here three years and may fall either side of the line on residency, depending on when you first became a tax resident in the Republic.
The situation is that ordinary residents pay tax in the Republic on all income worldwide. There are exceptions covering certain employment which takes place abroad and also certain provisions which would come under double taxation agreements with other countries. Equally, I am not aware if, as is the case when arriving in the Republic, you can elect residency in your new destination and override the ordinary residency provisions.
My advice would be to adopt the first approach I outlined. It is then up to the Revenue Commissioners to sort it out.
An Post Savings
I have some old issues of An Post National Instalment Savings, the savings period for which has long since elapsed. Do they continue to pay interest at the original interest rate - which would be quite generous by today's standards?
G.L., Dublin
Just when you think there is an issue which can be addressed with a simple yes or no answer, events transpire to frustrate it. In this case, the rate of interest payable at present depends under which scheme the savings plan was established.
For instance, there were a couple of schemes which ran from the early 1970s. These were not extended and savers were notified that there was no guarantee on interest rates thereafter. At worst, however, the Post Office interest rate would apply; this is currently a derisory 0.5 per cent on savings under £5,000 - the figure which would almost certainly apply to the amounts in these particular schemes given the limits on how much could be saved in them at that time - or 1per cent on savings in excess of £5,000. Self-evidently, this is not even enough to keep pace with our current low level of inflation.
Savers who had invested in other instalment schemes will probably find that those schemes have been extended. However, it would be too much to hope that the prevailing interest rate at the time the scheme was set up would still apply, given the dramatic fall in rates over the last few years. Instead, such schemes will attract interest at the rate pertaining to the current national instalment savings scheme - now 15 per cent after five years on deposit.
Instalment schemes operate with regular contributions from the investor. These attract no interest until the end of the first year of saving. Thereafter the interest payable depends on for how long the money is invested.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, Fleet Street, Dublin 2 or e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.
