Will I have to pay tax on my pension fund when I return to Ireland to retire?
Ask the Experts: Where can I find out about the possible tax implications in moving my investment fund
We are a married couple who have lived abroad for many years and intend to return home in the near future. We are resident in Belgium currently, but have lived in various places in/out of the EU over the past 25 years.We have two properties in Ireland, one of which is rented. We have been making tax declarations in Ireland every year on the rental income.
While abroad we have built up a retirement savings and investment fund in the Channel Islands. When I repatriate to Ireland (including the funds), will we be liable to pay tax on the fund in Ireland?
A: Barry Flanagan, senior tax manager,taxback.com
Firstly, in respect of the rental properties, it is good that you have remained compliant while abroad by submitting Irish tax returns. Rental income (income from “immovable property”) arising on an Irish property will always be taxable in Ireland, regardless of the residency of the owner. In some instances this income may also be taxable abroad, in which case a foreign tax credit can be taken for any Irish tax suffered.
Non Resident Landlords are frequently unaware of their responsibilities in this respect, especially when it comes to the requirement for the tenant to withhold 20 per cent of the rent and pay this directly to Revenue, unless an official Collection Agent has been appointed and a corresponding PPS number issued by Revenue.
Secondly, in respect of the retirement savings fund, it is always worth considering obtaining professional financial advice from the country you are leaving, as well as the one you are returning to, to ascertain whether the transfer of any pension/fund has tax implications there too. It is worth investigating whether an “exit tax” may be imposed/applicable by the country of departure.
The short and general answer to your query on whether the fund would be taxable in Ireland is, as always, it depends. Without further information it would not be possible to answer more specifically. To provide full advice, we would require knowledge of the type of fund (ie bank account, pension fund, investment fund, and so on), the duration it has been in existence, the country of administration and your country of residence.
However, I can recommend the Department of Social Protection (DSP) website, which has some excellent guidance on the tax consequences for returning emigrants of moving a pension fund back to Ireland. As you will see, it is quite extensive: https://www.welfare.ie/en/Pages/Transfer-of-Private-Pensions-to-Ireland-for-returning-Irish-Emigrants.aspx.
As per this guidance, Revenue will allow pensions from overseas to be transferred to an approved occupational pension scheme, Personal Retirement Savings Account (PRSA) or Buy-out bond (BOB) providing:
a) The transfer takes place before pension benefits under the overseas scheme come into payment.
b) The scheme member requests the transfer.
c) The rules of both the Irish and overseas scheme permit the transfer.
d) The trustees or administrator of the transferring scheme comply fully with any transfer rules, regulations or requirements in the other jurisdiction.
e) The Revenue authority in the State from which the transfer is made approves/permits the transfer.
Items (c), (d) and (e) are matters for the overseas trustee/administrator to confirm to the trustees/administrator of the Irish receiving scheme.
The DSP also cautions to take the following into consideration prior to finalising any transfer, which would certainly be worth independent financial advice:
1) How benefits are paid from their existing scheme compared with how benefits would be paid from the Irish pension scheme.
2) The age at which benefits can be accessed from their existing scheme as compared with the Irish scheme.
3) The amount (if any) of the benefits that can be taken as a lump sum from the existing scheme as compared to the Irish scheme
4) Projected values and costs under the existing scheme compared with projected values and costs under the Irish scheme.
5) The taxation of benefits under the existing scheme compared with taxation of benefits under the Irish scheme.
6) The investment fund choices that are available under the Irish pension scheme compared to those already invested in the existing scheme.
Once transferred, the pension fund and any draw-downs or distributions therefrom would be subject to standard Irish rules.
Have a query for our panel of experts about emigrating, life abroad or moving home? Email them to email@example.com. This column is a reader service and is not intended to replace professional advice.