Public Securities

Investment Income Treatment

Investment income is categorised differently from trade income. Investment income must be removed from the accounts when computing trading income. As with other categories of income, there are special rules regarding the computation of tax on investment income.

Generally, there are very limited write-offs and deductions against gross income. In many cases, tax is withheld at the source.

Losses from investment income (e.g. rental income)  cannot be used to the same extent as trading losses. Generally, losses will not arise in relation to investment income.

Losses on the sale of investments are subject to capital gains tax rules. They may be available against capital gains but not against investment income.

Securities of State Bodies

The Minister for Finance may issue securities without obligation to deduct tax at source and /or   tax-free interest for persons who are not ordinarily resident and/or not domiciled in Ireland.  There may  be a tax  liability, if the securities are not on terms that they are exempt,  or if the the recipient does not qualify, irrespective of the absence of deduction at source.

Interest on the securities of certain state sector bodies are exempt from income tax, where the recipients are neither ordinarily resident nor domiciled in Ireland. They include the securities of

• Airport authorities;
• RTE;
• ESB;
• certain local government stock;
• securities issued by local authorities outside the State;
• certain designated bodies;
• entities where the payment of interest and principal is guaranteed by the State;

If the beneficial owner of the securities is domiciled in Ireland but not ordinarily resident, interest on securities is exempt from tax above the capital is not liable to tax.

Encashment Tax

Encashment tax is a withholding tax that applies to Irish public revenue and foreign dividends.  The collecting agents pay the Revenue at a specified rate.  This is credited to individuals when they make their own tax return.

Collecting agents are obliged to make returns, keep records and allow inspections.  Various provisions and procedures in the Taxes Act are applied to the collection agents.

The tax collected is paid to the Collector-General. Encashment tax is not a final tax. Therefore recipients of income from which encashment tax has been deducted are required to return details of the relevant income on their annual returns of income and to pay any further tax due at their marginal rate where appropriate.

FA 2012 makes amendments

• to require the paying/collecting agents to submit a return along with the tax deducted without the necessity of having to be requested to do so;
• to enable the inspector of taxes to make assessments in the absence of such a return;
• to require the paying/collecting agent to keep records of all dividend payments and to produce same when requested in writing by the inspector;
• to allow the inspector to make adjustments to a paying/collecting agents liability where any amount has been incorrectly included in a return
• to apply the provisions of the Income Tax Acts relating to the assessment, collection and recovery of income tax to assessments, collection and recovery of encashment tax;
• to charge interest on unpaid encashment tax at the same rates as other unpaid taxes, and
• to delete the provision enabling remuneration of the paying/collecting agents