Broad Exemptions from USC
- Income Threshold: Where an individual’s total income for a year does not exceed €13,000. The USC exemption threshold is €13,000 for the years 2016 to 2022, €12,012 for 2015 and €10,036 for the years 2012 to 2014.
- All Department of Social Protection payments
- Similar Type Payments
- Payments that are made in lieu of Department of Social Protection payments such as payments for participation in Community Employment Schemes, Jobs Initiative Scheme or Back to Education Allowance paid by the Department of Education.
- Income already subjected to DIRT
- Exempt Income
An individual who has no liability to income tax based on his or her entitlement to tax credits or by use of losses or capital allowances may still have a liability to USC.
Social Welfare-Like Payments
The following income is not subject to USC.
- Department of Social Protection
- Rural Social Scheme
- Farm/Fish Assist
- Community Employment Scheme
- Tús (community work placement initiative)
- Job Initiative Scheme
- Health Service Executive (HSE)
- Blind Welfare Allowance
- Department of Education
- Vocational Training Opportunities Scheme (VTOS)
- Youthreach Training Allowances
- Fund for Students with Disabilities
- Student Assistance Fund
- Non-apprentice payments for trainees attending a course that isfunded by SOLAS
- Foreign Governments Social welfare-type payments received from another country.
Miscellaneous Exempt Income
- Interest on savings certificates
- Exemption from BIK – Travel Pass, cycle to work scheme
- Key Employee Engagement Programme
- Distributions to certain non-residents
- Payments in respect of personal injuries
- Special trust for permanently incapacitated
- Haemophilia Trust
- Hepatitis C
- Exemption in respect of certain payment under employment law
- Exemption of certain payments made or authorised by Child and Family Agency
- Nursing Home Support Scheme
- Fuel Grant payable to Disable Drivers and Passengers
- Water Conservation Grant
- Exemption in respect of certain education-related payments
- Exemption in respect of training allowance payments
- Exemption in respect of Mobility Allowance
- Exemption in respect of Pandemic Placement Grant
- Income from Scholarships
- Child benefit
- Early Childcare Supplement
- Certain Childcare Support Payment
- Back to Work Family Dividend
- Exemption in respect of certain expense payments
- Expenses of members of Judiciary
- State Employees: Foreign Service Allowance
- Employee of certain agencies: foreign service allowances
- Bonus or interest paid under instalment savings schemes
- Certain interest not to be chargeable
- Interest on certain securities
- Certain foreign pensions
- Basic and increased exemptions in respect of tax under section 123 (Redundancy) including SCSB
- Lump sum weekly payment or resettlement allowance paid under the Redundancy Payments Act, 1967
- Military & other pensions, gratuities and allowances
- Compensation for certain living donors (donation for kidney transplant)
- Veterans of war of independence
- Magdalen laundry payments
- Rent a Room relief
- Scéim na bhFoghlaimeoirí Gaeilge
- Childcare service relief
- Certain profits of micro-generation of electricity
- Pre-retirement access to AVCs
Foreign Employment Income on which Transborder Worker’s Relief is due; USC does not apply to that part of the income to which section 825A TCA applies.
Individuals whose total income does not exceed €60,000 and who are eligible for a full medical card, including a Health Amendment Act card, only pay USC at a maximum rate of 2%. This reduced rate of USC will apply until the end of the 2022 tax year. This treatment does not apply to individuals who hold other types of ‘medical card’, such as a GP Visit Card, a Drugs Payment Scheme Card or a Long-Term Illness Scheme Card.
The individual does not need to hold the medical card for the full year to qualify for the 2% maximum USC. The 2% rate applies once the individual holds a full medical card for some period during the year.
Certain individuals who are ordinarily resident in Ireland automatically qualify for an Irish medical card under EU Regulations. However, they are subject to the €60,000 income limit. The European Health Insurance Card, which provides for access to hospital care similar to that provided in public hospitals, is not regarded as a full medical card.
‘Frontier workers’ from another EU Member State (including, Northern Ireland) who are not entitled to a full Irish medical card, are liable up to the normal maximum 8% USC rate, where they have sufficient income for this rate to apply.
Medical card under EU legislation
Under EU legislation, individuals are subject to the social security scheme of a single Member State. Different rules apply depending on whether an individual is sent by his or her employer to work in another Member State for up to 24 months (known as a ‘posted worker’) or travels from the Member State of residence to work in another Member State, returning home at least once a week (known as a ‘frontier worker’).These rules also apply in the case of a small number of non-EU countries, i.e. Iceland, Liechtenstein, Norway and Switzerland.
Posted workers’ generally continue to be subject to the social security scheme of the original Member State and not the State in which they are employed. They retain the rights and advantages acquired through social insurance contributions made in their home country and this includes access to healthcare services. The Health Services Executive (HSE) provides (on application) such individuals with full medical cards as evidence of this entitlement, provided they are not subject to Irish social security legislation, i.e. chargeable to PRSI in Ireland.
Certain forms that are obtained from the relevant public bodies in the original Member State are accepted as evidence of entitlement to a full medical card by the HSE. These are the form A1 (formerly E106) in the case of social security coverage and the form S1 (formerly E101) in the case of healthcare coverage.
Revenue has and will continue to accept the Forms A1 and S1 as evidence of entitlement to a full medical card for the purposes of determining the rate at which USC is to be charged.
‘Frontier workers’ who are resident in the State and who travel to another EU Member State to exercise the duties of their employment, returning to the State at least once a week, have entitlement to a full medical card under EU legislation. Under a bi-lateral agreement with the UK, the usual Forms A1 and S1 are not required and it is sufficient for an individual to provide evidence of employment in the UK (for example, by way of a payslip) and of not being subject to Irish social security legislation.
However, establishing entitlement to a full medical card for the purposes of determining the rate at which USC is to be charged may not be relevant for these ‘frontier workers’ as their UK employment income is not chargeable to USC if they make a claim under section 825A TCA 1997 for ‘Transborder relief’. Revenue will also accept evidence of employment in the UK as evidence of entitlement to a full medical card for the purposes of determining the rate at which USC is to be charged.
‘Frontier workers’ who are resident in other EU Member States and who travel to the State to exercise the duties of their employment may have entitlement to a full medical card under Irish legislation, but only if the HSE regards them as being ordinarily resident in the State. In addition, such entitlement is subject to a means test.
Double Tax Relief
While the higher USC rates will apply, relief for USC paid in Ireland may be available where Ireland has entered into a tax treaty with the country in which the individual is resident for tax purposes and where that treaty contains a provision to the effect that the treaty will apply to any identical or substantially similar taxes that may be subsequently imposed by either State.
Where treaties contain such an article, Revenue has written to Ireland’s treaty partners informing them of the introduction of the USC and accepting that it is a substantially similar tax to income tax and that it is covered by the treaty provisions, including relieving provisions.