Financial service providers such as banks, building societies and post offices, offer accounts where you can save a sum of money (a deposit) for which they will pay you an annual rate of interest in return, usually as a percentage of the deposit.
The interest you receive is subject to a tax called Deposit Interest Retention Tax (DIRT).
From 1 January 2014, DIRT is charged at 41% (was 33% in 2013, 30% in 2012 and 27% in 2011) for payments made annually or more frequently. The tax is deducted by the bank or other deposit-taker before the interest is paid to you.
If you request it, you are entitled to be given a statement of the amount of DIRT deducted from your interest.
You do not have to pay any further income tax on the interest but it is declared as income if you are making a tax return. You may have to pay PRSI.
It was announced in Budget 2014 that the rate of Deposit Interest Retention Tax (DIRT), and the rates of exit tax that apply to life assurance policies and investment funds, is being increased and will now be 41% whether payments are made annually or more frequently (previously 33%) or are made less frequently than annually (previously 36%). The increased rates will apply to payments, including deemed payments, made on or after 1 January 2014.
Since 2007, your financial institution can pay your interest on deposits without deducting DIRT. You must apply to have your deposit interest paid without the deduction of DIRT - see 'Where to apply' below.
You can get your deposit interest paid without the deduction of DIRT or you can claim a DIRT refund, if you are over 65 and:
In general, joint accounts where one of the account holders is aged 65 or over will only qualify for the refund of DIRT if the other account holder is that person’s spouse or civil partner.
However, if another person, such as your son or daughter, has the authority to operate your bank account on your behalf, and is named as an account holder for this purpose only, you will continue to qualify for the refund of DIRT provided you are the beneficial owner of the account. In this case, when claiming a refund of DIRT, you must include a declaration that you (not your child) are entitled to all of the interest paid in respect of the deposit.
You can get your deposit interest paid without the deduction of DIRT or a DIRT refund, if you are:
Others who may qualify for an exemption from DIRT or a DIRT refund are:
When you save money with a credit union you do this by buying shares in the credit union. Each year you receive a dividend which will be a percentage of the value of your shares. The way the dividend is taxed depends on the type of credit union account that you have: a regular share account or a special share account. You can check with your credit union if you are not sure which type of account you have.
If you have a regular share account, DIRT is not deducted by the credit union. It is your responsibility to declare the dividend in your annual tax return.
If you have no tax liability on your income, you will not be taxed on your dividend. For this reason a regular share account is a good choice if you are not liable to pay income tax but you don’t meet the requirements above to obtain a refund of DIRT that has been deducted.
If you pay income tax at the 41% rate, then this rate will also apply to the dividend you receive on a regular share account and it may be preferable to open a special share account.
If you have a special share account, your credit union will deduct DIRT from your dividend. The dividend is taxed at 41%.
Special Term Accounts are deposit accounts that have a set term and have limits to the amounts that can be deposited in them. They can be medium term or long term. DIRT is charged at 41%. However, you can hold a dividend of €480 tax-free with a medium term account or €635 tax-free with a long term account, after which you will be charged DIRT at 41%.
If you are not resident in Ireland for tax, you may get a refund of any Deposit Interest Retention Tax deducted from your Irish deposit interest. To get a refund of DIRT, Ireland must have a double taxation agreement with the country you are resident in. DIRT will be refunded under the terms of that agreement. Fill in IC5 form (pdf) to apply for a refund of DIRT.
If you are not resident in Ireland you may get your Irish deposit interest without the deduction of DIRT. A non-resident person does not have to be a resident of a country that has a double taxation agreement with Ireland in order to apply for a DIRT exemption. You should contact your financial institution to find out if you can be exempt from paying DIRT. You will have to complete a Non-Residence Declaration. You must notify them if you become resident again.
If you are over 65 or a permanently incapacitated person or a trustee of a special trust for a permanently incapacitated person, fill in form 54D (pdf) to apply for a refund of DIRT. Send the completed form to your local Revenue office.
You will need to get a Certificate of Interest from your bank, building society, credit union, etc, and include this with your application.
You can apply to have your deposit interest paid without the deduction of DIRT:
If you have a question relating to this topic you can contact the Citizens Information Phone Service on 0761 07 4000 (Monday to Friday, 9am to 8pm) or you can visit your local Citizens Information Centre.