Irish Expats – How to Avoid Taxes on Your Pension

For Irish people who have chosen to retire abroad, they now have the option to avoid Irish pension tax, avoid Irish income tax, capital gains tax and save tax on death on their existing pensions. You can now avoid the new Irish pension tax through a transfer to a QROPS (Qualified Overseas Pension Scheme). This is also known as the European Union Retirement Benefit Scheme (EURBS).

Ireland’s new pension tax (starting at an initial rate of 0.6% per annum on pension fund assets) was announced last May 2011 and is retroactive to 1 January 2011. Commissioners , every year, at least during the four-year period 2011-2014. Irish tax on pension payments applies to individual pension policies (“retirement annuity contracts”), company pension plans, personal retirement bonds, PRSAs (not vested) and purchase bonds.

The new tax on pensions is basically a tax on savings and employment. This is a tax on the average worker. We can help you transfer your pension fund abroad to avoid these new taxes. If you have a pension fund of €100,000 or more, it may be beneficial to transfer it to EURBS or QROPS.

Irish expats and pension tax evasion

For those who are residents of Ireland and have an Irish pension plan or those who have pension plans in Ireland and have left, there are significant advantages to transferring those plans to a safe EU jurisdiction like Malta. Malta is a former British colony and a member of the European Union. You have a Double Taxation Agreement (DTA) with Ireland, which means your pension can be transferred to Malta and paid gross. It also has DTAs with more than 60 countries around the world, which means you can improve tax efficiency for many countries where you can retire abroad.

Benefits of a QROPS pension transfer:

• Avoid Irish pension tax
• Greater choice of investment
• Consolidation of pension plans. Manage all your pensions under the same umbrella
• Savings in income tax
• Capital gains tax savings
• Tax savings upon death
• Entire pension passes to loved ones upon death
• Currency options. Choose to keep in Euros or convert to GBP or USD
• Greater lump sum and income options available

The Irish pension rate

If you live in Ireland or have previously lived in Ireland and have an Irish pension plan, you can transfer it using a Malta QROPS (Recognized Qualifying Overseas Pension Plan) which is recognized by HMRC in the UK and approved in Malta.

The pension tax announced in May 2011 and in effect retroactively from January 1, 2011, applies to individual pension policies, company pension plans, personal retirement bonds, retirement savings accounts personal (not acquired) and purchase vouchers.

How much would the Irish rate be? How much would Irish pension tax be?

The Irish government has revealed plans to cut public spending by €2.1bn, with almost €1.4bn to be achieved by requiring public sector workers to pay a new pension ‘tax’ of 7.5% on average for their Irish pensions.

The government said the new ‘pension-related deduction’ would apply to the total earnings of all civil servants, though not to those already receiving a pension, and would be “graduated so that the effect is somewhat less at levels of lower income and higher at higher levels. levels”.

The average deduction will be 7.5% of the total remuneration, although the contribution will be made up of 3% on the first €15,000 of salary, 6% on the following €5,000 and a rate of 10% on the rest of the salary. the remuneration.

A table showing the effect of contributions means that the lowest paid public sector workers on €15,000 a year would contribute 3%, or €450 a year, while those earning €25,000 would pay 5% or €1,250 a year on his Irish salary. pensions

Peter McLoone, general secretary of Impact (Ireland’s largest public service union), said the government’s decision would mean that a civil servant earning €770 a week before taxes “would have to pay a further pension increase of €52 a week on top of your existing taxes, pension contributions and the new rate of 1%”, the income tax announced in the 2008 budget.

Who qualifies for a QROPS or EURBS pension transfer?

A state pension cannot be transferred. But, most other types of pensions, even final salary plans, can be transferred to a safe jurisdiction like Malta, which is within the EU and would avoid Irish taxes once you’re abroad for 5 years or plus.

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