Dáil Éireann debate -
Wednesday, 28 Feb 1996

Vol. 462 No. 3

Written Answers. - Tax Treaties.

Éamon Ó Cuív

Question:

44 Éamon Ó Cuív asked the Minister for Finance if he intends to negotiate a tax treaty with the Government of the United States of America, to exempt them from the deduction at source of income tax from their social security benefits similar to the tax treaties between the United States of America and Canada, Egypt, Germany, Italy, Japan, Malta, Romania and the United Kingdom (details supplied); and if he will make a statement on the matter. [4576/96]

Minister for Finance (Mr. Quinn)

Under the terms of United States domestic legislation non-resident aliens are liable to withholding tax on social security payments at a rate of 30 per cent on 85 per cent of the social security payments, i.e. 25.5 per cent overall.

The existing double taxation convention between Ireland and the United States, which has been in existence for over 40 years, does not contain any specific provisions relating to the taxation of social security payments. However, the question of US withholding tax on social security payments is being reviewed in the context of the current renegotiation of the Ireland-United States Double Taxation Convention. In the meantime, under the provisions of the existing convention, credit for the tax deducted by the US tax authorities is allowed against Irish tax on the same income.

The effect of the inclusion of a provision in double taxation conventions with the US exempting US social security payments from tax in the US is to transfer the taxing rights over these payments to the country of residence of the recipient. The conventions do not exempt the payments from tax in these countries. Tax would be payable at the normal rates in the countries in question.