Dáil Éireann debate -
Tuesday, 1 Apr 2003

Vol. 564 No. 1

Written Answers - Pension Povisions.

Willie Penrose

Question:

168 Mr. Penrose asked the Minister for Finance if there is a bilateral agreement in operation between Ireland and the United States dealing with the payment of pensions and, more particularly, with the deduction of income tax arising therefrom; and if it permits Irish authorities to deduct income tax rather than having federal income tax deducted therefrom by the United States authorities. [8700/03]

Minister for Finance (Mr. McCreevy)

A new double taxation convention between Ireland and the United States entered into force in 1998, replacing the existing convention which was in force since 1951. Under the provisions of the new convention, pension payments made from one country to a resident of the other country are taxable only in that other country. However, with respect to US citizens, the US reserves its right in the convention to tax its citizens, despite the provisions of the convention.

There is a different treatment for pensions paid in respect of Government service and US social security pensions. Government service pensions are generally taxable only in the country that pays the pension. US social security pensions are taxable only in the country of residence of the payee even if the payee is a US citizen. As a result, US pensions paid to Irish resident individuals are taxable in Ireland. Normal Irish tax exemption limits will apply. Where such individuals are non-US citizens, they are exempt from federal income tax. For US citizens, that exemption only applies to social security pensions. Where pensions are taxable in the US, a credit is given in the US for Irish tax paid. If the pension is paid in respect of US Government service, it will be taxable only in the US.