Dáil Éireann Debate, Tuesday - 20 February 2024
216. Deputy Claire Kerrane asked the Minister for Finance to advise under the bilateral agreement between Ireland and the United States, if a U.S. citizen living in Ireland who is paying taxes in the U.S on a social security disability and Union pension is expected to also pay taxes in Ireland, and therefore pay taxes in both countries; and if he will make a statement on the matter. [7692/24]
View answerI understand that the query relates to the Irish tax treatment of both a US social security disability pension and a US occupational pension and the treatment of both under the Ireland-US Double Taxation Treaty (“DTT”). From the information provided, both the social security disability pension and a US occupational pension are subject to tax in the USA.
I am advised by the Revenue Commissioners that Section 200 of the Taxes Consolidation Act (TCA) 1997 provides for a tax exemption for certain foreign pensions, but based on the information provided (i.e., that both pensions are subject to tax in the USA), the exemptions in section 200 would not apply.
Under general charging rules in Ireland, the extent to which the taxpayer is liable to pay tax on his/her US-sourced income depends on his/her residence and domicile position for Irish tax purposes. An individual who is resident and domiciled for Irish tax purposes is liable to Irish income tax on their worldwide income. An individual who is resident, but not domiciled, for Irish tax purposes is liable to Irish income tax on Irish-sourced income, but a liability to tax will only arise on their foreign-sourced income only to the extent that this income is remitted to the State. This is known as the remittance basis of taxation.
Further information regarding the above is available at the following link:
www.revenue.ie/en/jobs-and-pensions/tax-residence/index.aspx
Therefore, the extent to which the payments are chargeable to Irish income tax depends on the residence and domicile position of the taxpayer and subject to the applicable provisions of a double tax agreement where applicable.
Ireland-US DTT
The taxpayer may be able to claim relief from double taxation under the Ireland-US DTT in respect of the two pension payments that have been subject to tax in both jurisdictions.
With respect to the US private occupational pension, Article 18(1)(a) of the DTT provides that pensions and other similar remuneration derived and beneficially owned by a resident of a Contracting State (in this case, the USA) in consideration of past employment are taxable only in the State of residence (in this case, Ireland) of the beneficiary. If this treatment applies to the US private occupational pension, then the DTT provides that it is taxable only in Ireland. However, this paragraph is subject to the US ‘saving clause’ in Article 1(4), meaning that the US may tax a pension received by an Irish resident individual who is also a US citizen.
With respect to the US social security disability pension, Article 18(1)(b) of the DTT provides that payments made by one of the Contracting States (in this case the USA) under the provisions of its social security or similar legislation to a resident of the other Contracting State (in this case Ireland) will be taxable only in the other Contracting State, i.e., in Ireland. This income is, by virtue of Article 1(5), not subject to the US ‘savings clause’. In the circumstances, if this treatment applies to the US social security disability pension, then the DTT provides that it is taxable only in Ireland.
In both cases, where double taxation arises, the provisions of Article 24 on relief from double taxation will apply.
Without further specifics, the foregoing is a general overview of the position based on the information provided.
