If I receive my Irish pension in Spain, will I have to pay tax?

Question:

In March 2019 I will receive €1,000 month from my pension in (what was) Eircom. If this is paid into a Spanish bank account am I liable for tax in Ireland or here? I have been living in Spain for 10 years.

Answer: Barry Flanagan, director, Taxback. com

In general, Irish occupational pensions are subject to tax at source. Private sector Irish occupational pensions such as the one you have are chargeable for tax in this State under Schedule E by virtue of Section 779, regardless of the residence position of an individual.

However, where an individual is

1) In receipt of an Irish occupational pension (other than a Governmental or a Local Authority pension),

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2) is not resident in the State for tax purposes;

3) and is resident in a country with which Ireland has a DTA (Double Tax Agreement) for the relevant tax year, then generally the pension will be taxable solely in the country in which the individual is tax resident.

This is the case for Spain, as the DTA between Ireland and Spain affords the sole taxing right to Spain.

In order to exclude the pension from Irish tax, your pension provider or employer should apply for a PAYE Exclusion Order should be applied for to relieve the individual - in this case, you - from being charged income tax in Ireland. This pension you get from this former employer will be subject to tax in Spain. See revenue.ie for more details.

However, there is in your case the slight complication that this applies to Private Sector and not Governmental pensions. It is not clear what years you worked in Eircom. Pensions payable by a State or a Local Authority in connection with the discharge of functions of a governmental nature or in respect of services rendered to that State are taxable solely in Ireland, notwithstanding that the recipient may be tax resident in another DTA State.

As Eircom was a State body prior to flotation, you may need to check with the pension provider as to whether a portion of the pension could be considered to be a Government pension for “services rendered to the State”. A Foreign Tax Credit would be available in Spain in this instance.

Lastly, a recent change in the taxation of ARFs means that previously exempt payments to non-residents may now be taxable in Ireland. Further guidance should be sought if this is an ARF or an AMRF.

[ abroad@irishtimes.com ]