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Encashment Tax and USC/PRSI

  • 03-01-2014 4:25pm
    #1
    Clauric
    Registered Users, Registered Users 2 Posts: 610 ✭✭✭


    I was wondering if anybody could help me. I'm currently doing my income tax for 2013 (trying to get on it early). I haven't started to fill out the forms yet, but simply doing the Excel calculations.

    However, I have run into a problem with encashment tax. A number of my shares that were subject to both withholding tax (WHT) and encashment tax (all in USD). I know I can't reclaim the WHT and the net amount is subject to standard income tax.

    From what I understand, encashment tax is basically a prepayment of my tax liability, taken at 20% of the gross dividend received (before WHT). When calculating my tax liability, do I add the encashment tax back into the amount received, convert it all into Euro (at the rate on the date that it was paid), calculate my liability, and then subtract the encashment tax? i.e.

    Dividend received - WHT = liability
    Liability x 20% (tax rate) = Tax due
    Tax due - encashment tax (in Eur at rate on day dividend received) = Net tax due

    Secondly, are USC and PRSI due on non-earned income from 2013? If so, is it on pre-tax or post-tax income?

    My apologies for the long post. Any help would be gratefully appreciated.


Comments

  • #2
    nompere
    Registered Users, Registered Users 2 Posts: 1,678 ✭✭✭nompere


    In general terms you are liable to tax on the gross amount of any dividends, and are then entitled to credits for foreign tax and Irish encashment tax. Also, in general terms, the credit for foreign tax is usually limited to the lower of 15% or your average rate of tax on your income.

    You might need to check the terms of any relevant double taxation treaty.

    USC and PRSI are generally charged on gross income before tax.

    If this brief note isn't enough then you are going to need to talk to a professional, or trust Revenue to do the sums properly. In my experience they usually do get it right - which is more than can be said for some quite expensive software that is available in this country!


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