Deed of Covenant

foxirl

Hi,
Anyone know if you get PRSI and USC relief on Deed of Covenants aong with Tax relief.

Thanks

Calahonda52

http://www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/donations-and-covenants/deeds-of-covenant/your-tax-responsibilities.aspx
shows it is tax relief as opposed to a deduction from income so my sense is no subject to exception listed by OP below

foxirl

Calahonda52 wrote: »

http://www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/donations-and-covenants/deeds-of-covenant/your-tax-responsibilities.aspx
shows it is tax relief as opposed to a deduction from income so my sense is no

I thought the same but was unsure after reading http://www.crowleysdfk.ie/services/tax/personal-tax/deed-covenant/

foxirl

Also found his in the USC FAQs

1.22 Is income receivable by an individual under a Deed of Covenant liable to the
Universal Social Charge?
In most cases (e.g. deeds made for research, teaching of natural sciences and to certain
bodies for the promotion of human rights), there is no deduction available to a disponer
for USC purposes. In these situations, a deed of covenant is not regarded as income in
the hands of the recipient for USC purposes.
However, if the deed of covenant is in favour of
 A permanently incapacitated person (excluding covenants between a parent and
his/her permanently incapacitated minor child), or
 a person aged 65 or over
where the following provisions of section 792 TCA 1997 apply:
- it's payable or applicable for the benefit of an incapacitated person or a person aged
65 or over for a period which exceeds or may exceed six years, and
- in the case of the person aged 65 or over, the payment does not exceed 5% of the total
income of the disponer,
the qualifying amount reduces the income of the disponer for USC purposes. The
recipient is subject to USC on the qualifying amount where his or her income (including
the deed of covenant) exceeds the USC exemption threshold of €10,036.

Calahonda52

One lives and learns

Just wonder if the DOC can impact on a Non Con [pension/other SW related payments] received by the recipient

phormium

Yes I imagine it would as it would be counted as means. I know we have a couple of them for an elderly relative and have to be careful to keep it below the threshold for tax exemption but they are on contributory pension so doesn't affect it from a means point of view.

foxirl

It makes it significantly more appealing to the coventor with a savings of up to 27% as opposed to 20%. If the coventee is under the threshold there's a 47% saving all together between both parties. Now to put it into practice!!!