Government Exit Tax - Frequently Asked Questions
Q: What is Exit Tax?
A: Exit Tax is an Irish government tax payable on any profit made on a plan with a life assurance company. The life assurance company is obliged to deduct any tax due directly from the plan and pay it to the Irish Revenue Commissioners.
Q: When was Exit Tax introduced?
A: Exit Tax applies to all plans taken out on or after 1st January 2001.
Q: When does Exit Tax apply to my plan?
A: Exit Tax is only payable on any profit made on your plan. Please note that if your plan has a protected return that is greater than the amount you invested, that difference would be profit and you will have to pay Exit Tax on this amount.
Q: When will Exit Tax be deducted from the value of my plan?
A: The Exit Tax due on the profits of your plan is calculated and deducted (if applicable):
- whenever any money is paid from your plan, including in certain circumstances, when we pay out a life cover benefit;
- on every 8th anniversary of your plan;
- it may also apply if you are transferring ownership (the plan owner) of your plan.
Q: Why did I not pay any Exit Tax?
A: If you have not made any profit on your plan you do not pay Exit Tax.
Q: What is the current rate of Exit Tax?
A: The current rate of Exit Tax (January 2014) is 41%. If the plan is owned by a company the tax rate that applies may be different.
Q. Do I have to do anything about this tax?
A: No, Irish Life deducts the Exit Tax where appropriate, and pays it to the Revenue Commissioners on your behalf.
Q: Am I exempt from Exit Tax?
A: A limited number of plan owners are potentially exempt from Exit Tax; the most
- non-resident individuals - where you reside outside Ireland for more than 3 years (There are other rules and you should seek your own advice to determine if you qualify for non resident tax status). Please note that you may have tax obligations in the jurisdiction where you reside;
- a Revenue approved Charity;
- a Credit Union;
- the Court Service.
Q: I am over 65 and don’t have to pay DIRT (on bank accounts), should I have to pay Exit Tax?
A: DIRT and Exit Tax are two different types of tax and different rules apply to each of them. While an individual over 65 does not have to pay DIRT, they may have to pay Exit Tax.
Q: What does Irish Life need from me to prove I am exempt fromExit Tax?
A: Irish Life needs a specific Revenue declaration completed by the plan owner before we can make a payment without deducting Exit Tax. This declaration is subject to very strict Revenue regulations i.e. a fax is not acceptable, we must have an original declaration. Where the plan owner is non resident Irish Life will also require proof of this in the form of recent (within the last three months) utility bills or foreign bank account statements.
Q: When does Irish Life need this Revenue declaration?
A: Irish Life needs to have the relevant Revenue declaration at the time of the claim in order to pay out the proceeds of the plan without deducting Exit Tax. In the case of non residents only, the declaration must be completed at the time the plan is taken out.
We advise that you seek professional tax advice as the information given is a guideline only and does not take into account your personal circumstances.
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