Irish taxman hits out at wealthy retirees in Portugal

Wealthy Irish pensioners living overseas as non-resident taxpayers are likely to be hard hit by the Irish taxman’s new rule changes.

In the week before Christmas, the revenue office in Ireland announced new tax rules to apply to wealthy Irish national expat pensioners. The move is effective starting December 22, and is aimed at non-resident taxpayers with approved retirement savings funds. From that date, those affected will not be able to qualify for PAYE tax refunds formerly applying to money withdrawn from Ireland-based retirement funds, (ARFs).

The majority of those affected by the new law are expected to have settled in Portugal, having chosen the destination for its 10-year tax holiday for new expat arrivals. According to the Irish tax authority, only a small number of non-resident Irish taxpayers had taken annual advantage of tax refunds on their Irish ARF withdrawals, with its facilitating of the practice taking place even although there was no legislative base for the refunds.

However, pension experts are convinced the new crackdown will target a far higher number of Irish retirees in Portugal and other expat destinations than is anticipated. How many will be affected by the new law will depend on the terms of tax treaties between Ireland and expats’ countries of residence, and will also involve complex assessments as to whether the withdrawals are seen as income or capital in nature. Just eight of Ireland’s double tax treaties allow repatriation of capital.

According to the head of pensions at a leading Irish stockbroking firm, non-residents will need to carefully consider their ARF’s asset make-ups as well as their choice of retirement jurisdictions. The new rule will have repercussions for Irish pensioners in Portugal and will possibly make other international jurisdictions more popular as a retirement destination. Advice will need to be taken on the run-up to retirement as well as during the process and afterwards.