Revenue Note for Guidance

The content shown on this page is a Note for Guidance produced by the Irish Revenue Commissioners. To view the section of legislation to which the Note for Guidance applies, click the link below:

Revenue Note for Guidance

787G Taxation of payments from a PRSA

Summary

Subject to certain exceptions, payments from a PRSA are taxed under PAYE.

Details

(1) Any PRSA assets that a PRSA administrator (whether established in the State or not) makes available to a PRSA member, including an annuity purchased wholly or partly out of PRSA assets, are regarded as emoluments paid that are subject to PAYE. Where the PRSA administrator has not received a revenue payroll notification from Revenue, tax is required to be deducted at the higher rate of income tax.

(2) A PRSA administrator is liable to account to the Collector-General for any PAYE which the administrator is required to deduct and the individual beneficially entitled to the assets in the PRSA must allow such deduction. Where the assets of the PRSA are insufficient to discharge the tax, the excess will be an amount due to the PRSA administrator from the beneficial owner of the PRSA assets.

Non application of PAYE

(3) PAYE is not to apply to—

  • an amount by way of lump sum, made available when assets of the PRSA are first made available to the contributor, which does not exceed 25% of the fund or, in the case of an AVC PRSA, the amount that may be paid by way of lump sum under section 772(3)(f),
  • assets transferred to an ARF or AMRF (see section 787H below),
  • assets transferred to a personal representative of a PRSA contributor in accordance with section 787K(1)(c)(iii),
  • where a tax-free lump sum has not been paid from the PRSA and the assets are transferred to another PRSA in the individual’s name or to an approved scheme or to a statutory scheme of which the PRSA contributor is a member,
  • an amount referred to in section 787K(2A), that is an amount of a PRSA benefit that is commuted by a PRSA administrator to meet a tax charge arising on a chargeable excess in connection with that PRSA benefit under the provisions of Chapter 2C (relating to the maximum tax-relieved pension fund).
  • an amount made available from a vested PRSA (within the meaning of section 790D(1)) for the purpose of—
    1. the reimbursement, in whole or in part, of an administrator (within the meaning of section 787O(1)) for tax paid by that administrator on a chargeable excess relating to the PRSA owner, or
    2. the payment by the PRSA administrator of a non-member spouse or civil partner’s appropriate share of the tax charged on a chargeable excess, or part of it (for which the administrator is made jointly liable with the non-member) in circumstances where a benefit crystallisation event (BCE) giving rise to chargeable excess tax occurs in respect of retirements benefits which are the subject of a pension adjustment order (PAO). Chapter 2C of Part 30 deals with the taxation treatment of PAOs in the context of the standard fund threshold regime.

(4) The circumstances in which a PRSA administrator is treated as making assets, available to an individual include the making of a relevant payment [defined in section 787A], circumstances in which assets cease to be PRSA assets or circumstances whereby assets cease to be beneficially owned by the PRSA contributor.

(4A) Where assets in a PRSA (including a vested PRSA within the meaning of section 790D(1)) are used in connection with any transaction that would, if the assets were assets of an ARF, be regarded as giving rise to a distribution, the assets will be treated as having been made available to the PRSA contributor. This means that any such transaction will be contrary to the rules of the PRSA until such time as the PRSA contributor is entitled to take benefits from the PRSA (generally at age 60 or over). Any such transactions will give rise to a tax charge under PAYE on the PRSA contributor in the same way as a tax charge would arise where such transactions occur in relation to funds in an ARF (see section 784A(1A) to (1E).

(4b) For the purposes of subsection (6), the administrator of a PRSA in respect of which benefits have not commenced on or before the date of the contributor’s 75th birthday is treated as making the PRSA assets available to the contributor on that date or where the contributor was 75 before 25 December 2016 (i.e. the date Finance Act 2016 was passed), on 25 December 2016. In other words, the PRSA becomes a “vested PRSA” within the meaning of section 790D(1) on the applicable date. Accordingly, any assets in such a PRSA when the contributor dies are, as provided for in subsection (6), subject to the taxation regime applying to ARFs.

(5) Where a PRSA administrator is not established in the State at any time, the administrator must enter into an enforceable contract with the Revenue Commissioners to meet all of the duties and obligations imposed by Chapter 2A and Chapter 2C of this Part and section 125B of the Stamp Duties Consolidation Act 1999, or appoint a person resident in the State to carry out those duties. Any contract between the Revenue Commissioners and a PRSA administrator is to be governed by the laws of the State and the courts of Ireland are to have exclusive jurisdiction in determining any dispute arising under such contracts. Where an administrator opts to appoint a resident agent to discharge the duties and obligations, the agent’s identity and the fact that they have been appointed must be notified to the Revenue Commissioners.

(5A) The Revenue Commissioners can, by way of notice, seek information from a PRSA administrator or a PRSA provider about the value of any assets made available to, or paid to, a PRSA contributor or any other person. The information can include the name, address and PPS number of the PRSA contributor and any person who receive assets or payments and the amount or value of any assets or payments. The provision can apply to both domestic and foreign PRSA administrators or PRSA providers and gives the Revenue Commissioners discretionary power to get access to relevant information about the value of assets or payments made from PRSAs should they deem it necessary.

(6) Where an individual dies after PRSA assets have been or, on reaching age 75, are deemed to have been, made available to him or her, the assets in the PRSA at the time of death are treated, under section 784A(4), in the same way as assets in an ARF i.e. transfers to an ARF in the name of the individual’s spouse or civil partner or to a child of the deceased or his/her civil partner who is under 21 when the contributor dies are not chargeable to income tax. However, transfers to a child who is 21 or over from the deceased’s PRSA or from the surviving spouse or civil partner’s ARF, following the death of the spouse or civil partner, are taxed under Case IV of Schedule D at the rate of 30%. All other transfers from the deceased’s PRSA are taxed at his or her marginal rate in the year of death.

Relevant Date: Finance Act 2019