Revenue Note for Guidance

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Revenue Note for Guidance

PART 36B

Pensions: Incentive tax credits

Overview

Part 36B, which contains sections 848V to 848AG inclusive, provides an incentive for those on lower incomes to invest some or all of their Special Savings Incentive Account (SSIA) funds, when their SSIA matures, in a pension product.

The types of pension products into which SSIA funds can be invested under the incentive are Personal Retirement Savings Accounts (PRSAs), Additional Voluntary Contributions (AVCs) and Retirement Annuity Contracts (RACs).

The incentive is available to individuals who, in the year preceding the year in which their SSIA matures, had a gross income of €50,000 or less and did not pay any tax at the 41 per cent rate (but see the note in section 848W).

The incentive has two aspects. Firstly, for every €3 of SSIA funds invested, the Exchequer will contribute €1, up to a maximum Exchequer contribution of €2,500. Secondly, the Exchequer will also contribute a proportion of the exit tax deducted by the SSIA provider when the SSIA matures. That proportion will be the same as the proportion of SSIA funds reinvested in the pension product.

The Exchequer contribution to the pension products will be by way of tax credits and the grant of these credits will be administered by the Revenue Commissioners in much the same way as the Exchequer contribution to SSIAs was administered.

However, neither the first €7,500 invested nor the amounts contributed by the Exchequer can be claimed as a deduction against the investor’s income.

As the incentive is intended to encourage long-term pension savings, section 848ABA provides for a clawback of a proportion of the tax credits contributed by the Exchequer where an individual availing of the incentive withdraws any funds from the pension product within one year of it having received those tax credits.

848V Interpretation (Part 36B)

Summary

This section contains definitions of various terms used throughout Part 36B.

Details

Definitions

“additional voluntary contributions” and “retirement benefits scheme” have the meanings assigned to them in section 770;

“administrator” means, subject to section 848AD—

  • as respects a PRSA, a PRSA administrator,
  • as respects a retirement benefits scheme, an administrator within the meaning of section 770, and
  • as respects an annuity contract, a person mentioned in section 784 (including the person mentioned in subsection (4A)(ii) of that section) who is carrying on the business of granting annuities on human life;

“annuity contract” means an annuity contract or a trust scheme approved by the Revenue under section 784;

“gross funds”, “maturity date”, “maturity statement”, “maturity tax” and “net funds”, in relation to an SSIA, have the same meanings as they have in section 848H(5);

“gross income”, in relation to an individual for a year of assessment, is the aggregate of the individual’s income from all sources (including any exempt income) for that year before taking into account any reduction in respect of allowances, losses, or deductions including a deduction in computing Case V income under section 372AP (relief for lessors), a deduction against total income under section 372AR (relief for owner occupiers) or a deduction under various residential reliefs under various older schemes;

“PPS Number”, in relation to an individual, means that individual’s Personal Public Service Number within the meaning of section 262 of the Social Welfare Consolidation Act 2005;

“PRSA administrator” and “PRSA contribution” have the meanings assigned to them in Chapter 2A of Part 30;

“special savings incentive account” has the same meaning as it has in section 848C and “account” shall be construed accordingly.

Relevant Date: Finance Act 2019