787M Interpretation and General (Chapter 2B)

Summary

This section is concerned with the interpretation of terms used in the Chapter.

Details

(1) The definitions are generally self-explanatory but the following call for comment —

“Certificate of Contributions”, is a certificate that the relevant migrant member of an overseas pension plan is required to obtain from the administrator of the plan and provide to the Revenue Commissioners for each calendar year (i.e. for each year of assessment) setting out the following particulars:

• the relevant migrant member’s name, address, PPS number and policy reference number.
• the contributions paid by the relevant migrant member under the plan in that year.
• where relevant, the contributions if any paid by the relevant migrant member’s employer.

The purpose of the certificate is to verify that contributions have been made in the context of any claim for relief in respect of those contributions.

“Overseas pension plan”, means a contract, an agreement, a series of agreements, a trust deed or other arrangements, other than a state social security scheme, which is established in, or entered into under the law of, a Member State of the European Communities, other than the State. The definition is designed to cover both occupational pension type schemes and personal pension type plans e.g. insurance based annuity type products, irrespective of structure, that a migrant worker might bring to the State whether he or she was an employee or self-employed in the other EU Member State.

“Qualifying overseas pension plan”, means an overseas pension plan that:

• is established in good faith for the sole purpose of providing retirement benefits similar to those tax relieved in the State,
• qualifies for tax relief on contributions under the law of the EU Member State in which it is established, and
• in relation to which the migrant member of the plan provides certain supporting evidence and information.

This definition narrows the type of overseas plan that will be acceptable for the purposes of the relief. While the Revenue Commissioners have no direct role in approving the overseas plan which will have been set up on the basis of the social, labour and tax laws of the EU Member State in which it is established, overseas plans for the purpose of saving or investment, other than for retirement, may be rejected by the Revenue Commissioners and the inclusion of the “sole purpose” test preserves that option. At the end of the day, the primary purpose of an overseas pension plan is a question of fact that may have to be established on a case-by-case basis.

“Relevant migrant member” of an overseas pension plan means an individual who:

• is a resident of the State,
• was a member of the plan on taking up residence of the State,
• was a resident of another EU Member State at the time he or she first became a member of the plan and was entitled to tax relief on contributions under the law of that Member State,
• was resident outside of the State for a continuous period of three years immediately before becoming a resident of the State, and
• is a national of an EU Member State or, if not, was resident in an EU Member State immediately before becoming a resident of the State.

The three year absence requirement is designed to demonstrate the bona fides of Irish nationals who go abroad and return with a foreign pension plan. Section 787N(2) gives discretion to the Revenue Commissioners to accept, in genuine cases, an individual as a relevant migrant member notwithstanding that the three year test is not met.

(2) Reflecting the definition of “qualifying overseas pension plan” in subsection (1) certain supporting evidence and information must be obtained by a relevant migrant member from the plan administrator and provided to the Revenue Commissioners, as follows:

• such evidence as the Revenue Commissioners may reasonably require to verify that the plan is bona fide established for the sole purpose of providing retirement benefits of a kind similar to those referred to in the other Chapters of Part 30, and that contributions to the plan are eligible for tax relief in the Member State in which it is established.
• the name, address and tax reference number of the institution operating or managing the plan.
• the relevant migrant member’s policy number in relation to the plan.
• the date on which the relevant migrant member became a member of the plan.
• the date on which contributions first became payable under the plan.
• the date on which benefits under the plan first become payable.

In addition, the relevant migrant member must give an irrevocable instruction to the plan administrator to provide the Revenue Commissioners with any information they may reasonably require in relation to payments under the plan. In this case, unlike the position for foreign pension providers who may be actively targeting the Irish market and who will have to deduct tax at source under PAYE etc, the administrator of an overseas pension plan could not reasonably be expected to incur the administrative costs of setting up that system. Nonetheless, as payments under the plan will be taxable in Ireland if the relevant migrant member is resident here at the time such payments are made, it is important that the Revenue Commissioners can obtain information on payments from the plan administrator. Subsection (3) of section 787N provides that such information may be obtained by way of a notice.

Relevant Date: Finance Act 2021