Revenue Note for Guidance
This section is the charging provision for DIRT. It provides that a financial institution must deduct DIRT on paying or crediting relevant interest. The financial institution is indemnified against any claim for the “gross” amount of such interest. A financial institution is required to treat every deposit as a relevant deposit, and thus subject to DIRT, unless satisfied that it is not a relevant deposit. Finally, the section removes relevant interest from the ambit of section 246 so that there is no conflict with the provisions of that section requiring deduction of tax at source from certain payments of interest.
(1) A financial institution is required to deduct DIRT (referred to in the Chapter as “appropriate tax” – see definition in section 256(1)) from payments of “relevant interest” (that is, interest paid or credited in respect of “relevant deposits”). The deduction is to be made out of “the amount of the payment”, which means the gross amount (see section 256(2)(b)) of the interest paid or credited before deduction of the appropriate rate of DIRT. The use of the words “the person.....shall allow such deduction” ensures that the financial institution is protected in its contractual relationship with customers to whom the financial institution pays interest “net” of tax instead of gross.
(2) A financial institution must treat every deposit held by it as a relevant deposit subject to DIRT unless it is satisfied that it is not a relevant deposit. The financial institution must ensure that the rules contained in the definition of “relevant deposit” in section 256 relating to excluded deposits (mainly non-resident accounts) are complied with. The financial institution may continue to regard the deposit as not being a relevant deposit after it has satisfied itself that the deposit is outside the scheme until it is in possession of information to the contrary (for example, when informed – see section 263(1)(e) – that an Irish resident person has become beneficially entitled to any interest on the deposit).
(3) Interest payable under deduction of tax under this Chapter is removed from the ambit of section 246.
Relevant Date: Finance Act 2021