An Irish Times guide to the world of personal finance

Tax returns

I am 66 years of age and have just retired to Ireland, having spent the previous 20 years working overseas. My overseas salary was, and my present pension is, exempt from Irish taxation. The only income I have in Ireland is the interest from a deposit account, which is taxed at source.

Being resident overseas I did not make a return for the last 20 years. Under the above circumstances, is there a legal requirement for me to make a tax return to the Irish authorities?

Mr M.G., Dublin

If you have no tax exposure here, it is unlikely you will have to worry about a tax return. There is certainly no legal requirement to make a return if you have no Irish-based income. Indeed, I am not too sure why you are paying Deposit Interest Retention Tax on your bank deposit account.

While this is levied at 20 per cent on interest earned, that applies only to people under the age of 65, according to the Revenue. If I were you, I'd be down to point this out quickly to your bank. In a State where thousands live in fear over letters that claim they failed to pay tax due on interest on bogus non-resident accounts, it's a happy man who finds he is owed a refund on tax paid in error.

Property yields

I often read that a property can provide a yield of X per cent for an investor. How is this yield calculated? What factors are taken into consideration: tax, appreciation, interest, maintenance etc?

Mr C.D., Dublin

The mortgage yield is determined by working out what proportion of the cost of the property is represented by the annual rental income on it. CB Hamilton Osborne King's Mr Brian Cooney explains that, when referring to costs in this context, you are talking not just about the actual purchase price of the property but also certain taxes and other fees related to the acquisition.

For instance, a yield of 6 per cent on a property with a rent roll of €100,000 per annum would indicate a property cost of €1.66 million. However, that would include stamp duty of 9 per cent, estate agents' fees of 1 per cent and legal fees of 1 per cent, with VAT at 21 per cent on the latter two items.

In total, the costs amount to 11.42 of the purchase price, which means the actual value of the property in question is €1.495 million.

The Irish Auctioneers and Valuers Institute's chief executive, Mr Alan Cooke, notes that yields fall as the capital value of the property rises, meaning that investors have to pay more for the same return in income.

He also reminds potential buyers that yield does not take into account tax payable by the individual investor or investment company on the rental income from the property. There are also cases where the actual property purchase will attract non-recoverable VAT, adding 13.5 per cent to the total costs.

While future rental growth is not usually reflected in the net yield, it obviously influences the price buyers will pay, Mr Cooke says. It is for this reason that initial yields as low as 2.9 per cent have been accepted in some prime retail property deals in Dublin, for instance. In accepting such a low initial net yield, buyers are aware that, in the normal course of events, they will benefit from substantial rental growth in future years.

A net yield that is very much lower than the norm would indicate an existing profit rent (that is the actual rental level is below the market level and a built-in increase in rent can already be anticipated at the next rent review).

Pensions abroad

I am working for the Irish branch of an international company. For the last five years I have been on secondment to our head office in Paris. I have now been offered a second term of secondment to our Amsterdam office for another three years.

The Irish office still holds my employment contract and I am still a member of its defined benefit scheme. Under Irish law, I understand they will not be able to continue contribution to the pension scheme, if the secondment in total goes beyond six years.

Is that correct, and could the fact the second secondment will be to a different company make any difference? If not, what should I do about my pension? It does not seem practical, if indeed possible, to join a new scheme especially if I am only going to be in it for a very short period.

Mr G.McQ., Paris

As you say yourself, there does not seem to be a lot of point in joining a separate scheme for the sake of the couple of years in question but it shouldn't come to that. As your employer says, there is a restriction on the amount of time it can continue to pay into your pension fund once you have left the State.

I understand this has something to do with avoiding abuse with people who might effectively emigrate to another jurisdiction but avail of the generous tax relief available on pension contributions here. As you can imagine, with 90,000 Irish people employed by US companies based here - to say nothing of those people employed by companies based elsewhere in the European Union or further afield - increased trans-boundary mobility within one group is going to become more of an issue as time goes on.

However, having spoken to Revenue, I understand that your company can apply to the Retirement Benefits District, which is based in Dublin. It will assess situations like yours on a case-by-case basis and I would imagine that, given the perfectly legitimate nature of your secondments, you would have grounds for optimism.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, D'Olier Street, Dublin 2 or e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.